Most end-of-season markdown piles start the same way: a buyer overbought. Open to buy is the discipline that prevents it, a running budget that says exactly how much new stock you can still commit without blowing past the plan.
It is one of the core calculations of retail math, and it sits directly under merchandise planning: the plan sets the sales and stock targets, and open to buy turns them into a spendable buying limit for each month of the season.
What is open to buy?
Open to buy (OTB) is the amount of new inventory a retailer can purchase in a given period after accounting for what it plans to sell, mark down, and hold, and for stock already on order. It is usually expressed in money, at retail or cost, for a month or a week.
Think of it as the difference between where a period should end and where it started. If your planned sales, markdowns, and closing stock need more inventory than you already have on hand and on order, the gap is your open to buy. If they need less, you are overbought and should be buying nothing.
Open to buy is derived from the merchandise financial plan, which sets the season's sales, margin, and stock targets; OTB turns those targets into a monthly or weekly buying limit. It is owned by planners and buyers, and in fashion it is usually run on the retail 4-5-4 calendar rather than plain calendar months, so the periods line up with how sales actually fall across a season.
The open to buy formula
Formula (at retail): OTB = planned sales + planned markdowns + planned end-of-month stock - beginning-of-month stock - merchandise on order. Worked example: with $600,000 planned sales, $40,000 planned markdowns, a $350,000 end-of-month stock target, $400,000 of beginning stock, and $150,000 already on order, OTB = 600,000 + 40,000 + 350,000 - 400,000 - 150,000 = $440,000 of new buying room.
Read it as two halves: everything the period needs (sales, markdowns, and the stock you want left at the end) minus everything you already have committed (opening stock plus orders on the way). What remains is what you can still buy.
Markdowns sit inside the formula on purpose. Planning them in means the budget reflects the stock a season will really clear at full price, not an optimistic version of it. Some teams instead fold markdowns into sales planned at cost and drop the separate line, which is equivalent as long as you stay consistent.
Retail, cost, or units
Fashion usually plans open to buy at retail, because buys are tied to sales and revenue targets. To convert the figure to cost, multiply by the cost complement of your initial markup on retail: at a 60% markup on retail, $440,000 at retail is 440,000 x (1 - 0.60) = $176,000 at cost. Unit-based OTB works the same way, in pieces rather than dollars. Whichever basis you pick, use it consistently, or the numbers stop reconciling.
How to build an open-to-buy plan
An OTB plan is a simple grid: one row per input, one column per month or week across the season. The steps to fill it:
- Plan the sales. Forecast sales by month or week for the period, from your merchandise plan. This is the number every other line depends on, so it is worth getting right.
- Plan the markdowns. Project the discounts the season will need, so the budget reflects real, not wished-for, full-price selling.
- Set target stock levels. Decide the beginning- and end-of-month inventory each period should carry, usually from a stock-to-sales ratio or a weeks-of-supply target.
- Subtract what you already have. Take out opening stock and any merchandise already on order for the period. What is left is your open to buy.
- Plan across the whole season. Each month's ending stock becomes the next month's opening stock, so the plan flows month to month, and by category or class, not just as one total.
Reforecasting open to buy in-season
Open to buy is a living budget, not a one-time calculation. As the season trades, actual sell-through replaces your forecast, and the remaining open to buy has to move with it. A category selling ahead of plan opens up more buying room; one selling behind should have its budget cut before the overstock becomes a markdown.
A quick example: a category planned for $200,000 in sales is tracking at $260,000 by mid-season. Its remaining open to buy rises with the stronger forecast, so you can chase the winner in the right sizes. A neighbouring category running at half its plan has its open to buy cut toward zero before the overstock is locked in. Same total budget, redirected by real demand.
This is where OTB earns its keep. Recalculated weekly or monthly against real demand, it lets you chase winners and starve losers with a number, not a hunch, which is exactly the in-season control a static start-of-season buy can never give.
Why open to buy matters in fashion
Every retailer benefits from OTB, but fashion needs it most, for four reasons.
- Seasons do not wait: fashion stock expires, so buying past the plan is not a timing problem you can sell through later; it is a markdown you have already committed to.
- It protects cash and margin: OTB caps the capital tied up in inventory and keeps the buy aligned to the margin the plan assumed.
- It works by category, not just total: a healthy total can hide an overbought category and a starved one; planning OTB by class guards the mix.
- It links buying to demand: reforecast against sell-through, OTB is how a buyer reacts to the season in real time rather than at the end of it. That is the same loop that assortment planning depends on.
Common open-to-buy mistakes
- Planning only at the total level: a single company-wide OTB can look fine while categories quietly overbuy and starve underneath it.
- Forgetting merchandise on order: leaving committed orders out of the calculation is the fastest way to double-buy and overshoot the plan.
- Treating it as static: a start-of-season OTB that is never reforecast against actual sell-through is just a guess with a spreadsheet around it.
- Mixing retail and cost: blending retail-value and cost-value figures in one plan produces a budget that reconciles to nothing.
- Omitting markdowns: leaving planned markdowns out inflates the buying room and quietly plans for stock you cannot sell at full price.
- Hitting the total with the wrong mix: spending the full budget but sending it to the wrong categories still ends in markdowns; the plan has to hold at class level, not just in total.
From budget to buy: what to put in the open to buy
Open to buy answers how much you can spend. It is deliberately silent on the harder question: what to spend it on, which styles, colors, and sizes will actually sell the budget through at full price.
That is a demand question, and it is where a buying limit becomes a good buy or a warehouse of markdowns. Apshan builds the layer above the plan, a connected, sourced signal on fashion demand, so the open to buy you carefully calculated is spent on what the market actually wants. See how it feeds merchandise planning, or request access and see the plans and pricing.