If there’s one thing retailers fear, it’s something they don’t understand. If there’s one thing that retailers don’t understand, it’s open to buy. The term has been around for a very long time and there have been many approaches to trying to figure out how much to buy. There are services and systems available to help retailers figure it out and using one of them is better than not using anything since guessing (the most used option) is not a very good option.
A properly constructed open to buy plan will show how much to buy (in retail dollars) in each merchandise category in each month for the next 12 months. This will all be based on anticipated sales and desired turn rates, the two forces that drive any retail business. An open to buy should be planned in retail dollars since you’re building a retail dollar inventory to support your retail dollar sales. Open to buy is not an accounting tool, it’s a forecasting tool. Since most vendors in the fashion industry require that retailers place orders from three to 12 months into the future, ordering without open to buy planning is guessing and that never works.
The biggest flaw in almost every open to buy plan available is that it is left to the retailer to determine how much inventory they want to have at the beginning or end of each month. This is totally without merit as inventory levels must be determined by the open to buy system based on sales and turnover. Not only that, but turnover must be figured annually and adjusted to reflect the sales impact of each month because that adjustment will make a big difference in the beginning of the month inventory. Also open to buy plans must incorporate adjusting out any negative open to buy amounts to insure that there is ample inventory to support your strong selling months, but also reduced inventory going into your weaker selling months.
Now if the above sounds confusing to you, you’re not alone and that’s probably why retailers would rather ignore it than use it. But the difference in your bottom line using open to buy will amaze you. You’ll reduce your markdowns and your payables, balance your inventory and turn it faster and improve your cash flow.
As I said to begin with, there’s numerous systems and services that can provide you with open to buy, but if you want one that’s easy to understand and use, accurate, affordable, with online accessibility and the best support, you’ll want to subscribe to the only open to buy that requires no contract and is guaranteed to improve your buying, inventory position and cash flow or we’ll refund your payments.
MYOTBPLAN.COM has been serving retailers for over 30 years first as a paper based system, then software, and now online. There are many things you can do to improve your business, but you won’t be around long enough to get that done if you’re not using open to buy.