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What Does OTB Mean in Retail?

Updated: Aug 12, 2022

One of the most important financial documents you will work with in retail is the OTB (open-to-buy) report. But what does an OTB report mean? And what retail metrics does it measure?


OTB meaning

Every retailer has a different OTB report but what is consistent is that every major retailer does maintain one. An OTB report is updated on a weekly basis, usually on Mondays, when sales data from the last week is populated. The purpose of an OTB is to project sales by Class and is an inventory management tool. The better you project your retail sales, the better you will manage inventory and make sure that you are not overstock.


What Retail Metrics Does an OTB Manage?

A common OTB report measures your inventory levels at the beginning of the month and how much you plan to sell through by the end of the month, determining how much inventory will be remaining for the following month's sales. This is key in determining your inventory replenishment strategy.

BOM Inventory - Sales = EOM Inventory.

If you start the month with $1,000 in candy bars, and sell $800 in candy bars you are left with $200 in candy bars for the following month. That might be a problem if you start the next month with only $200 in candy bars but plan to sell through another $800 of candy bars. You need to order more inventory to meet your customer's demands. Depending on the lead time, you may be able to replenish the inventory before you sell out of your $200 inventory.

Keeping an up-to-date OTB is essential to realizing your sales potential. Even small business owners need to track and manage their inventory levels with an OTB report.

More advanced OTB reports can include metrics like BOW Inventory, Period-To-Date Sales, Projected Sales, Sales Plan, Total Markdowns, YoY Sales, and Projected EOM Inventory.


Need OTB Help?

Having OTB Problems? I would love to take a look and help you create and efficient and accurate OTB report. Contact me anytime at amanda@posstrategies.com


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