Good question because sometimes it seems we work with technology and just go through the motions without much to show for our effort. But open to buy (OTB) is different. First, it requires a commitment. Without that, it’s useless. And it’s hard to make that commitment when there are so many other things to fill your time, but you must if you want to make money.
So, if you’re ready to make the commitment to use OTB and FOLLOW it, you are on the path to retail financial success. Without OTB, you’ve been guessing about your needs (even if you’ve been checking last years sales or orders or whatever). Without OTB, you’ve been ignoring (or giving lip service) to turnover, and turnover is the way you make money as a retailer and it’s half of the driving force of your OTB system (as well as your store).
So, let’s look quickly at the factors that make you successful or not. First, you’ve got to create an atmosphere that your customers feel comfortable spending time in. That means your physical décor, displays, sales personnel, music, temperature, and everything else about your sales floor. What? You’ve got that handled? Great!
Now you need to get customers into your store and that means promotion of all kinds – advertising, emailing, social media, the works. And don’t forget to find ways to get your current customers to bring in their friends. What? You’ve got that handled? Great!
OK, now you’re bringing customers into your store and making them comfortable. So what’s left? Merchandise. What? You’ve got that handled? Do your really?
Do you have the right quantities in the right departments or are you missing sales? Do you have the right quantities in the right departments or are you building surplus inventory that you will have to mark down? In reality, once customers are in your store and willing buyers, you need to have the right amount of merchandise in the right area at the right time to meet their needs and yet, not create surplus and markdowns. Missing sales costs your bottom line and markdowns will put you in the red quickly.
The only way to insure that all of the money you’ve spent on promotion, décor, rent, employees, etc. is going to come back to you with a profit is to do your buying using OTB planning. Since OTB is based on your anticipated sales and your desired turn rates, it tells you how much merchandise you need in each department for each of the next 12 months. Retailers get into financial trouble trying to figure this out in their heads at the time they do their buying. But they can’t. There’s too many variables – multiple departments, different turn rates in each department, 12 months for each department where sales fluctuate dramatically.
But using a quality OTB program like myotbplan.com (and buying according to it) will insure you are on target all the time. But things keep changing, you say. True, and a good OTB will show you trends as they begin and allow you to make revisions to your plan. So a good OTB plan WILL make money for a retailer when used, updated, and followed.
And once you start using OTB, you will find that much of your time that was spent correcting problems created by your buying is now available for more creative pursuits (and making more money).
So, will OTB help a retailer make money? Just try to succeed without it.