Open-to-Buy by Vertical

What open-to-buy is

Open-to-buy is the value of receipts a business can still commit for a period once its sales plan, stock targets, planned reductions and existing commitments are counted: planned end-of-period (EOP) inventory, plus planned sales, plus planned markdowns and other reductions, minus beginning-of-period (BOP) inventory, minus what is already on order. The open-to-buy formula carries the calculator, and what is open-to-buy planning covers maintaining the balance in apparel. The identity never changes; the five inputs around it do.

This is the fifth guide in the by-vertical series, after the merchandise hierarchy, the planning calendar, allocation and replenishment and markdown and exit strategy — and open-to-buy is the budget all four spend against. OTB planning for home goods is the single-vertical treatment this guide generalizes; assortment planning by vertical covers what the balance buys.

The identity, at retail and at cost

Open-to-buy = planned EOP inventory + planned sales + planned reductions − BOP inventory − on order

The first four terms are the receipt plan, covered by the receipt plan formula; subtracting on order leaves what is still open. Every term has to share one basis, one period and one grain.

A retail-method plan values every term at the selling price, and it needs a markdown line because a price reduction lowers the stock's retail value without a unit leaving. Retail open-to-buy converts to cost through the cost complement of the planned initial markup: cost open-to-buy = retail open-to-buy × (1 − planned IMU). A cost change that has not reached the plan's IMU turns a correct retail balance into a wrong cost one; the keystone markup entry covers where the doubling convention stops describing that IMU.

A plan held at cost has no markdown line, because a markdown changes a unit's margin, not its cost. Its reductions are whatever removes cost without a sale: shrink, damages, write-downs, testers consumed, and returns to vendor, netted against receipts or carried as a reduction but never both. Where cost moves between commitment and receipt — landed cost in home and furniture, metal in jewelry — holding the plan at cost stops a stale cost complement from hiding that movement until the goods land.

The five inputs that change by vertical

Each input is set by something the category does, not by a planning preference.

1. The period the balance is held for

The OTB period should match the interval in which a commitment can still change. Apparel holds a fiscal month because deliveries land by month inside a season and a monthly read can still move a chase. A furniture container lands whole, from an order placed a factory slot and an ocean crossing earlier, so the period is the booking cycle for a landing window. Footwear fixes wholesale quantity at the account prebook, and outdoor and sporting goods at the dealer prebook, with monthly receipt phasing beneath it; beauty and toys plan against the retailer's reset; jewelry against gifting peaks and a capital review. A period shorter than the commitment cycle moves every month and cannot be acted on, and a longer one hides a month that is already overcommitted.

2. The grain the balance is held at

The OTB grain is the hierarchy level at which the balance is approved. It sits above the buy plan's style-color by size, but it has to be fine enough that a trade between two parts of the business is a visible decision: department or class by channel in apparel, where DTC and wholesale commit on different dates; a core pool and a seasonal pool in accessories; supplier in furniture, where a full container load ships from one supplier at one freight assumption. A coarser grain lets an overbuy in one pool hide inside headroom in another.

3. What counts as on order

On order is every commitment that will become a receipt in the period and cannot be withdrawn without cost. A fabric booking at a mill minimum, a leather lot, a factory slot, a container afloat and a beauty component run all commit money before an order line exists, so a balance counting only confirmed POs overstates what is open by exactly those amounts. A cancelled or expired PO left on the books does the opposite, suppressing the balance and starving the next buy.

Three things look like on order and are not. A dealer prebook or retailer commitment is demand the buy is sized against; the on order is the production that fills it. Memo stock a brand has placed with a retailer is still the brand's on-hand inventory. A licence minimum guarantee is a cost obligation with no units attached. Counting demand or obligations as supply produces a balance that reconciles and misleads. Furniture special orders, back-to-back with a customer order, take container space without consuming speculative open-to-buy.

4. The reduction lines

Beyond markdowns, discounts and shrink, each vertical carries lines that consume open-to-buy and never produce revenue: testers, gift-with-purchase and gratis in beauty; demo gear in outdoor and sporting goods; floor samples and freight damage in furniture; returned defectives in toys; compliance write-offs in juvenile hard goods; remount and melt in jewelry. Left out of the plan, they reappear as a receipt shortfall.

Markdown money looks like a reduction and is not one. The markdown line measures the fall in the stock's retail value, which is the same whoever funds it; a vendor's allowance recovers margin after the fall. Netted against planned markdowns, it shortens the receipt plan by its own amount, and the period ends below its stock target while the margin line looks fine. The allowance belongs in the margin plan, in the season whose markdowns it funded.

5. The reserve, and why lead time decides it

The reserve is open-to-buy held back from the preseason buy to fund a quantity decision made after the season produces a read. The planning calendar sets the in-season window as the latest useful decision date — the exit date minus the lever's lead time — less the date the read becomes usable. A reserve is only worth holding for a lever whose window is positive. Apparel with fabric booked and colorways unassigned has one, so a dollar reserve buys a real chase. Where the only quantity lever is a production run that lands after the model-year changeover, the window is negative, and a dollar reserve sits idle through the season it was meant to protect.

There, flexibility has to be bought preseason in another form: an at-once layer in footwear and sporting goods, a domestic DC holdback in toys, reserved fabric or capacity where a supplier will sell it. In furniture the reserve is the unloaded mix of the next containers. The share held back is an output of lead times and read dates, not a house rule copied from another category.

Illustrative example: apparel by month, furniture by container

The figures below are illustrative, chosen because they divide cleanly. They are not benchmarks, not targets, and not drawn from any brand.

Plan A is one apparel department for one fiscal month, held at retail. The receipt need is planned EOP of $900,000 + planned sales of $400,000 + planned markdowns of $48,000 + other reductions of $8,000 − BOP of $820,000 = $536,000. With $310,000 already on order, the open-to-buy is $226,000. The planner releases $176,000 and holds $50,000 in reserve for a chase on fabric booked with colorways unassigned. At a planned IMU of 60 per cent the cost complement is 0.40, so the open-to-buy at cost is 226,000 × 0.40 = $90,400.

Plan B is a home and furniture program for one container booking cycle, held at landed cost, covering the goods that land in one 13-week window, with no markdown line. The receipt need is planned EOP of $720,000 (the program's weeks-of-supply floor) + planned sales at landed cost of $540,000 + freight damage and floor-sample write-downs of $12,000 − BOP of $780,000 = $492,000. Four containers averaging $72,000 are already booked, so on order is $288,000 and the open-to-buy is $204,000, or 2.83 containers. Booking two ($144,000) leaves the window $60,000 short of its receipt need and ends it at $660,000, below the floor. Booking three ($216,000) overshoots by $12,000 and ends the window at $732,000. The planner books three and records a deliberate container overage.

Plan A's reserve is a real option because its lever lands in time. If the department sells ahead of plan, the $50,000 funds a chase that lands inside the month. If it sells to plan and the reserve stays unspent, the month ends at $850,000, $50,000 below planned EOP; if it sells below plan, EOP lands above $850,000, and the unspent reserve is $50,000 of stock the slow month does not also have to carry. Plan B's flexibility is the mix of its three new containers, not yet loaded. A review that applied Plan A's rule to Plan B would flag $12,000 of overbuying and trade it for a $60,000 breach of the stock floor.

Apparel: monthly balance, fabric commitments and the chase reserve

Apparel holds open-to-buy by fiscal month inside the SS and FW seasons, at department or class by channel, on a retail-method basis, with the merchandise financial plan setting monthly sales and stock targets. Fabric booked at a mill minimum commits money before the style-color exists and belongs in on order at the plan's basis, the retail or cost value of the finished units it commits, relieved when the garment PO is cut against it so the same commitment is not counted twice, as planning against fabric minimums sets out. Wholesale orders written against the line sheet are demand, not supply, so a brand selling DTC and wholesale holds two channel balances against one receipt schedule.

A chase reserve works only if the fabric behind it was booked with colorways unassigned; without that optionality the chase inherits the full fabric lead time and the reserve funds nothing. The in-season chase covers the mechanics. Kidswear and babywear plan on the same balance, with age bands where size runs sit.

Footwear: size runs, prebooks and an at-once layer in pairs

Footwear holds the balance by delivery window inside a model year, and the buy beneath it is a size-run decision counted in pairs. Tooling and lasts are committed once at model level, so a carryover model brings only its colorway and material bookings into the season's balance. Prebooks are demand; the production that fills them is on order, and that prebook-backed share carries less risk than the at-once share the brand holds for fill-in and its own channels.

For seasonal and fashion models the factory reorder lead time runs past the point where the season's read is usable, so an in-season dollar reserve funds nothing; core carryover models replenish against a minimum and maximum instead of a discretionary reserve. The footwear reserve is an at-once layer bought preseason, sized in pairs by run. Sized to a pair count instead of complete runs, it ends as odd pairs that clear only through markdown. Try-on damage and odd pairs written down are the reductions. See assortment planning for footwear brands.

Accessories & bags: two pools, one envelope

Accessories hold one envelope with two clocks inside it. The evergreen core — black leather, house hardware, stable velocity — is planned by month as replenishment receipts; seasonal colorways are bought once against the collection date. With no size dimension the grain is the style-colorway, and hero colors draw deep buys from the seasonal pool while fashion colors draw shallow, dated ones. Tannery and hardware minimums commit money before the style is final, so the gap between forecast depth and a minimum belongs in on order at approval — the point planning accessories lines makes about minimum order quantities.

The core needs a correct minimum and maximum, not a discretionary reserve. Seasonal color can be chased only on the leather lead time, which can support a small reserve on a hero color and not on a fashion color whose collection closes first. Attached items take their open-to-buy from the host's plan through attach rate rather than from their own history.

Home & furniture: container cycles at landed cost

Home and furniture plans per container booking cycle, keyed to the landing window, at landed cost — first cost plus freight, duty and inbound handling — because that is the cost the business carries, and it moves between order and receipt. The grain is the model by finish or option, grouped by supplier. On order is the booked factory slot and the container afloat, committed before any sales from the landing window exist; special orders sit in the receipt schedule without consuming speculative open-to-buy.

Reductions at cost are freight damage and floor-sample write-downs. Event promotions return the item to full price afterwards and change margin rather than cost, so they add no markdown line. The reserve is the unloaded container mix, and a stock projection that saw-tooths on container arrivals is the plan working, not the plan failing. See merchandise planning for home and furniture brands.

Outdoor: prebook seasons and counter-seasonal categories in one balance

Outdoor lines hold soft goods and hard goods in one open-to-buy: the apparel and footwear portion plans at style-color by size, by season, and the gear plans by model year, with carryover until sell-down. Dealer and specialty prebooks set the quantity period, and on order is the production placed against those bookings plus the technical-material bookings that commit ahead of it.

Snow and summer categories run offset receipt, markdown and clearance calendars, and an annual, all-category open-to-buy lets a snow overbuy net against summer headroom and read as balanced; held by category and season, the same position shows two errors. The at-once layer for an insulation category is bought preseason, and in-season dollars help only where the weather read arrives before the lever's lead time runs out. MAP pricing narrows the markdown line and moves clearance into closeouts and reallocation; warranty and repair stock and demo gear are reductions. See merchandise planning for outdoor brands.

Sporting goods: the model year is the period

Sporting goods equipment plans open-to-buy by model year, with the softgoods beside it planned by season and size run. Preseason dealer prebooks arrive as account-level commitments through the dealer network and rep groups, and the production buy is that committed volume plus a planned at-once layer. The prebook close, not the purchase order, fixes the model year's quantity, and once factory capacity is allocated no in-season reorder lands before the changeover, so a dollar reserve held for one has nothing to buy.

The balance therefore does its work preseason. The at-once layer is sized at the prebook close, team and roster orders run as their own seasonal line sized by roster, and ski, golf, cycling and racquet each keep their own period. Under MAP the markdown line stays narrow, and the closeout of the prior model year carries the clearance. See merchandise planning for sporting goods brands and planning a model-year changeover.

Health & beauty: shades, launches, testers and the dating ceiling

Beauty holds one open-to-buy over two businesses: core shades on replenishment driven by retailer POS, and launches and limited editions bought once against a planogram reset. The grain is the shade within a franchise — the shade range is the beauty equivalent of a size curve — and on order includes batch fills plus the cartons, pumps and applicators committed before the formula is scheduled.

The reduction lines are units, not price: testers per door per shade, gift-with-purchase, gratis, damages on fragile packaging, stock aged past its shelf-life or expiry date, and opened testers past their PAO. Planned outside the open-to-buy, non-sellable units reappear as a receipt shortfall on the sellable shades. The reserve is bounded twice: batch lead time sets how late it can be spent, and the dating ceiling (shelf life less the retailer's reserved remaining-life share and transit time) caps how many weeks of cover any one batch can add, so cover that cannot ship with enough remaining life is not cover. See merchandise planning for health and beauty brands and when dating rules cap your weeks of supply.

Toys & games: retailer commitments ahead of a single peak

Toys concentrate the selling year into Q4, so the open-to-buy is decided before any read from that peak exists. The period is the retailer commitment cycle — line reviews and the planogram reset — with licensed lines as discrete windows. The grain is the item in case-pack multiples. Retailer commitments are demand and the factory POs against them are on order; a licence minimum guarantee is a cost obligation with no units, and counting it as inventory overstates the stock the brand will own.

Safety standards change two lines. A lot that fails pre-shipment testing never arrives, and the failure can land after the last date a replacement could be made; stock withdrawn after receipt, like returned defectives, is a reduction with no sale behind it. A single peak leaves no second window to recover those units, so the balance plans for them. The reserve is a domestic DC holdback committed before the reset. See merchandise planning for toy and game brands and planning a licensed product window.

Baby & juvenile: certified configurations, cube and registry demand

Juvenile hard goods plan open-to-buy by model year, paced by the certification cycle, with platforms — the chassis or frame — carrying colorway depth; the certified configuration is fixed before the colorway is chosen. On order is the production on that configuration, and for bulky goods cube binds alongside dollars: open dollars against a container that is already full buy nothing.

Registry demand is a forward read of consumer intent, created at item level ahead of the purchase. Registry adds are the evidence a reserve can be released against, which makes a small in-season reserve workable on long-tail items that sell for years. Reductions include damaged returns on bulky items and write-offs when a certification change makes stock unsellable from a compliance date. Kidswear and babywear are apparel and plan on the apparel balance. See merchandise planning for baby and juvenile brands and planning with registry demand.

Jewelry & watches: memo, metal and a capital ceiling

Jewelry and watches plan at piece level, at low velocity, on a cost base that moves with metal. The period is the gifting calendar crossed with a metal-cost review, and the balance is held at cost, because metal is bought before the piece is made and a retail plan converted at a stale cost complement misstates the units it buys. See planning margin on a moving cost base.

Memo stock placed with a retailer stays on the brand's books until the retailer sells or buys it, so it belongs in on-hand as a distinct memo position, and pieces returning from memo move from that position to in-house stock without counting as receipts; counting memo placements as sales invites a rebuy of pieces the brand still owns. A retailer holding consigned goods has the mirror rule: they take display and security capacity without consuming its open-to-buy. Melt, remount write-downs and damaged pieces are the reductions. The reserve is set by capital and security, not lead time, and released into gifting peaks on the gifting calendar. See merchandise planning for jewelry and watch brands.

Governance: reserve release, re-forecast cadence and the two calendars

An open-to-buy with correct inputs still fails without owners for its three standing decisions.

Who releases the reserve

Merchants request, planning releases and finance sets the ceiling: the merchant sees the style that is selling, planning sees every claim on the balance, and finance owns the total the business will fund. Each release is tied to a read agreed before the season — sell-through at a defined week in apparel, the prebook close in footwear and sporting goods, registry adds in juvenile hard goods — and each reserve carries an expiry date, the latest date its lever can still land before the exit. Reserve still unreleased at that date lowers planned EOP instead of rolling silently into the next period.

Re-forecast cadence

Cadence follows lever deadlines rather than the reporting calendar, the argument how often to reforecast makes for the whole plan. Apparel in season re-reads weekly at the weekly trade meeting; a container category re-forecasts per booking cycle and on every vessel slip or freight change; a prebook category at the prebook close. A demand read that moves the sales plan moves the balance with it, and demand sensing in retail covers how those signals are read. Every cancellation, date change and cost change has to reach on order on the day it happens: a balance re-forecast weekly on a PO file refreshed monthly is a monthly balance.

Open-to-receive versus open-to-order

Open-to-receive is the balance by landing period: what the month or window can still absorb against its planned EOP. Open-to-order is the same balance moved back by the supplier lead time to the date an order has to be placed to land in that period. With a domestic holdback the two nearly coincide; with an ocean or production lead time they separate, and a period can be open to receive while already closed to order — fillable from stock already in the network, not by a new order. A plan that reports one open-to-buy number without naming its calendar invites an order into a period the order cannot reach.

Where open-to-buy breaks

Each failure below produces a balance that reconciles and still points the buy the wrong way.

• →Dead orders left on order. A cancelled or expired PO still counted suppresses the balance, and the buy that should replace it is never placed.
• →Upstream commitments left off. A fabric booking, leather lot or factory slot without a PO line overstates the balance, so a buy approved against it overcommits by construction.
• →Demand counted as supply. A dealer prebook or retailer commitment entered as on order makes the production behind it look placed, and the receipt need goes unfunded.
• →Markdowns counted twice. A markdown already taken off the stock value and also carried as a planned reduction lifts the ceiling on the next buy by its own amount.
• →Recoveries netted against reductions. Markdown money netted against the markdown line under-plans receipts while margin looks healthy.
• →A stale cost complement. Last season's IMU, applied after landed cost or metal moved, gives the buyer a cost figure that buys fewer units than it claims.
• →A dollar reserve against a negative window. Money held for a reorder that cannot land in time starves the preseason layer that could have used it.
• →Averaged receipts and pooled categories. Smoothed container steps hide the month already overcommitted, and pooled counter-seasonal categories, or core and seasonal pools, let one overbuy net against another's headroom.

None of these is visible in the total. Each shows only where the balance is held at the period, grain and basis the category runs on.

How RetailNorthstar plans open-to-buy

RetailNorthstar holds open-to-buy planning on the same shared data model as assortment planning, buy planning, allocation, and PO and WIP tracking. PO commitments are tracked against planned receipts by period, and the balance updates as assortment and buy decisions are made. Balances are held by channel, category and period. In-season demand signals inform buy-depth and allocation recommendations — AI-assisted planning that works from the brand's own sell-through — while deep statistical forecasting runs through integrations.

RetailNorthstar plans the buy behind a dealer prebook but is not a dealer portal or an order-entry system, and in beauty it plans alongside the ERP that holds batch and expiry data: it is not a batch- or lot-tracking system. The same model plans, buys and allocates for apparel, footwear, accessories, home and furniture, outdoor, sporting goods, beauty and wellness, toys and games, baby and juvenile, and jewelry and watch brands, with apparel as the flagship vertical.

Related resources

• →What Is Open-to-Buy Planning? — how the balance is maintained in apparel
• →Open-to-Buy Formula — the identity, with the calculator
• →OTB Planning for Home Goods — container schedules and landed cost in full
• →The Planning Calendar by Vertical — the decision window that sizes the reserve
• →Markdown and Exit Strategy by Vertical — the markdown line, seen from the exit
• →Allocation and Replenishment by Vertical — where released open-to-buy becomes a stock position
• →Markdown Money — where a vendor's markdown recovery belongs
• →Keystone Markup — the pricing convention behind a 50 per cent IMU
• →Open-to-Buy Template — a working spreadsheet version of the balance