What is open to buy in retail?

Open to buy (OTB) is the dollar or unit amount a retailer is still allowed to purchase in a period without exceeding the planned ending inventory. It is calculated as planned EOM inventory + planned sales + planned markdowns − planned beginning inventory − merchandise on order. A positive OTB means room to buy; a negative one means the category is already overbought.

What is the open to buy formula?

OTB = Planned EOM inventory + Planned sales + Planned markdowns − Planned beginning inventory − Merchandise on order. The first three terms represent everything inventory needs to cover; the last two represent what you already have or have committed to receive. Whatever is left is available to commit to new purchases.

What does OTB meaning include beyond just 'budget left'?

OTB is not simply unspent budget — it is a stock-to-sales balancing figure. It accounts for the inventory you need to hold at month end, the sales you expect to make, and the markdowns you expect to take, then nets out what is already owned or on order. Treating it as leftover cash ignores the ending-stock target it is built to protect.

Why do understated planned markdowns overstate open to buy?

Because planned markdowns are added into the OTB formula, a markdown number that is too low understates the dollars needed to reach the EOM inventory target on a retail basis, which inflates the calculated OTB. The buyer then thinks there is more room to purchase than the plan can actually support once markdowns are taken at their real depth. The sensitivity table on this page shows how a $16,000 understatement creates $16,000 of phantom OTB.

Should open to buy be calculated in units or dollars?

Dollar OTB controls total investment and cash flow and is what most merchandise plans run on; unit OTB controls how many SKUs or styles a buyer can place and matters most when average unit retail varies widely within a category. Many planners run both — dollars as the hard ceiling, units as the assortment-planning check.

How often should an open-to-buy plan be updated?

Monthly at minimum, matching the merchandise planning calendar, but the on-order and sales-to-date components should be refreshed weekly so the buyer is never purchasing against a stale number. A plan reviewed only once a month can drift meaningfully out of step with actual sell-through by the third or fourth week.

Open-to-buy calculator

Open to buy (OTB) is the amount left to purchase without breaking your ending-inventory target. It is planned EOM inventory + planned sales + planned markdowns − planned beginning inventory − merchandise on order — and the markdown line is the one buyers most often shortchange.

Plan the markdowns feeding this OTB See all retail markdown formulas

The open-to-buy formula, worked

Open to buy = Planned EOM inventory + Planned sales + Planned markdowns − Planned beginning inventory − Merchandise on order. The first three items are everything the month has to account for on a retail-dollar basis; the last two are what is already owned or committed.

Example: a category plans $210,000 EOM inventory, $95,000 in sales, and $14,000 in markdowns for the month, starting from $180,000 in beginning inventory with $60,000 already on order. OTB = ($210,000 + $95,000 + $14,000) − ($180,000 + $60,000) = $319,000 − $240,000 = $79,000 still open to buy.

Now suppose the true expected markdown is $30,000, not $14,000, because last year's sell-through for this class needed a deeper break than the plan assumed. Real OTB = ($210,000 + $95,000 + $30,000) − $240,000 = $95,000. Buying against the understated $79,000 figure leaves $16,000 of purchasing power unaccounted for on paper — and when the real markdown eventually gets taken, the units already bought against the low estimate become the excess that pushes ending inventory over plan. In practice, an understated markdown line lets buyers commit to receipts the season's real sell-through can't clear without a deeper, later markdown than intended.

Open-to-buy calculator

Planned EOM inventory ($)

Planned sales ($)

Planned markdowns ($)

Beginning-of-month inventory ($)

Merchandise on order ($)

Open to buy: $79,000.00
Planned purchases: $79,000.00
Total inventory need: $319,000.00
Already covered: $240,000.00

OTB is a stock-to-sales balancing figure, not spare budget — it exists to protect the planned ending-inventory position.

Choosing a basis

Unit-based vs. dollar-based OTB

Most plans run both, but they answer different questions.

Dollar OTB

Controls investment

Caps total retail-dollar (or cost) commitment for the month. This is the figure finance and merchandising leadership track, because it ties directly to cash flow and the inventory plan.

Unit OTB

Controls assortment

Caps how many units or SKUs a buyer can place. Matters most when average unit retail varies a lot within a category, since a dollar cap alone can let a buyer overbuy units by skewing toward cheaper goods.

On-order visibility

Keeps both honest

On-order dollars and units need to be current — a stale on-order figure is the most common reason OTB looks open when it is actually already committed.

Three-month open-to-buy worksheet

Month	Planned EOM	Planned sales	Planned markdowns	BOM inventory	On order	Open to buy
February	$210,000	$95,000	$14,000	$180,000	$60,000	$79,000
March	$235,000	$110,000	$18,000	$210,000	$70,000	$83,000
April	$220,000	$120,000	$22,000	$235,000	$55,000	$72,000

Each month's OTB = (EOM + sales + markdowns) − (BOM inventory + on order). Markdown estimates should come from the same schedule driving the sales and EOM plan.

How the markdown line changes OTB: February example

Planned markdowns	Inventory need	Already covered	Open to buy	Risk if true markdown is higher
$8,000	$313,000	$240,000	$73,000	Buyer overcommits by $6k vs the real $14k plan
$14,000	$319,000	$240,000	$79,000	Aligned with the season markdown schedule
$22,000	$327,000	$240,000	$87,000	Buyer overcommits by $14k if the low estimate is used
$30,000	$335,000	$240,000	$95,000	Severe overbuy risk if the plan assumes only $14k

A $16,000 understatement in the markdown line creates $16,000 of phantom OTB. That money gets spent on receipts the season cannot clear without a deeper, later markdown.

Why the markdown line matters most

Planned markdowns are the item in the OTB formula most likely to be guessed rather than planned, because they depend on sell-through that hasn't happened yet. But because markdowns add directly to the inventory need, an optimistic (too-low) markdown assumption inflates OTB and invites purchases the season's real sell-through can't absorb without deeper end-of-season cuts.

The fix is mechanical: build the markdown line from the same weekly sell-through and price-break assumptions used in the season markdown plan, not from a flat percentage carried over from last year.

Keep planning

Planned markdown calculator
Build the markdown schedule that should feed the OTB markdown line.
Retail markdown formulas
The full formula reference, including maintained markup and sell-through.
Inventory turnover calculator
Check whether the inventory this OTB implies is turning fast enough.
Retail markdown planning
How markdown planning fits into the broader merchandise planning cycle.

Answers

Open-to-buy questions

Plan the markdowns feeding your OTB

Model sell-through per price period so your open-to-buy markdown assumption reflects a real schedule, not a flat guess — and see how sensitive OTB is to the markdown line.

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