What is open to buy and how does it work?

Open-to-buy answers one question: how much more can I commit to without breaking the plan.

The most common misunderstanding is that OTB is a budget handed down from finance. It is not. The budget is a target. The OTB is what falls out of the weekly plan once the target meets reality, and unlike the budget, it moves every single week.

It is a ceiling, not a target. Nobody wins for spending all of it. The number exists so that buying decisions stay tied to what the business can actually sell and hold, rather than to what looked good in a showroom.

It is usually calculated by category and by period, most often monthly. That monthly habit is where a lot of the damage happens: a number built in week one is still being spent against in week four, by which point sales, stock and deliveries have all moved and nobody has said so. Weekly is more work and it is more true.

For any given period, at retail value:

In plain terms: work out where you need to end up, add everything that will leave the building on the way there, then subtract what you already have and what is already coming. Whatever is left is what you can still buy.

Three of those five inputs are decisions and only two are facts. Planned closing stock, planned sales and planned markdowns are all calls somebody made. Opening stock and stock already on order are simply true. That balance is worth sitting with, because when the OTB comes back at a number nobody likes, three of the five can be argued with, and they usually are. Nudge the closing stock target, take a friendlier view of forward sales, quietly assume the markdown will be shallower, and the open-to-buy improves without a single thing changing in the business.

Every OTB guide gives you the formula. Almost none of them cover the part that decides everything: whether you can get the stock in time to sell it.

A category is six weeks from the end of its phase, weeks 7 to 12. It has been trading well. The plan says there is 120 of open-to-buy left, at retail value in thousands of dollars. The bestseller is running at roughly 40 a week and is going to run out around week 9.

So there is 120 to spend and an obvious thing to spend it on. Here is what actually happens.

Look closely at the option that works. The bestseller runs out in week 9 and the air freight lands in week 10, so even the right call leaves the shelf empty for a week. That is not a mistake in the plan, it is what a three week lead time costs you when you start the conversation in week 7. The decision was really made a month ago, when nobody thought they were making one.

Open-to-buy is calculated in money and in time, but almost everybody only reads the money. An OTB you cannot land inside the selling window is not an OTB, it is a number on a page.

Which is why the sea option is not just worse, it is actively dangerous. It spends the 120, closes the OTB, and lands the stock into a phase that has already ended. You have not bought sales, you have bought next season's markdown.

Read your OTB against your lead times before you read it against your ambition. The calendar spends it before you do.

Both, and this is where two people can look at the same plan and disagree about a number neither of them has got wrong.

OTB is normally calculated at retail value, because the WSSI it comes from is planned at retail. But buyers commit at cost, because that is what a purchase order is written in. So the same open-to-buy is one number to the planner and a different number to the buyer, and the gap between them is your intake margin, or IMU if you are in the US.

If your OTB is 120 at retail and your intake margin is 60%, you have 48 at cost to spend. Neither number is more correct. They are the same decision in two currencies.

The failure is not using one or the other, it is failing to say which. When someone asks how much OTB is left and the answer is just a number, ask which side of the margin it is on.

By the time anyone asks how much open-to-buy is left, most of it is usually gone, and not to anything anyone remembers deciding.

The formula is arithmetic. Anyone can do it once. The problem is that four of its five inputs move every week, and the number is usually calculated once a month. The one that holds still is the closing stock target, and that is not because it is right. It is because nobody has gone back to it.

Sales run ahead or behind and the forward plan changes. Stock lands early or late. A markdown gets taken or does not. A purchase order gets cancelled. Every one of those moves the OTB, and none of them announce themselves.

So the number in the buyer's head is almost always the number from the last time someone rebuilt the sheet. Buying against a stale OTB does not feel like a mistake at the time. It feels like buying.

The version that hurts is a negative OTB found late. It means the category is already overbought, and by the time it shows up the stock is usually on a boat.

In Merchmix, open-to-buy is not a sheet somebody rebuilds. It falls out of the WSSI, which is fed by Budget Builder, so the ceiling on the buy traces back to the target finance signed off without anyone retyping it.

Because the WSSI updates from your live POS and ERP data, the OTB moves when the plan moves. Re-forecast on a Monday and the number the buyer is working to has already changed.

The range plan is where it gets spent, and it tracks OTB against the committed buy at style level, so a buyer can see what is left while they are building the range rather than after. Styles carry their status through the process, and the range plan is the gate before a purchase order is raised. The dashboards track OTB against actual purchases, which is how buying discipline gets measured rather than assumed.

Your team still decides what to buy. The platform makes sure the number they are deciding against is the real one.