Q: I am opening a new store and would like some advice on how I should spend my open-to-buy (OTB). I’ve seen you tell merchants that they should only spend 80% of their OTB at the beginning of the season to save some money for reorders and fill-ins later on. Is this the case when buying for a new store opening?
Steve Pruitt: Great question. You’re right in that we normally advise our merchants to withhold some of their OTB for later in the season, but in the case of a new store you need to have a good amount of inventory to get started and look competitive in your market. So, for the first month of the first season you will need to spend 100% of your OTB – this is technically the purchase plan for the store opening. For the balance of the first season, you should leave some OTB open for top sellers and items your new customers are asking for. We normally suggest keeping 20% open.
Also, remember that if you hold back a little of your OTB you are also guarding yourself against a downturn in the market. You can always buy more if the market is strong, but if you buy too much at the beginning of the season and the market is weak you’ll have to take margin hits later on.
Good luck with your new store!
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