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Home / Glossary / What Is a Stock Keeping Unit (SKU)?

November 2, 2023

What Is a Stock Keeping Unit (SKU)?

What does SKU mean?

A stock keeping unit (SKU) is a unique alphanumeric code assigned to a specific item in inventory, allowing for precise tracking, identification, and differentiation of products within a retailer’s range or a warehouse’s inventory. SKUs are essential for inventory management, facilitating processes such as ordering, stocking, and sales reporting, and ensuring each product variant, even if similar, can be accounted for and monitored independently.

How do SKUs differ from UPCs (universal product codes)?

SKUs are unique alphanumeric codes exclusive to retailers, designed to monitor individual inventory items and manage stock, often detailing specific product characteristics through a mix of letters and numbers. In contrast, UPCs, standing for Universal Product Codes, are standardized barcodes used universally, ensuring each product has a consistent identifier across various retail platforms.

Creation & Use:

SKU: 

Retailers create skus based on various factors, often tailored to their inventory management system. SKUs are crucial in sku management, especially in online stores where similar items, like purple ugg boots in the bailey bow style, might have different sku numbers based on slight variations.

UPC: 

It’s a standard, universal product identifier, and its creation follows a specific process. UPCs are printed on product labels and used universally by all retailers, making it a consistent method to track inventory and sales across the market.

Scope:

SKU: 

Unique to your business. It helps in keeping track of specific product details, and skus are unique, meaning two different items won’t share the same SKU even in the same online store.

UPC: 

Universal across all retailers. It offers a broader scope, ensuring product fulfillment centers, online retailers, and physical retail stores are on the same page regarding a product’s identification.

Why Both?

Why juggle two codes? Simple. SKU’s cater to a retailer’s internal needs – inventory levels, sales tracking, and more. UPCs, on the other hand, ensure a consistent product identity worldwide, simplifying processes like global distribution or sales analysis based on a product’s universal code.

So, if SKU is the detailed story a business tells about a product, UPC is its universally recognized title. Knowing both? Best practice in the retail arena.

Why are SKUs used in a warehouse and online store environment?

SKUs play a pivotal role in the inventory management system. In the warehouse landscape, every product, whether it’s purple ugg boots or a high-tech gadget, is assigned a unique sku number. This ensures efficient tracking, management of stock levels, and smooth product fulfillment centers’ operations.

Inventory Management:

SKUs, which stand for Stock Keeping Units, facilitate a streamlined inventory management system. By assigning every product its unique sku number, warehouses can efficiently track stock levels and manage their inventory.

Efficient Tracking:

With countless products in a warehouse, from purple ugg boots to the latest electronics, having a specific SKU for each item ensures that products are easily located and accounted for.

Alert Systems:

If a particular item, like the bailey bow style boots, goes out of stock, its assigned SKU can trigger a reorder point, ensuring continuous availability.

Online Shopping Precision:

For online retailers, SKUs ensure that when a customer searches for a product, they find the exact variant they desire. A search for “ugg boots in the bailey design” will yield precise results thanks to SKU differentiation.

Clear Sales Snapshot:

SKU numbers used in online stores offer a comprehensive view of inventory and sales, making it easier to analyze business performance and plan for future demands.

Enhanced Customer Experience:

Differentiating between similar items using unique SKUs ensures customers find exactly what they’re looking for, reducing potential confusion and increasing satisfaction.

Business Growth: A robust and meaningful SKU system not only aids in operational efficiency but also paves the way for businesses to scale and grow by providing insights into product performance and customer preferences.

What is the relation between SKUs, barcodes, and universal product codes?

SKUs, barcodes, and UPCs. Sounds complex? It’s simpler than you think!

SKUs:

Short for Stock Keeping Unit, SKUs are unique to a retailer, assisting businesses in maintaining inventory levels. Think of it like this: a retailer might label purple ugg boots as “Ugg-Purp-01”. This is their internal identifier, making it simpler to manage stock and assess sales.

Barcodes:

These are those zebra-like lines you see printed on product labels, acting as a visual representation of the UPC or SKU. When scanned, a barcode provides swift access to product information and price. So, when you’re at a retail store and they scan your bailey bow style boots, they’re reading its barcode.

Universal Product Codes (UPCs):

These are standard, ensuring every product gets a unique code, irrespective of where it’s sold. This means that a specific model of ugg boots will have the same UPC at different retail locations, but its SKU might vary from one store to the next.

How do they interact? 

Imagine buying boots online. The online store uses the SKU to manage its inventory and sales. But the barcode, reflecting the UPC, helps the store’s POS system process your purchase. Together, they ensure efficient sales, stock management, and product identification, making shopping a breeze!

How do you create a SKU for your products?

Crafting SKUs isn’t just about slapping numbers and letters together. It’s an art, one that, when executed right, streamlines inventory levels and tracks products effectively. Dive in to decode the SKU puzzle.

  • Understanding the Basics: A SKU, or Stock-Keeping Unit, stands for each specific product’s unique code. Unlike a model number, which is often generic, a SKU is unique to your business. So, if you sell purple boots, instead of just labeling them “Boots-01”, you might opt for “PurpBoot-01” to distinguish them further.
  • Best Practice: Think of the SKU as your product’s fingerprint. It should be descriptive yet concise. Incorporate essential product characteristics while avoiding vague references. Remember, the best SKU is one that balances detail with simplicity. So, if you sell a pair of leather boots in size 8, consider a SKU like “LthrBoot-8”.
  • Tools to Help: While the ‘come up with a SKU’ process can be manual, several free barcode generators and SKU system tools simplify the task. They ensure each SKU is unique, aiding retailers to keep track of inventory effectively.
  • Remember the Importance: Never underestimate the power of the SKU. Online store operations, POS system efficiency, and inventory and sales tracking rely heavily on it. Every time a product goes out of stock or has a spike in sales, the SKU numbers used become invaluable data points.

Considering growth? Tailor-made SKUs, aligned with best practices, help grow your business. They provide insights about sales because customers often search products based on SKU information. Optimize, simplify, and thrive!

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About Brian Meert

Brian Meert is the CEO of AdvertiseMint, a full service digital advertising agency and regular contributor to our Advertising Blog. Brian has written in-depth articles and marketing infographics that are used by marketing executives around the world. He writes about topics relating to Meta Ads Agency, Instagram Ads Agency, TikTok Ads Agency, Snapchat Ads Agency, YouTube Ads Agency , Amazon Ads Agency, Google Ads Agency, and Pinterest Ads Agency. After completing his MBA in marketing, Brian has spent the last 20 years working in digital marketing and helping clients like Coca Cola, Newegg, Grant Cardone and Consumer Affairs run profitable advertising.

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