Blog

What is Open to Buy (OTB) Planning and How Does It Help Retailers?

August 26, 2025 / 8 minute read / By Zoya Naeem

What Is The Open-To-Buy (OTB) And How Does It Help Retailers?

Learn what Open to Buy (OTB) planning is, how it works, its benefits, limitations, and how you can create your own OTB plan.

If you’ve ever ended a season with way too much stock sitting in the backroom, or the opposite, empty shelves when customers were ready to buy, you’re not alone. Striking the right balance between inventory and demand is one of the biggest challenges in retail.

Buy too much, and you tie up cash and risk markdowns.

Buy too little, and you miss sales you can’t get back.

That’s where Open to Buy (OTB) planning comes in. OTB is a roadmap for your inventory, a forward-looking budget that helps you decide when to buy, what to buy, and how much to buy, without relying on guesswork.

In this article, we are talking about it and more. We’ll break down:

What Is Open To Buy (OTB)?
When Retailers Should Use It (And When It Might Not Be Necessary)
The OTB Formula
The Biggest Benefits of Planning With OTB
The Limitations to Keep in Mind So You Don’t Fall into Common Traps
How To Create Your Own OTB Plan Step by Step
And Finally, How Celerant’s POS Can Help Bring OTB To Life in Your Business with Always-On Insights and Automation.

What Is Open to Buy (OTB)?

Open-to-Buy (OTB) is a structured plan for managing inventory budgets. It’s the amount of money you’ve set aside to purchase new merchandise for a specific period based on your expected sales, planned markdowns, and current stock levels.

Rather than reacting to what’s already on your shelves, OTB helps you plan ahead. It ensures you’re bringing in the right amount of product at the right time, so you can meet customer demand without overspending or tying up unnecessary cash in inventory.

Retailers use it to stay flexible, adjust as sales trends unfold, and keep inventory decisions grounded in data rather than guesswork.

When Retailers Should Use It (And When It Might Not Be Necessary)

Once you understand what Open-to-Buy is, the next step is knowing when it can make the biggest difference. OTB planning is especially useful for retailers who deal with seasonal categories like fashion, sporting goods, or holiday items, where sales cycles can change quickly and leftover stock eats into margins.

It’s also valuable for businesses that constantly find themselves overstocked after a season ends or, on the flip side, dealing with empty shelves when demand is at its peak. For growing retailers, OTB provides a way to keep expansion under control without draining cash reserves.

“Smaller retailers often see the biggest impact. When every dollar matters, having the right retail system in place makes all the difference. An all-in-one retail POS that ties sales, inventory, and planning together helps ensure OTB decisions aren’t based on guesswork. Instead, you’re working with real-time data, so the products you buy are aligned with what’s actually selling across every channel.”

The OTB Formula and How to Calculate Your OTB at Cost

When it comes to calculating your OTB, the good news is that the math is straightforward.

The OTB formula looks like this:

Planned Sales + Planned Markdowns + Planned End-of-Month Inventory – Planned Beginning-of-Month Inventory = Open-to-Buy

Let’s break that down:

Planned sales = what you expect to sell that month.
Planned markdowns = discounts or promotions you’re likely to take.
Planned beginning inventory = what’s already on the shelves at the start.
Planned end-of-month inventory = what you want left over to roll into the next month.

Here’s an example of an OTB plan for a single month:
Say you’re planning $15,000 in sales for September, $500 in markdowns, and you want $20,000 in stock left over going into October. You’re starting September with $28,000 worth of inventory.

Here’s how it plays out:

$15,000 (sales)

$500 (markdowns)
$20,000 (inventory at the end-of-month)
– $28,000 (beginning inventory)
= $7,500 Open-to-Buy

That means you can safely purchase $7,500 worth of new inventory this month without risking excess stock.

Some Of the Big Benefits of Open-to-Buy Planning

Understanding the OTB formula is one thing, applying it in your business is where the results show up. Open to Buy planning helps retailers stay intentional with purchasing instead of reacting week-to-week. By setting spending limits that reflect real sales forecasts and inventory goals, you can keep books in order, shape a healthier flow of merchandise and cash through the business.

Here’s what that looks like in practice:

Improved cash flow control
Spend confidently on the right products without tying up capital in excess stock.
Better balance between supply and demand
Align purchases with demand patterns so customers find what they expect, when they expect it.
Fewer overstocks and markdowns
Cut back on costly clearance sales by preventing misaligned buying in the first place.
Stronger vendor negotiations
Reliable purchasing plans put you in a better position to ask for flexible terms or priority delivery.
More agility in retail planning
Adjust faster to sales trends or seasonal swings with clear visibility into what’s available to buy.

“OTB delivers its biggest impact when paired with the right retail POS system. Without the right tools, you’re stuck piecing together spreadsheets and reconciling numbers long after the month has ended. With an all-in-one retail system, sales, inventory, and forecasts update in real time, turning your OTB plan into a living guide you can act on every day. This is why the system you choose matters. The stronger the integration between your POS and your planning, the easier it becomes to keep cash flow healthy and inventory aligned with customer demand.”

Limitations to Keep in Mind So You Don’t Fall into Common Traps

While open-to-buy planning offers clear benefits, it also comes with important limitations to keep in mind.

OTB is only as good as the data behind it.

If sales forecasts are off or inventory isn’t updated consistently, the plan can quickly lose its accuracy. It’s also not a replacement for real-time inventory management. Instead, it works best as a forward-looking guide layered on top of strong operational practices.

This raises an important question ‘Who is responsible for OTB and inventory planning?’

In one of our recent Celerant webinars on Open-to-Buy Strategies for Fall 2025, our panelists Michele Salerno, Gregg Shahian, Jeff Dillon, Dmitry Goykhman, and Jeff Sward explored this very topic.

Webinar: Master Open-to-Buy Strategies for Fall 2025

They conducted a live poll during which 67% of attendees said OTB planning should fall to buyers, while 33% saw it as a collaborative effort. The panelists agreed with the latter, stressing that while buyers play a critical role, OTB is most effective when it involves merchandising, finance, and operations working together.

By treating OTB as a shared responsibility, retailers reduce the risk of overbuying, planning based on gut feel, or missing financial signals. that helps businesses adapt to market changes with more confidence.

How To Create Your Own OTB Plan (Step-by-Step)

The first step is to get the right people in the room so that you can align on sales goals, review past performance, and set realistic targets for upcoming months or seasons.

From there, you’ll want to build a framework that includes:

Sales forecasts
What do you expect to sell in the upcoming period?
Markdown projections
How much discounting do you anticipate, based on past trends?
Inventory goals
What levels of stock do you need on hand to support those sales?
OTB calculation
Using the formula we walked through earlier, determine how much budget remains available for new purchases.

An OTB plan works best when it’s updated frequently, monthly, or even bi-weekly for fast-moving categories. This ensures your team can adjust buying decisions before problems pile up.

And here’s where the right retail system makes a huge difference.

A modern all-in-one POS with inventory planning tools can automate much of the data gathering, reduce manual errors, and give every department access to the same real-time numbers. Instead of passing spreadsheets back and forth, your team can work from a single source of truth, making collaboration smoother and decisions more confident.

So, How to Get Started with Celerant and Bring OTB to Life?

We’ve seen that Open-to-Buy can be a powerful tool, but also one that depends on accurate data and consistent updates. That’s why many retailers find the right technology just as important as the plan itself. Without reliable numbers flowing in, even the best OTB strategy can fall short.

With Celerant’s all-in-one retail POS, much of the heavy lifting is automated. Sales, inventory, and customer activity are tracked in real time, so instead of chasing spreadsheets, you’re working from a clear picture of what’s happening in your business. That makes OTB easier to manage and far more effective, because your buying decisions are based on live data, not estimates.

Ready to see it in action?

Schedule A Consultation Now!

Share this content:

What is Open to Buy (OTB) Planning and How Does It Help Retailers?

Learn what Open to Buy (OTB) planning is, how it works, its benefits, limitations, and how you can create your own OTB plan.

What Is Open to Buy (OTB)?

When Retailers Should Use It (And When It Might Not Be Necessary)

The OTB Formula and How to Calculate Your OTB at Cost

Planned Sales + Planned Markdowns + Planned End-of-Month Inventory – Planned Beginning-of-Month Inventory = Open-to-Buy

Some Of the Big Benefits of Open-to-Buy Planning

Improved cash flow control

Better balance between supply and demand

Fewer overstocks and markdowns

Stronger vendor negotiations

More agility in retail planning

Limitations to Keep in Mind So You Don’t Fall into Common Traps

How To Create Your Own OTB Plan (Step-by-Step)

Sales forecasts

Markdown projections

Inventory goals

OTB calculation

So, How to Get Started with Celerant and Bring OTB to Life?

About Celerant

Learning Center

Partners