What is a SKU? How They Work and Examples

For example, start with the identifier for jeans before getting into style and size. Doing so makes it more difficult for a consumer to find the exact model at another store while decreasing the chances of competitors matching pricing strategies with the same information. It can also help to reduce the practice of consumers visiting stores to compare prices for items they intend to buy online instead. SKU product data can also be applied on the sales floor or within an ecommerce checkout. For example, you could place high-selling SKU items at eye level on your store shelves, or feature them prominently on your website’s homepage.

We’re not suggesting you should be able to reel off every SKU in your Shopify store. But you (and your employees) should at least be able to remember how your SKUs work, thereby making it easy to figure out the correct stock-keeping unit for any given product. Without a consistent format — such as a set number of characters or a specific pattern of letters and numbers — it becomes far harder to manage and track SKUs. It should be obvious that this approach makes it far easier to organize large numbers of products than with a sequential or alphanumeric system.

  1. In addition, built-in analytics help you create more efficient purchasing processes and more effective sales and marketing strategies.
  2. Looking to manage stock keeping unit numbers and print barcode labels, all in one place?
  3. Brigitte also has a background in writing, research, and publishing, with an undergraduate degree in writing.
  4. A SKU (Stock Keeping Unit) is a system used by lots of businesses it makes it easier to track inventory.

The average retail store use these POS systems for tracking their products inventory and process payments. You can grow your business with such a system since it simplifies inbound and outbound inventory tracking. The middle two or three numbers represent the product’s unique features.

To automate the process, you want to leverage POS systems with integrated inventory management and other tools like bar coding. SKU stands for “stock keeping unit” and — as the name suggests — it is a number (usually eight alphanumeric digits) that retailers assign to products to keep track of stock levels internally. If a product has different colors and sizes, each variation has a unique SKU number. As with SKUs, universal product codes (UPCs) are uniquely assigned to track trade items in stores.

Pairing a meaningful SKU number system with a POS like Square for Retail gives you every tool you need to maintain your inventory and sales floor efficiently. Square provides streamlined, user-friendly inventory management and reporting tools so retailers can put SKU numbers and their data to work. Sometimes it’s helpful to have supplier information tied to your SKU number. This is an especially helpful SKU number system in fulfillment warehouses where goods are stocked and tracked by the supplier rather than merchandised in a mix as in a retail store. If you display or store products based on brands or suppliers, this two-identifier, 10-digit SKU number system can cover all the bases. For small retailers, this level can be a bit fussy, But if you wish to track inventory and sales at a very granular level, you can add a Subcategory Identifier to your SKU.

Stock takes are necessary to make sure your recorded inventory (in either your system or spreadsheet) matches the actual inventory that’s sitting in the warehouse. And you’ll then be able to select SKU as an option to edit for all products on one screen. Having two different what means sku SKUs is effectively like having two different products, just with the exact same titles and descriptions. One of the most critical aspects of good SKU practice is to make sure you only have one SKU for each product variant across every channel you sell on.

Why Are Stock Keeping Units Important to Business

The American branch of GS1, an organization that develops and maintains global business communication standards, assigns a permanent UPC to a product for its entire shelf life. So even if multiple retailers sell the product, it’ll still have the same UPC at each store. For example, every box of a certain brand’s blackberries will have the same UPC at every store they’re sold at. With a few exceptions, like food and car parts, all products should have a unique identifier, and that identifier should be included on all sales orders.

To automate the process, you want to leverage POS systems with integrated inventory management and other tools like barcoding. Using software to manage your inventory allows you to electronically track items in real time and automatically update inventory. In addition, built-in analytics help you create more efficient purchasing processes and more effective sales and marketing strategies.

When customers can’t physically see or touch the product they’re buying, they need as much information as possible to make an informed decision. By including SKUs in your product descriptions, you can give customers all the information they need about a product before they make a purchase. Although they do also list the size code on the tag, it does not appear that is part of the SKU. This is a common way of repurposing SKU numbers after products have been discontinued for some time. After the first section of a SKU number, subsequent sections of digits identify more specifics such as item type (e.g., men’s jeans), brand name (Levi), and color. Using the same gross profit ranges, note the number of units sold (in a given period of time).

Stock Keeping Units vs. Universal Product Codes

You can also use this section to identify store locations if you run multiple stores. The SKU does more than just identify a product or track inventory. With the information collected, you’re given information https://1investing.in/ that can be analyzed to gauge the profitability and efficiency of your retail business. Where possible, create codes with visual meaning, such as the first few letters of a supplier or brand name.

How Can I Get an SKU for My Product?

For example, if you’re a clothing retailer, you might notice that certain colors, sizes, or styles sell better than others. By using SKU numbers to track these attributes, you can better understand your customers’ preferences and adjust your inventory accordingly. Online businesses can benefit from algorithms that use SKUs to suggest similar items and automatically mark products as “last few” or sold out. Because companies internally create SKUs to track inventory, the SKUs for identical products vary among businesses.

Create a scalable SKU system that’s able to grow with your business. Be sure to leave space for new products, categories, and variants. And develop a process for replacing or retiring outdated SKUs as your inventory changes over time. Your SKU should help you easily identify the product in question, incorporating details like manufacturer, color, size, product category, and various other characteristics.

If you’re like most retailers and wholesalers, you have a lot of money invested in stock, which sits at the center of your sales, purchasing, and inventory processes. This makes keeping careful track of that stock as you grow essential to your business’ ongoing success. In fact, many sales channel partners consider the SKU that you offer them (assuming you are the manufacturer) as an “MPN” which stands for “manufacturer part number”. There are a lot of reasons for this, but the primary one is that two different manufacturers can technically have the same SKU. Obviously, when this happens it creates a mountain of headaches for retail businesses. For this reason, many retailers or distributors simply create their own SKU system.

Barcode is a series of lines and spaces that represent a product’s unique identifier. It can be scanned using a barcode scanner to quickly and accurately identify the product. When done well, product SKU management allows you to optimise your inventory levels and purchasing (and increase revenue). If done poorly, you have high inventory holding costs and less available capital. When done well, product SKU management allows you to optimize your inventory levels and purchasing (and increase revenue). In offering an SKU definition, it’s important to flag how the format differs to UPC codes.

These systems are capable of automating common SKU management tasks, like report generation, order management, and inventory tracking. Physical retailers use SKUs to keep tabs on inventory levels and sales in brick-and-mortar stores, helping them identify top-selling products and understand when items need to be restocked. While both SKU and UPC are used for inventory tracking, they serve different purposes. SKU tracking in retail can be used to monitor internal inventory and sales, while UPC codes are applied by manufacturers to track products in the supply chain.

If you’re going to use SKUs, their management is incredibly important. SKU management allows you to analyse the cost of carrying each product so you can be sure that every piece of inventory meets the financial objectives of the business. Another possible way that a company like this could accommodate an internal SKU structure is by randomizing each variation into a unique number. This creates an incredibly long list of SKU numbers that are not reverse engineerable.

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This greatly simplifies the supply chain, especially for purchasing, and adjustments for quality or other potential issues. The famous clothing brand, Lee, uses a 7-digit SKU number for its products. Here you can see how Lee has divided their SKU into two distinct sections.

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