How to Determine Your Store's Open-to-Buy
When deciding on your store’s open-to-buy, there are a lot of factors to take into account. First, consider department needs AND sales growth challenges. Read on for more tips!
What is open-to-buy?
An open-to-buy is a critical tool for successful retailers. It is a thirty thousand foot view of inventory control. Open-to-buy takes into account your sales and inventory on-hand figures to order and reorder product (by department, category and individual item).
Your job as a buyer, is to steer product selection that keeps customers, staff and volunteers engaged and sell more product every day. Carefully analyze your store’s daily/weekly/monthly sales figures. Look at how your budget is divided among your various departments, all while taking into account expected sales and existing stock.
Why is open-to-buy important?
Whether less formal or highly structured, an open-to-buy is one of your most powerful tools to increase product turnover and store profit. Maintaining an inventory level that fits your anticipated sales for a specific time period (and ordering and implementing markdowns according to this plan) will improve sales volume, cash flow, and visual presentation in your stores.
Carefully figure your open-to-buy before you ever step foot on the tradeshow floor. Develop a budget -- how much you want to spend and on what categories. It is important to do a quick inventory and put together a shopping list prior to attending market. This exercise will keep you focused what product holes need be filled, & to not overspend a particular category.
Tips for a roomier open-to-buy:
No matter what type of store you operate, we all have challenges with expanding our open-to-buy with our finance departments. You can’t grow if your budget is too tight! You can’t buy more if you are over-bought in other departments. Plan carefully!
One suggestion is to auto-replenish the “basics” that consistently, routinely turn. Carefully take these figures into account, and you may just find more room in your open-to-buy.
Consignment may be a resource to expand your merchandise without paying for it until it sells. Finance departments may want to avoid consignment complications: who is financially responsible if something gets broken, shop worn, or stolen? Manage the inventory and prevent these problems, by having a clear and firm system in place.
What if you are inventory-heavy with in-house books and catalogs (which skews how your inventory is viewed)? See if you can move these items out of inventory and brought in as-needed to the selling floor. This “right sizes” your sales figures for a more accurate picture which categories are selling strong, and most profitable.
How to approach challenging scenarios?
- Board or executive director “wants” merchandise that you don’t suppose will sell
- Employee costs (which are higher than ever!) affect profits, and in turn affect open-to-buy
- Forces outside your control, i.e. a closed major exhibit, weak exhibit, or abnormal weather