They take delivery of $50k in new candles and mugs. Storage fills up. They have to slash prices to 40% off to move the stock. Gross margin drops from 52% to 12%. They miss Q1 profit goals.
OTB=(Planned Sales+Planned Markdowns+Planned End-of-Month Stock)−Beginning-of-Month Stock−On-Order Commitmentscap O cap T cap B equals open paren Planned Sales plus Planned Markdowns plus Planned End-of-Month Stock close paren minus Beginning-of-Month Stock minus On-Order Commitments open to buy
is a critical financial control and budgeting process used in retail to manage inventory investments. Essentially, it acts as a roadmap for retailers, determining how much inventory they can afford to purchase during a specific period—typically a month or a season—to meet sales goals without overstocking. The Core Mechanics of Open-to-Buy They take delivery of $50k in new candles and mugs