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SKU Explained in Simple Words

7 min read

In today’s world, retailers rely on technology to expand and maintain their business. When a company has a clear understanding of its inventory, it can operate more effectively and efficiently.

SKUs, also known as stock keeping units, were created to keep track of retail inventory. This article will dig into the role that SKUs play within the retail business.

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The SKU Meaning

Retailers depend on organizational systems to manage their products. Without a system in place, businesses would make too many items, too few items, or lose track of their inventory.

An SKU is a number (most often eight alphanumeric digits) that helps track a specific type of product.

Image source: Investopedia

If your business sells the same item in different sizes, colors, or variations, each version will be assigned its own SKU.

What is SKU Compared to UPC?

Those unfamiliar with the retail business may confuse SKU with UPC (universal product code). So what is SK compared to UPC?

An SKU is a unique code created by each retailer. This means that even if other retailers have a similar product, the SKU will still differ. While SKUs are most often 8 alphanumeric (both numbers and letters) digits, they may vary in length.

A UPC remains consistent across different retailers. This means that if the same item is sold in different stores, it will have the same UPC. Universal product codes are always 12 digits long and they are numeric rather than alphanumeric. While some retailers choose to use UPCs as SKUs, many smaller businesses prefer to create their own SKU system.

Both SKUs and UPCs are often seen as barcodes. However, UPCs are simply meant to identify the product regardless of the retailer. UPCs are also meant to connect you to specific retail businesses.

Why is an SKU Number So Important?

Simply put, an SKU number helps retail managers recognize when a product is running low.

When an item is purchased by a customer, the SKU is scanned in order to update inventory. Warehouses also rely on SKU numbers to know when to send more items to retail stores.

SKUs are optimizing the retail business, allowing companies to be more efficient. In turn, this allows customers to have the products they want more quickly.

For example, retail clerks would need to spend time looking for clothing or shoes in the back for potential customers.

Due to a wide range of colors and sizes, this process would often be very time-consuming. In today’s world, a clerk can simply scan the SKU to see if a particular item is in stock.

Another benefit to SKUs is that it makes the shipping and returns process easier. This is particularly helpful for ecommerce businesses. By having an SKU, businesses are far less likely to ship the wrong product to a customer. This saves companies and customers from unneeded returns.

SKU Number Lookup: How Do Businesses Make Their Own SKU System?

Unlike UPCs, each individual business needs to create its own SKU number lookup system. Creating a comprehensive and consistent system is crucial, otherwise SKUs can cause more harm than good.

Ultimately, when SKU management is done well, it can optimize sales and profits. Here are a few tips to help businesses create an effective SKU management system.

  • Avoid overcomplicating the process. When creating a code, use only numbers and letters rather than special characters.
  • Do not create a similar or duplicate code, even if it’s a variation of the same product.
  • Start the code with a letter rather than a number. This will often help employees identify products more easily.
  • Make sure that your codes make sense. For instance, use the first few letters to represent the brand, make, and model.
  • Be consistent across all of your products. Allow employees to see trends and optimize the process.
  • Review and update your system over time. If the system causes confusion among employees, make changes whenever necessary.

The Benefits of an SKU Search System

An SKU search system offers a wide range of benefits for the consumer and the retailer. By having a strong inventory system in place, companies can optimize their business and minimize unneeded mistakes.

Here are a few key takeaways to remember.

  • SKUs are the easiest way to track an item across all possible locations. Whether an item is in a warehouse, at a store, or in a customer’s hands, SKU helps the retail business run more smoothly. Improved supply chain management with SKUs allows companies to spend more time building the brand and expanding operations.
  • SKUs can help businesses understand which items are selling or not selling. This information allows them to put more time and energy into products that customers desire, rather than wasting resources. This information can also inform retailers on when to run a discount and particular products that aren’t selling as well as others.
  • SKUs can improve customer experience. An SKU search system makes it easier for clerks to find specific items. Rather than searching in the back for items that may not be available, everyone involved can save time and energy. Ultimately, a quick and efficient in-store experience will build loyalty among customers.

Optimize Your Business with Ecwid

In the competitive landscape of retail, it’s crucial to optimize every aspect of your business. Growing a retail business takes time, energy, and resources. At Ecwid, we help entrepreneurs and new businesses bring their dreams to life.

We take the stress out of managing your product catalog. This allows you to focus on other aspects of the business without worrying about when it’s time to restock. With Ecwid by your side, you can take your company to a whole new level!


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About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.

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