This page is for a domestic retail buyer or planner who has to judge a single style's own full profitability, not just one figure from it in isolation. At work, a buyer who checks only a style's own margin, without also checking open-to-buy and the risk of a later markdown, can approve a style that looks good on one measure and still lose money overall. This lesson mainly teaches the money flow: it combines the four earlier lessons of this course into one worksheet, using Cedar & Co.'s own hybrid buying of forecast plus reorder volume.
Cedar & Co. buys a style equivalent in value to Order A: 15,000 pieces bought partly against its own forecast and partly as a reorder once early sales confirm demand, a hybrid buying pattern. Omar must check the style's own margin, confirm it fits inside the remaining USD 24,000 open-to-buy, and estimate what a possible later markdown would still leave of the planned profit, all before treating the style as approved. Without this skill, a buyer signs off a style on one good number while three other numbers, checked separately, could each still turn it into a loss.
You need: lessons T19-C01-L01 through T19-C01-L04, covering margin and markup, open-to-buy, and the cost of a markdown.
By the end of this lesson you can:
Not covered here: any lesson beyond this course; Track 19's next course moves on from retail profitability to a different buying and brand-management skill.
| Term | Meaning |
|---|---|
| Margin | Profit divided by the selling price, shown as a percentage of what a company sells for. |
| Markup | Profit divided by the cost, shown as a percentage of what a company paid. |
| Open-to-buy | A retailer's season budget minus its committed spend: the amount still available to commit to any range. |
| Markdown | A reduction in the shop price of goods that have not sold as forecast, used to clear the remaining stock. |
| Sell-through rate | The share of stock actually sold within a planned period, used to judge whether a forecast was right. |
| Hybrid selling model | A brand that sells through more than one route to market at once, for example wholesale and its own direct retail, often at different prices. |
No single figure from the earlier lessons of this course is enough on its own to approve a style. A strong margin can still be unaffordable if it does not fit inside the remaining open-to-buy. A style that fits the budget can still disappoint if a plausible markdown, applied to even a modest share of its stock, removes most of its planned profit. A complete check combines all four figures, margin, markup, open-to-buy and markdown risk, into one picture before a style is approved.
A buyer meets several shapes of this combined check across a normal working year, and skipping any one figure in any of them can turn an apparently good style into a disappointing result.
| What can differ | The shapes you will meet | Why it matters |
|---|---|---|
| Hybrid forecast-plus-reorder buying | Cedar & Co. commits part of its 15,000 pieces against its own forecast and holds the rest back as a reorder option once early sales confirm demand. | The reorder portion can be cancelled or trimmed if early sell-through is weak, lowering markdown risk compared with committing the full quantity up front. |
| Fully pre-booked export buying | Fairway Stores commits to the full quantity of an export order before the season starts, with no reorder option to adjust later. | A fully pre-booked order carries higher markdown risk than a hybrid order, because none of the quantity can be trimmed if sell-through disappoints. |
| A style with strong margin but little open-to-buy room | A new style shows a 59.8% margin, equivalent to Fairway Stores' own figure, but the season's open-to-buy has almost none left. | The margin alone cannot justify approval; the style must be resized, reallocated, or delayed to fit the remaining open-to-buy. |
| A style with comfortable open-to-buy but high markdown risk | A style fits easily inside open-to-buy, but its category has a history of needing markdowns on a large share of stock. | Comfortable budget room does not protect against a style's own markdown history; the worst-case profit must still be checked before approval. |
Cedar & Co.'s style, equivalent in value to Order A, is planned at a shop price of USD 19.90 against a buying cost of USD 8.00, a margin of 59.8% and a markup of 148.8%. It requires USD 30,000 of the season's remaining USD 24,000 open-to-buy, a shortfall Omar resolves by committing only the forecast portion of 12,000 pieces up front (USD 24,000) and holding the remaining 3,000 pieces as a reorder option. Omar then checks the worst case: if sell-through is weak and 4,000 of the pieces eventually sold need a 20% markdown, what does the style's own profit look like.
Even in the worst case modelled, Cedar & Co.'s style still keeps 88.9% of its planned profit, because the markdown affects only a third of the committed quantity, and the style already fits inside the season's own open-to-buy. This combined picture, not any single figure alone, is what actually supports Omar's decision to approve the style.
The methodA common mistake is treating a style's own strong margin, such as 59.8%, as proof the style is worth buying, and skipping the open-to-buy and markdown checks that this course's earlier lessons cover separately. What this costs a retailer that gets it wrong is real: a style can pass the margin check easily and still overcommit the season budget, or still lose a meaningful share of its planned profit to a markdown that a full check would have anticipated and priced in from the start. A buyer who runs only one of the four checks has not actually completed a profitability review; the other three checks each carry their own separate risk that margin alone cannot reveal.
A single style is not properly checked until four separate figures are looked at together: its own margin and markup, whether its cost fits inside the season's remaining open-to-buy, and what a plausible markdown would still leave of its planned profit. A strong margin on its own proves nothing about whether the budget can afford the style, and a style that fits the budget can still lose much of its profit to a markdown if that risk is never estimated in advance. Building all four figures into one worksheet, for one style at a time, is what turns four separate lessons into one usable buying decision.
Cedar & Co.'s buying team reviews the style and reports back to Omar: margin 59.8%, but the full 15,000-piece quantity needs USD 30,000 against only USD 24,000 of remaining open-to-buy, and a worst-case 20% markdown on 4,000 pieces would still leave 88.9% of planned profit on the resized, 12,000-piece committed order.
Here is the team's own summary note:
Should Omar approve the full original quantity, or hold at the resized commitment? Decide before opening the answer.
Hold at the resized, 12,000-piece commitment. Two facts in the team's own note decide this.
First, the full 15,000-piece quantity does not fit the remaining open-to-buy. It needs USD 30,000 against only USD 24,000 available, a USD 6,000 shortfall that a strong 59.8% margin does not remove, exactly as lesson T19-C01-L03 showed.
Second, the resized commitment already has a tested worst case. At 12,000 pieces, the style keeps 88.9% of its planned profit even if 4,000 pieces need a 20% markdown; the reorder portion of 3,000 pieces can be added later only if early sell-through justifies it, without ever risking money the season budget does not have.
Approving the full 15,000-piece quantity now would repeat the open-to-buy shortfall this course's third lesson already warned against, for a style whose worst-case profit has only been tested at the resized, 12,000-piece level.
Using this lesson's own figures:
Approving the full quantity without first securing the extra USD 6,000 of open-to-buy risks committing money the season budget does not currently have, even though the larger order's own worst-case profit of USD 158,600 would still be a larger absolute number. A retailer that repeatedly commits beyond its own open-to-buy, chasing a larger absolute profit, is the exact mistake lesson T19-C01-L03 warned against.
Open the course workbook's "Complete profitability" sheet. It draws in the margin and markup from the "Markup and margin" sheet, the remaining open-to-buy from the "Open-to-buy" sheet, and a markdown scenario from the "Markdown impact" sheet, calculating a single style's own worst-case profit automatically. Use it as the final check before approving, resizing, or rejecting any style.
[Download the Retail profitability worksheet](../../templates/T19-C01-retail-profitability-worksheet.xlsx)
1. A style shows a strong 55% margin. What else must be checked before it can be approved?
2. A style needs USD 40,000 against USD 35,000 of remaining open-to-buy. Its margin is a strong 62%. Can it be approved at its full quantity?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Margin | الهامش | Marge | Marj | Profit divided by the selling price, shown as a percentage of what a company sells for. |
| Markup | الزيادة على التكلفة | Majoration (marge sur coût) | Kâr yüzdesi (markup) | Profit divided by the cost, shown as a percentage of what a company paid. |
| Open-to-buy | الرصيد المتاح للشراء | Budget disponible (open-to-buy) | Alıma açık bütçe (open-to-buy) | A retailer's season budget minus its committed spend: the amount still available to commit to any range. |
| Markdown | تخفيض السعر | Démarque | İndirim (markdown) | A reduction in the shop price of goods that have not sold as forecast, used to clear the remaining stock. |
| Sell-through rate | معدل البيع الفعلي | Taux d'écoulement | Satış oranı | The share of stock actually sold within a planned period, used to judge whether a forecast was right. |
| Hybrid selling model | نموذج بيع مختلط | Modèle de vente hybride | Karma satış modeli | A brand that sells through more than one route to market at once, for example wholesale and its own direct retail, often at different prices. |
This completes Course 1 of Track 19. You now have every piece needed to read a retail buyer's own profitability worksheet from open-to-buy through to a marked-down final result. Back to the course map