For independent retailers, cash flow is everything. One of the most powerful yet underutilized tools for managing inventory and protecting your bottom line is Open-to-Buy (OTB) planning. While larger chains have sophisticated buying departments, independent retailers can leverage this same strategic approach to gain complete control over their inventory investments and maximize profitability. If you’re looking to strengthen your inventory systems and improve cash flow, contact us to explore practical strategies tailored to your business.

What Is Open-to-Buy and Why Does It Matter

Having an accurate and realistic sales budget will lead to an accurate retail buying budget (OTB), which is very important to avoid overstock or understock issues. At its core, OTB answers one critical question: how much can I safely spend on inventory right now without overextending my cash position? The formula is straightforward: OTB equals planned sales plus planned markdowns plus planned end-of-month inventory minus beginning-of-month inventory. However, the strategic value goes far deeper than the math.

In retail, OTB planning is in-season merchandise planning where planners create receipt plans to support inventory and sales goals. For independent retailers, this distinction is crucial. Unlike pre-season buying decisions that are locked in months before a season starts, OTB allows you to remain agile, adjusting your buying decisions based on real-time sales data and market trends as they unfold.

The Cash Flow Challenge Independent Retailers Face

Inventory represents your largest capital expenditure as a retailer. Persistent stockouts cost retailers nearly $1 trillion worldwide annually, while overstocking ties up the cash you need for operations and growth. For independent retailers with limited access to capital, getting this balance right isn’t just about profit—it’s about survival.

Consider this: if you’re carrying excess inventory, that cash is sitting on your shelves instead of in your bank account, paying rent, payroll, or supplier invoices. Conversely, if you under-buy due to cash constraints, you miss sales opportunities and disappoint customers. Open-to-buy planning bridges this gap by forcing you to be intentional about every dollar you invest in inventory.

How OTB Drives Better Decision-Making

With real-time insights into stock availability and demand patterns powered by machine learning algorithms that analyze sales data, demand planners can optimize inventory and reduce both stockouts and overstocking while cutting carrying costs. This is particularly valuable for independent retailers who need to move quickly in response to market conditions. A rolling OTB approach allows you to make strategic adjustments week to week, ensuring your inventory investment always aligns with actual demand signals rather than assumptions made months in advance.

The power of OTB lies in its flexibility. Most businesses operate with weekly or monthly open-to-buy plans, allowing them to make adjustments as conditions change without being locked into an annual or quarterly plan. This means if you notice a category is selling faster than anticipated, you can reallocate budget to capitalize on that trend. If another category is underperforming, you can reduce buying and preserve cash.

Technology Is Making OTB Accessible

Not long ago, sophisticated OTB planning required expensive enterprise software beyond the reach of independent retailers. That’s changing rapidly. As retailers leverage AI and machine learning to optimize inventory management by enhancing forecasting accuracy, automating tasks, and enabling smarter decision-making, with 91% of executives believing AI will be the top game-changing retail technology in the next three years, new tools are emerging that democratize these capabilities.

Real-time data analytics and automated systems can track inventory metrics effectively with key performance indicators and dashboards, giving independent retailers visibility into their inventory performance that was previously only available to large enterprises. A fully integrated point-of-sale system with inventory controls provides automated reports and insights, eliminating the need for manual tracking and reducing costly errors.

Implementing OTB: A Practical Starting Point

Begin by understanding your sales history and projections. Fast-growing retailers should review OTB plans weekly, while others can manage with a monthly review to keep inventory aligned with demand. Start with your highest-volume categories and expand from there.

Next, define your promotion and assortment plan to allocate cash and resources strategically. Be realistic about markdowns—many independent retailers underestimate how much inventory they’ll need to mark down, which throws their entire OTB calculation off. Account for seasonal swings, supplier lead times, and your typical inventory turnover rates.

The Bottom Line

Mastering open-to-buy planning is essential for retail success in 2025. By implementing a strategic approach that encompasses inventory management, sales forecasting, expense control, and planning, you can enhance your business’s financial health and drive sustainable growth. As an independent retailer, implementing OTB planning transforms you from a reactive buyer to a strategic operator. You’ll reduce excess inventory, minimize stockouts, improve cash flow, and ultimately drive greater profitability.

For independent retailers ready to move from reactive buying to confident, data-driven decisions, contact us to learn how expert OTB guidance can help you scale profitably.