What Is SKU Number? Everything You Need to Know

A stock keeping unit is a helpful tool for inventory management. This guide will give you the ins and outs of all you need to know!

Managing your inventory is paramount for any retail business. You want to keep track of all that comes in and all that goes out of course! SKU is the magic tool that streamlines the whole thing.

SKU stands for stock keeping unit. A stock keeping unit is an alphanumeric code that you give a specific product. It’s often listed above the barcode. It’s a simple concept that can revolutionise your business if you know how to use it in the best way. That’s what this guide is all about. Let’s talk about how to use SKU to improve your inventory systems.

Here’s What We’ll Cover:

How Does an SKU Work?

How to Use SKUs

Stock Keeping Units Vs Universal Product Codes

Key Takeaways

How Does an SKU Work?

So we’ve established that a stock keeping unit helps identify products from each other. How does it all work in practice?

The seemingly nonsensical collection of numbers and letters actually have a method behind them. The idea is that the SKU contains valuable information about the product at a glance. This could be colour, brand, gender, size etc. Anything relevant.

Your SKU system is also entirely personal to you. It’s a secret language for your internal use only.

Let’s create a fictitious example. Say I have a stationery business.

A1 means lined notebook. A2 means blank notebook. A3 means dotted notebook.

Now for colour. BL means black. BU means blue. YE means yellow.

Finally, size. 001 is small. 002 is medium. 003 is large.

A customer orders an item online with the SKU A1BU002.

That is a medium, blue, lined notebook.

And I just made that up off the top of my head! That is how powerful personalised SKUs can be. It enables you and your team to track your inventory in a succinct way.

How to Use SKUs

So now you know what a stock keeping unit is and how to make one. Why should you be using them? What can an SKU help you track? Well, almost everything! But here is a shortlist of metrics SKUs may help you with.

Managing Inventory Levels

This is the main reason why SKUs exist. A database of your products all listed by their SKU code helps you to manage your inventory efficiently. What is running low on stock levels? What is your current turnover of a certain product? Efficient inventory management software will provide information on any inventory item in real-time.

Sales Analysis

Monitoring the flow of product variants using their codes can help you identify useful buying patterns. Maybe my blue notebooks are selling more than my red ones. Why is that? Large notebooks sell really well just before kids go back to school. This data can be gleaned all by tracking your product flow and sales ratio using SKUs.

Customised Advertising

On the super fancy end of the spectrum, SKUs are how companies create personalised adverts to potential customers. By reading the characteristics of the products they’ve seen before, the system can generate other similar products to show. This is done simply by matching certain qualifiers in the SKU to the product that the customer was previously scrolling. Ultimately, this is about creating tailored online shopping experiences.

Customer Service

Using SKUs throughout your team helps to streamline customer service enquiries too. The customer can quote the stock keeping unit when they call in if they have any issues with the product. Your customer service reps can also easily and quickly find similar products to recommend using the same codes.

Stock Keeping Units Vs Universal Product Codes

When introducing the concept of SKUs, I mentioned that it is usually listed above the barcode. But not that it is integrated into the barcode itself. When you scan a barcode, you are more likely to read the UPC or universal product code.

This is another alphanumeric identifier for a product with one key twist. It is not unique.

Let’s say that you sell toasters. Amazon also sells toasters. If you sell the same brand and model of a certain toaster as Amazon, they will share a UPC and barcode. It will be identical. But what you can do is customise the SKU to your online shop. That way you can more easily cut down the chances of comparison with competitor sites selling the same products as you.

Key Takeaways

A stock keeping unit is a useful tool for any online retailer! We hope this guide helped you understand how you can create your own secret codes for your product line.

For more useful articles like this one, head to our resource hub.

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