A Boulder 3-location specialty running chain had been ordering inventory by instinct for years. A SKU-level open-to-buy budget cut markdown losses by $68K and lifted gross margin 4.1 points in year one.
01The Situation
The founder had opened her third location two years earlier. Revenue was growing but gross margin had declined for three consecutive years as markdown losses increased. She was ordering too much slow-moving product and not enough fast-moving, a classic open-to-buy problem in specialty retail.
A brand rep mentioned her sell-through rate was 20 points below top-performing specialty retailers in comparable markets. That comment prompted the call to us.
02What We Did
We pulled two years of sell-through data by SKU, category, and location. The pattern was clear: running shoes in the $120-180 price range turned 5-6x per year; shoes above $200 turned 2-3x and accumulated in markdown inventory. She was buying too deep into the premium segment relative to customer demand.
We built quarterly open-to-buy limits by category: maximum buy amounts based on projected sales and target turns, with hard limits preventing over-buying in slow-turn categories. First season under the system: markdown volume fell 31%. Gross margin improved from 34.1% to 38.2%.
03Client Impact
The founder had been losing margin to markdowns every year and attributing it to competition. It was not competition, it was buying discipline. The open-to-buy system changed her behavior, and the margin recovered faster than she expected.
Breakdown
| Category | Annual Revenue | Prior Turns | New Turns | Margin Before | Margin After |
|---|---|---|---|---|---|
| Running Shoes | $960,000 | 4.2x | 5.8x | 38% | 42% |
| Apparel | $480,000 | 3.1x | 4.4x | 44% | 48% |
| Accessories | $360,000 | 5.8x | 6.2x | 52% | 53% |
| Nutrition | $240,000 | 8.4x | 8.6x | 34% | 35% |
| Clearance/Markdown | $360,000 | — | Reduced 31% | 8% | 12% |
| TOTAL | $2,400,000 | 4.1x avg | 5.6x target | 34.1% | 38.2% |
What changed
SKU-Level Inventory Budget Built
Two years of sell-through data analyzed. Open-to-buy limits by category and price range established.
Markdown Volume Reduced 31%
Over-buying in premium segment eliminated. First OTB season: markdown losses fell $68K.
Gross Margin 34.1% → 38.2%
4.1 point improvement in one year. Recovers 3 years of margin decline.
Sell-Through Rate: 62% → 84%
Now in line with top specialty retailers. Brand rep relationship improved.
The founder had been losing margin to markdowns every year and attributing it to competition. It was not competition, it was buying discipline. The open-to-buy system changed her behavior, and the margin recovered faster than she expected.
Want results like these?
Book a free consultation — we'll tell you exactly what we'd do.