Are you planning to increase sales this year? Do you have an idea of how you will achieve this goal? Perhaps you found a new vendor during the holidays that you will order from again. Perhaps you will add a new merchandise classification. Maybe you will find that perfect salesperson who really can sell blocks of ice in Antarctica. OR, maybe you will start buying all your inventory smarter by using an Open-to-Buy.
The Open-to-Buy is a tool. The thing about a tool is that you have to use it to benefit from it. It takes more than an occasional glance, best guesstimate, or gut feel to benefit from it. It takes planning and use. Would you like to increase you initial markup, decrease markdowns and bring your customers in more frequently? Correctly using an Open-to-Buy can help. An Open-to-Buy is based on a sales plan--your sales plan for your store. It will calculate your inventory needs to meet your sales plan and keep the inventory fresh so customers will make it a priority to come back often.
The Open-to-Buy will also give you a measurement and analysis of your inventory's success (or failure). Remember, not every classification will increase or decrease by the same percent. Some may not change at all. Some may increase or decrease by 20% - 30% or more.
Inventory is the largest investment you make for your business; therefore, you need to make the best purchasing decisions possible. Using a Open-to-Buy will help to keep your inventory fresh and bring your customers back more frequently. It will help you be a better buyer at market because you will be able to spend your time searching for and buying the best merchandise for your store instead of worrying about whether you have bought too little-or too much. It will help you achieve higher mark-ups and decrease markdowns. You can save money (no excessive amount of seasonal merchandise to mark down to cost--or less--) and time. Of course, using an Open-to-Buy is invaluable in managing your cash flow. You know when you plan to bring in merchandise so you know when you will pay for it as well.
Since the Open-to-Buy is based on your sales plan, you will have to review each classifications' performance to keep the Open-to-Buy relevant. I recommend that sales plans be revised as soon as you see a trend developing-even if it's month 4 of a six month season. After all, you want to stock what your customer wants when they want it-that's how you make the largest profit.
The following table shows the results of a client's store located in the southeast United States. These are actual results and demonstrate exactly what proper use of the open-to-buy can do for your store. Concerning using an Open-to-Buy, this retailer told me, "I have found that both good buying and bad buying are a habit."