Retail & CX metrics glossary
Open to buy (OTB) is the buying budget still open. Here is how to plan it — and the assumption it hides.
Open to buy (OTB) is the portion of the merchandise budget a buyer can still commit without blowing past the planned inventory level. It answers the one question every buying meeting circles back to: given what we plan to sell, what we want to end the period with, what we already own and what is already on order — how much room is left to buy? OTB is the brake and the accelerator of merchandise planning at once: too little and the assortment starves; too much and the season ends in markdowns.
The mechanics are simple arithmetic, but the discipline is not. A functioning OTB is revised on a cadence, broken down by category, and protected from the two classic failure modes — impulse buying that consumes the budget early, and over-locked plans that leave the sales floor without sizes. This page covers the formula, a working calculator, the operating discipline that separates a real OTB from a spreadsheet ornament, and the structural blind spot underneath every buying plan: the conversion rate the sales projection quietly assumes.
OTB — Open to buy
OTB = planned sales + planned end inventory − beginning inventory − on-order
planned sales = sales forecast for the period, at the same valuation (retail or cost) as the rest of the plan · planned end inventory = the stock level you want to carry into the next period · beginning inventory = the stock you actually own at the start of the period · on-order = purchase orders already placed but not yet received — committed money that is no longer open
Open to buy calculator
A womenswear buyer plans October: planned sales of $180,000, planned ending inventory of $220,000, beginning inventory of $240,000 and $90,000 already on order. OTB = 180,000 + 220,000 − 240,000 − 90,000 = $70,000. That is all the money still open for October receipts — everything else is either owned or committed. If a supplier shows up with a great deal worth $110,000, the plan says no, however good the price looks.
How a disciplined OTB is operated
There is no universal "good OTB number" — the health of an open-to-buy shows in how it is run, not in its value. The operating conventions below are the working baseline in merchandise planning:
| Revision cadence | Monthly at minimum; weekly during peak season |
|---|---|
| Planning level | By category or department — never only the total |
| Opportunity reserve | 5–15% of OTB held back for in-season deals |
| Cover target | Tied to the category's days of inventory (DIO), not a flat number |
These are planning conventions from merchandising practice, not statistical norms — the right cadence, reserve and cover depend on category volatility, lead times and how fast your forecast decays.
How to calculate and operate the OTB
The calculation runs per period and per category. Start from the sales plan for the month, add the ending inventory you want to hand to the next month, subtract what you already own, and — the step most spreadsheets forget — subtract everything already on order. On-order is committed money: a purchase order signed in July is not "open" in September just because the goods have not arrived. An OTB that ignores the order book systematically overstates the room to buy and delivers the overstock two months later, with interest.
Operating the OTB means revising it every time reality diverges from plan. Sales came in 12% under forecast? The ending inventory target is now too high relative to demand, and the open budget shrinks — or receipts get pushed. Sales beat plan? OTB opens up, and the buyer can chase. Monthly revision is the minimum; in season, weekly. And always by category: a chain can be overbought in knits and starved in denim while the total OTB looks perfectly balanced. The total hides exactly the imbalances the OTB exists to prevent.
The classic OTB mistakes
The first classic failure is buying on feeling. A strong vendor pitch, a one-time discount, a competitor rumor — and the buyer commits budget outside the plan. Each individual deal looks defensible; the sum is an inventory position weeks above target cover, and the "saving" on the invoice is paid back at markdown time with a much bigger number attached. The whole point of the OTB is to make that trade-off visible before the signature: an opportunistic buy is fine when it comes out of a reserve planned for it, and toxic when it silently eats next month's receipts.
The mirror-image failure is the OTB operated as a straitjacket. A plan locked at the total level, revised quarterly, with no opportunity reserve, will refuse the reorder of the best-selling item because "there is no budget" — while the money sits in categories that are not selling. The visible symptom is broken size curves on winners: the store has stock, just not the stock customers ask for. A disciplined OTB is firm about totals and flexible about mix; a bureaucratic one is the opposite, and it converts planning discipline directly into lost sales at the shelf.
The blind spot: OTB plans on projected sales — and projected sales assume a conversion rate
Every number in the OTB formula is either known or chosen, except one: planned sales. And a sales projection for a physical store is really three assumptions multiplied together — how many people walk in, what a transaction is worth, and what share of visitors convert. Traffic and ticket get measured routinely. Conversion, in most merchant planning, is a historical average taken as a given: last year's rate, plus or minus a growth wish. The buying plan inherits that assumption in every line.
The problem is that conversion is not a constant of the store — it is the output of the sales conversation, and it moves with execution. A store where the team actually greets, discovers needs and offers the product converts more of the same traffic; that store sells through faster, frees OTB earlier and earns the reorder. A store where the product never enters the conversation converts less, misses plan, and locks the whole buying calendar behind it. The OTB math is identical in both cases; the premise underneath it is not. A merchandise planner who cannot see execution on the floor is planning purchases on top of an unmeasured variable — and will keep correcting with receipts and markdowns what was, all along, a conversation problem.
OTB plans the buy on one assumption: conversion. We measure the assumption.
Cognifyze captures the in-person sales interaction itself — with consent, without identifying any individual shopper — and measures the number every buying plan takes on faith: how often the store actually offers, argues and converts the traffic the plan projected. When conversion becomes visible and moves, the whole merchandise plan breathes: forecasts firm up, cover targets hold, and the OTB stops absorbing the floor's execution gap as if it were a demand problem.
In measured deployments, making the interaction visible moved same-store conversion from 51.5% to 79.5% (+28pp, p<0.001), with 383% ROI and payback in 1.4 months.
See the assumption under your buying plan — book an executive diagnostic.
Related metrics and guides
Open to buy — frequently asked questions
What is open to buy in retail?
Open to buy is the amount of merchandise budget a buyer can still commit in a period without exceeding the planned inventory level. It is calculated from planned sales, planned ending inventory, current inventory and orders already placed — everything not yet owned or committed is "open".
How do you calculate open to buy?
OTB = planned sales + planned ending inventory − beginning inventory − on-order. Run it per month and per category, at a consistent valuation (retail or cost), and always subtract the on-order — purchase orders already signed are committed money, not open budget.
What does a negative OTB mean?
A negative OTB means you are overbought: current inventory plus incoming orders already exceed what the sales plan and the ending-stock target justify. The playbook is to stop new commitments, postpone or cancel what can still be moved, and accelerate sell-through — before the position resolves itself as markdowns.
Should OTB be planned at retail value or at cost?
Merchandise planning traditionally runs OTB at retail value, because sales and inventory plans are set at retail; finance teams often prefer cost for the cash view. Either works — what breaks the OTB is mixing the two in one plan. Pick one valuation, state it, and keep every line consistent.
How often should the OTB be revised?
Monthly is the minimum for the plan to react to actual sales; in high season or fast categories, weekly. An OTB revised quarterly is a photograph, not a control: by the time it flags the deviation, the receipts that caused the overstock — or the reorder that would have saved the winner — are already history.