Most small boutiques do not fail because they cannot sell — they fail because they buy wrong: too much of one category, too little of the winner, and reorder money trapped in stock that has not moved. The retail industry solved this decades ago with open-to-buy (OTB) planning, but the method is usually explained in department-store terms that mean nothing to a shop with $3,000 of buying power. Here it is, rebuilt for small-lot wholesale.
What open-to-buy actually is
Open-to-buy is one number: how much more inventory you are allowed to purchase this period, in dollars, at cost. Everything else is arithmetic around it.
OTB = Planned end-of-month inventory (at cost)
+ Planned sales (at cost)
+ Planned markdowns (at cost)
− Beginning-of-month inventory (at cost)
− Inventory already on order
A worked example for a boutique doing $8,000 retail/month at a 55% gross margin (cost of goods ≈ 45%):
| Line | Value |
|---|---|
| Planned EOM inventory (4× monthly COGS target) | $14,400 |
| Planned sales at cost (8,000 × 0.45) | $3,600 |
| Planned markdowns at cost | $300 |
| Less BOM inventory | −$14,000 |
| Less on order | −$1,200 |
| OTB for the month | $3,100 |
If your OTB comes out negative, you are overbought — the discipline says buy nothing, mark down the laggards, and convert stock back to cash. That single rule prevents most boutique deaths.
Stock-to-sales ratio: the coverage dial
The 4× in the example above is the stock-to-sales ratio, and it differs by category — which is where low-MOQ sourcing changes the game:
| Category | Typical ratio | With 3-piece minimums |
|---|---|---|
| Core basics (white cloths, black clips) | 4–5× | 3× — reorders are cheap and fast |
| Fashion/trend (leopard, bubble texture) | 2–3× | 1.5–2× — test 3, reorder the winner |
| Seasonal (Christmas, Valentine) | 3× | 2× — shallow buys, air-express top-up window |
| Jewelry/accessories | 3–4× | 2.5× — tiny cartons, frequent replenishment |
Traditional wholesale forced high ratios because minimums were huge: if you must buy 300 units, you must sell 300 units, so buyers padded safety stock. At 3-piece minimums with consolidated DDP shipping, the safety stock lives at the supplier, not in your back room. That is the structural advantage of the model, and OTB math is where it shows up as cash.
Category allocation: the 60/25/15 split
Divide monthly OTB across three buckets:
- 60% proven sellers — SKUs with sell-through above 50% in the last 90 days. Reorder these first, always. This is the boring money.
- 25% adjacency bets — new colorways, sizes, or one category step from a proven seller (the customer who bought the pink voile runner is the customer for the pink lace round — see how the spring linens guide cross-feeds). Measured risk with a thesis.
- 15% discovery — genuinely new SKUs at 3-piece minimums. The rule: a discovery SKU graduates to the adjacency bucket at 40%+ sell-through in 60 days, or it gets marked down at day 90. No exceptions, no sentiment.
Sell-through is the only metric that matters at this scale: units sold ÷ units received over a fixed window. Track it in a spreadsheet by SKU — every 3-piece test order generates real data for $15 of inventory risk, which is cheaper than any market research you will ever buy.
Reorder cadence and the freight calendar
Reordering on feel is how freight costs eat margins. Set cadence by lead time:
- Weekly review: sell-through report, discovery-bucket decisions
- Order in consolidated batches: one carton every 3–4 weeks beats four small ones — each DDP shipment carries a fixed clearance and handling cost, and consolidation is the single highest-ROI freight decision (the mechanics are in the mix-and-match consolidation guide)
- Seasonal pre-buys: dated backward from shelf-up day minus 45 days sea freight — the seasonal calendars for Christmas, Mother's Day and graduation all follow the same backward-planning pattern
- Air-express reserve: hold ~10% of OTB unspent for mid-season top-ups of unexpected winners; at air rates the winner still clears margin, the dud never gets bought
The markdown discipline
Markdowns are a cost of being wrong, and being wrong is budgeted for — that is what the 15% discovery bucket is. The schedule that works:
- Day 60 at under 25% sell-through: reposition (move to register zone, re-photograph, bundle)
- Day 90: 25% off
- Day 120: 40% off or bundle into a gift box as a component
- Day 150: clearance to cash — cash funds the next winner; dead stock funds nothing
OTB for online-only sellers
The math is identical with two changes: storage-cost ratio replaces shelf space (a closet-warehouse operation runs leaner inventory, ratio 2–3×, and leans harder on the weekly-consolidation freight rhythm — see the closet-warehouse channel playbook), and platform listing velocity replaces foot traffic as the sell-through clock (a listing with 20 saves and zero sales is a pricing problem, not a demand problem — cut price before you cut stock).
Run your first OTB month
- Count current inventory at cost (not retail) — the number that matters.
- Set planned sales from the last 90-day average, and a stock-to-sales ratio per the table above.
- Compute OTB; split it 60/25/15 before you look at a single product page.
- Buy in one consolidated carton per month at 3-piece minimums; review sell-through weekly; reorder winners from the proven bucket first.