Open To Buy | How Much Inventory Do I need? | Retail Dogma

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How Much Inventory Do I Need To Buy?

The process of calculating how much inventory to buy for your retail or ecommerce store is called Open to Buy (OTB). It is usually done in an excel sheet, formulated to calculate the buying budget, based on the expected sales for that period and the current inventory level.

If you are starting a new retail or ecommerce business, your opening stock will be zero, and you will calculate based on your estimated sales and desired inventory turns or forward stock cover.

After you start trading and sales come in, you will be able to create a more realistic sales budget every year, and use it to calculate your buying budget on a 6 months basis. This doesn't mean you will buy the inventory every 6 months, but the planing process takes place every 6 months. Then you use this plan to place your orders with your suppliers, based on their order lead time.

Calculating an accurate purchasing budget is very critical for any retail or ecommerce business, as low inventory levels will prevent delivering the required sales, and high inventory levels will trap cash in the business.

Maintaining an Open to Buy excel sheet for your fashion boutique will also help you track your inventory throughout the year and spot any inventory build-ups quickly.

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