What Does OTB Mean in Retail?
- Amanda Dinan
- Aug 10, 2022
- 2 min read
Updated: Feb 8, 2023
This post was written by Amanda Dinan, retail consultant, and SEO strategist at Point of Sale Strategies. Amanda helps small businesses and brands grow through merchandising strategies and organic SEO. If you need help creating your own OTB, Amanda offers a 6-week 1:1 Retail Strategy Course where we develop a custom OTB template for your business.
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?
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
Understanding OTB (Open-to-Buy) in retail is essential for managing inventory effectively and ensuring that stock levels match customer demand without overstocking or understocking. It helps retailers plan purchases, control budgets, and improve overall profitability.
In practice, good financial planning plays a big role in keeping retail operations stable. Businesses that manage their cash flow well are better positioned to respond to demand changes and seasonal trends.
Tools like Grid Finance can support retailers by providing flexible funding options, helping them maintain healthy inventory cycles and smoother day-to-day operations.
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