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Is It Time for Your Retail Store to Convert to Open-To-Buy?

The buzzword of Open-To-Buy occupies every merchandiser’s mind to save on dollars. Open-To-Buy not only helps maximize sales dollars but also minimizes cost dollars. It is an essential tool for Retailers to improve their financial performance. Small Retailers struggle to make their merchandise budget and often buy based on surmise. Big Retailers struggle with bulky worksheets as Retail ERP software does not offer the Open-To-Buy concept as part of their core modules. Some software provides it as an add-on module with poor integration.

What is Open-To-Buy?

Open-To-Buy is a concept to bring more transparency into the retail business. It is a tool that addresses the most critical question of how much to replenish and when to replenish stocks as they deplete. Retailer’s significant investment goes into their inventory buys, and Open-To-Buy addresses how much to buy. It is always future-oriented and adjusts the plan based on past trends and the vendor’s history of supplies. It is derived based on sales budgets to procurement budgets to actual sales in dollar terms. Often, an Open-To-Buy is combined with an assortment plan to answer both questions of how much to buy and which items to buy in each inventory category. Open-To-Buy is not used for daily basics or essentials as they go by standard replenishment at re-order levels.

Open-To-Buy in Retail

Open-to-Buy starts with a transparent planning process. Planning is the cornerstone of the Open-To-Buy concept. A sales plan or budget is prepared period-wise, sometimes even week being the tiniest period, but most take a month as a period. After a good sales plan is ready, an inventory plan is prepared to match the sales plan. The critical question here is how much inventory do I need to keep supporting subsequent period sales? Based on stock on hand and expected movement of stock, an inventory receipt plan is made, and vendor purchase orders are finalized ultimately. Several other inventory adjustments like markdowns, adjustments, one-time bulk sales, etc., are also considered while arriving at the inventory replenishment question.

How can you Implement an Open-To-Buy Strategy in your store?

Open-To-Buy is a collaborative partnership where both the retailers’ suppliers and the merchandisers work together. It is a solid strategy to minimize and manage inventory costs. In Retail ViVA, our Retail ERP, we have created an integrated merchandising module that provides full-fledged Open-To-Buy Store Inventory Functionality to help your store generate profit. Inventory replenishment ordering is so automated that merchandisers can efficiently function and place an order on time to receive goods on time. A sale lost due to lack of inventory at the store can well turn out to a customer loss permanently, and thus the availability of inventory items at the store plays a crucial role in customer loyalty and experience.

Conclusion

Customers are cost and time-conscious. So, you can implement Open-To-Buy with precise analytics to track return on investments on your inventory assets. Further, Open-To-Buy can help merchandisers plan better with optimum inventory holding without facing the risk of stock-outs.

Written by
(Ragu)nathan Kannan