Return to Vendor (RTV)

Return to vendor (RTV) is the transaction that sends merchandise back to its supplier for a credit against what the buyer owes, under terms in the purchase order or vendor agreement. It removes units from inventory without a sale, touching three plans at once: the inventory position, the open-to-buy, and the margin line where the credit and any charge for the return land. An RTV is only as available as the agreement makes it: there is no general right to return goods delivered to specification that simply did not sell.

When agreements allow it

Agreements that permit returns name the grounds, each resting on a mechanism. Defects and quality failures — goods that do not match the approved sample, the specification or a safety requirement — are returnable because the vendor did not deliver what was bought. Overstock and stock balancing are returnable only where negotiated, as a capped allowance or against a replacement order, because the vendor is absorbing the buyer's demand miss. Discontinued items can be returnable where the vendor chose to discontinue, because that choice stranded the buyer's remaining stock. Each ground comes with conditions — a return authorization number, a window after receipt, original packaging, a restocking or freight charge — and a return shipped outside them can be refused credit.

How it is recorded against OTB and inventory

An RTV reduces inventory at cost and at retail on the date the units leave, not the date the return is requested, which is the date the open-to-buy should see. Because OTB is the gap between what the plan needs and what inventory plus on-order covers, a completed RTV raises open-to-buy by the value it removed: the plan now needs that inventory from somewhere else, or it needed less all along.

The plan has to pick one line for the transaction and hold it there. It can sit as a negative receipt that nets against the period's purchases, which is how the retail inventory method treats purchase returns, or as a planned reduction alongside markdowns and shrink. Either works. Mixing them releases the same open-to-buy twice, once as a lower net receipt and again as a higher reduction. The credit is a separate event: a credit memo against future invoices is not cash, and a restocking charge lands in margin. RTV is also distinct from markdown money, which leaves the units with the buyer and funds part of the price reduction.

Wholesale versus owned retail

Which side of the transaction a brand sits on changes what RTV means. A brand selling through its own stores and site is the buyer, and if it manufactures its own designs its RTVs are mainly quality claims, because the factory made the goods to its order and specification. A brand selling wholesale is the vendor: its accounts' returns reduce net sales to the account and arrive as inbound stock to be planned, inspected and re-ticketed, and seasonal goods returned after their window can go only to exit channels such as outlet or off-price.

Category shapes the rest. Bulky home and furniture goods can cost more to ship back than the return recovers, so a defect may be settled by credit or repair in place. Dated beauty stock returned by an account comes back with less shelf life than it left with. And jewelry on memo or consignment is not an RTV when it goes back, because title never passed.

RetailNorthstar keeps OTB planning, receipts and PO tracking on a shared data model, so the next buy is planned from current inventory positions, confirmed POs and receipts. See how RetailNorthstar handles OTB planning →