Merchandise Planning & Retail Finance Lab

Open-To-Buy & Markdown Lab

Calculate retail Open-To-Buy (OTB) budgets, stock-to-sales ratios, inventory sell-through rates, and markdown elasticity.

OTB Model Merchandise Ratios Retail Theory FAQ

Retail Presets

Load calibrated department budgets.

Step 1: Inventory Balances & Sales Targets

Open-To-Buy Financial Plan Configuration

1. Sales Targets & Inventory Needs

$
$
$
$
Needs = Planned Sales + Markdowns + Desired Ending Inventory (EOM).

2. Existing Supply & Margin Rules

$
Committed purchase orders in transit or scheduled for delivery.
%
Determines purchasing capital conversion: Cost = Retail × (1 - IMU%).
Open-To-Buy (Retail)
$125,000
Purchasing Capital Available
Open-To-Buy (Cost)
$56,250 at Cost (55% IMU)
Capital to commit to vendor POs
Stock-to-Sales (SSR)
1.61 Stock-to-Sales
38.1% Sell-Through Rate
Maintained Margin
49.4% Maintained Margin
Realized margin after markdowns

Retail Merchandising & Cash Flow

The Open-To-Buy (OTB) Discipline

Open-To-Buy is the foundational financial control mechanism in retail merchandise management that prevents over-inventoried cash traps.

  • Total Needs vs. Available Supply: If your total needs exceed beginning inventory plus open POs, you have open buying power. If available stock exceeds needs, you are overbought.
  • The Cost of Being Overbought: Overbought departments suffer cash stagnation, forced clearance markdowns, and inability to buy hot-selling in-season trends.
  • Stock-to-Sales Ratio (SSR): Balances customer shelf availability against holding cost risk.

Explore inventory turn in the GMROI & Turnover Lab.

Retail Merchandising Formulas

Essential merchandise budgeting formulas

OTB at Retail = Planned Sales + Markdowns + EOM - BOM - On-Order

OTB at Cost = OTB at Retail × (1 - Initial Markup %)

Stock-to-Sales Ratio (SSR) = BOM Inventory ÷ Planned Sales

Sell-Through Rate % = Period Sales ÷ (BOM + Total Receipts)

Maintained Markup % = IMU% - (Markdown % of Sales × (1 - IMU%))

Calculate safety stock in the Safety Stock Lab.

FAQ

Open-To-Buy and markdown questions

What is Open-To-Buy (OTB) in retail merchandising?

Open-To-Buy (OTB) is the financial budget available for a retail buyer to purchase new inventory for a specific period without exceeding planned ending inventory limits.

How do you calculate Open-To-Buy at retail and at cost?

OTB at Retail = Planned Sales + Planned Markdowns + Planned Ending Inventory (EOM) - Beginning Inventory (BOM) - On-Order. OTB at Cost = OTB at Retail × (1 - Planned Initial Markup %).

What does it mean when a retailer is 'overbought'?

Being overbought occurs when existing stock (BOM) plus incoming on-order purchase orders exceeds total planned sales and ending inventory targets, resulting in a negative OTB that requires freezing new POs or accelerating markdowns.

What is a healthy Stock-to-Sales Ratio (SSR)?

Stock-to-Sales Ratio (BOM Inventory ÷ Monthly Sales) typically ranges from 1.5 to 3.0 depending on category turn velocity, lead times, and replenishment cadence.

Can I export retail merchandising and OTB plans to CSV?

Yes. You can export complete BOM/EOM inventories, planned sales, markdowns, on-order POs, and OTB budgets at retail and cost as a UTF-8 CSV spreadsheet with formula injection defense.

Is this tool certified professional accounting or retail buying software?

No. This tool provides educational retail merchandising simulations for business analysis without certified accounting, financial planning, or commercial ERP guarantees.

Continue Exploring Retail & Inventory Tools

Explore our Retail & Inventory Hub, evaluate gross margin return on investment in the GMROI & Turnover Lab, model safety stock buffers in the Safety Stock Lab, or calculate order quantities in the Inventory EOQ Lab.