What is a SKU?
SKU stands for SKU and is an alphanumeric code for data collection and inventory tracking. Each product listed for sale in a retail store is assigned one SKU. The product data generated by SKUS helps manage inventory and is then analyzed by point-of-sale systems and cloud-based accounting software to provide beneficial insights and improvement strategies.
Why are SKUs important?
Why are SKUs important? Not only do they help retailers track products and improve the billing capabilities of the software, but they also provide several other useful benefits that ultimately help retailers increase sales and revenue.
Why is adding SKUs important in retail management? The unique SKU code assigned to each product provides the following benefits:
Better inventory management
SKU management means better inventory management. When they distinguish products from each other, managers in a retail company are better able to search and locate products, which increases customer satisfaction and reduces errors. In addition, they streamline the inventory tracking process and catalog optimization while avoiding inventory level issues. SKUs even allow retail managers to use inventory management apps to keep track of everything remotely.
Improved customer experience
How can a SKU system improve retail store customer loyalty? Data generated when retailers track inventory levels can be analyzed to better understand customer behavior. In this way, retail elements such as store layout and product placement can be modified to attract more shoppers. Of course, improving inventory management and providing better product locations will only increase customer satisfaction. Similarly, SKUs are great for online retailers because they allow online shoppers to locate products and easily initiate repeat purchases.
Implementing a SKU system can help a retail business save money. By using SKUs to streamline inventory management, a retail manager can optimize the store’s use of consumables, such as raw materials or packaging products, reducing overall store costs. In addition, by analyzing sales data and inventory levels, they can better prepare for future orders or production, set re-order points, and identify lowest prices, thereby making smarter inventory purchasing decisions and reducing product wastage.
The ultimate goal of most retailers is to increase future sales and revenue. Fortunately, assigning a unique SKU to each product in the store’s assortment is a proven path to growth. Improving your company’s sales system through improved inventory management and customer satisfaction is a great recipe for increasing your sales revenue. After all, less waste and happy customers can only combine to result in more products moved.
SKU vs. Universal Product Code
Now that you understand the meaning of SKUs, you may be wondering how they differ from UPC or Universal Product Codes. While both SKU and UPC code are used to identify products, the two sequence types differ as follows:
- SKUs are used internally by the company, while UPC numbers are, as their name suggests, commonly assigned to a product for external identification.
- UPC codes are always 12 digits long and SKUs can be 8 to 12 characters long.
- SKU codes are alphanumeric while UPC codes contain only numbers.
- The UPC identifies the product name and manufacturer, but the SKU provides important product characteristics.
- Individual retailers assign SKUs to their own products, while UPCs are issued by the Global Standards Organization and apply to all items of the same product worldwide.
SKU number vs serial number
If SKUs are different from UPCs, what about serial numbers? While both SKUs and UPCs identify product types, serial numbers are unique identifiers for individual items. For example, if a store sells 20 laptops with the same model numbers, each will share a common SKU and UPC code, but each product will receive a unique serial number. They are typically used to track a specific unit through inventory and to document warranty information.
How to create SKUs
Is creating SKUs difficult? Creating SKUs is quite simple by following a few simple steps.
Step 1: Create a format
There are no fundamental restrictions on the formatting used in the SKU architecture or the number of characters that must be included in the SKU codes. When deciding on a format, keep in mind how you use the SKUs. For example, if cashiers need to memorize SKUs, it’s a good idea to keep them short and easy to read. However, if you work in warehouses with many different products, longer SKUs may be a better choice.
Once you’ve decided on the length, choose a format that embeds a certain level of meaning in each section of the SKU. You can divide your code into three sections – start, middle, and end – and give each section a different meaning.
Step 2: Develop a coding system
Once the SKU format is determined, it’s time to create a coding system, including a list of codes for product characteristics such as manufacturers, brands, colors, and sizes. Your point of sale software may provide a feature for this step, but the manager may also design the coding system using spreadsheet software such as Microsoft Excel or Google Sheets.
For example, list manufacturers and brands in one column of a spreadsheet and assign each a code in another column. By combining the various sections of the code, you will be able to identify each product that you sell. By developing their own system, employees will finally be able to identify each product they sell by their own unique SKU.
Step 3: Generate SKU numbers
Don’t worry if all these numbers overwhelm you. You don’t have to create SKUs manually. Instead, use the SKU generator to assign you sequences.
Many of the best ecommerce platforms and point of sale software systems offer SKU generators. Business owners can also choose from a variety of SKU generation apps that are easy to download and use immediately. A few of the most popular SKU generators are Zoho, MageCloud, and Primaseller.
How to recognize the SKU number? What does it look like? Most SKUs are around 8 characters long and consist of both letters and numbers. However, since each company may develop its own SKU format, the exact length and composition of the sequence may vary.
Still can’t figure out the SKU number? Perhaps the following examples of SKU numbers will help:
- TSH-000-S – This SKU has been assigned to a small black tee. In the code, TSH means the type of product, T-shirt. 000 is the code assigned to the color black, and S means that the product is small in size.
- DR-211-FL-12 – This hypothetical SKU was created for a size 12 yellow floral dress. At the beginning of the sequence, the DR code indicates that the product is a dress. Then 211 means it’s yellow, FL means the pattern is a floral pattern, and finally 12 is obviously the size of the item.
- TV-RCA-52-SM1 – In another sequence of images, the number is assigned to a specific TV. The SKU starts with the item description and the obvious description of the TV. The next code, RCA, identifies the manufacturer, followed by the screen size code – 52 inches – and another code, SM1, which identifies the function of the smart TV.
While you can easily create an SKU by following the steps above, you can streamline the process by taking a few key tips into consideration:
- Reuse SKUs – Even though different SKUs are meant to be unique identifiers. you can use old SKUs for new products as long as you wait a few years before reassigning them.
- SKUs start with letters – When assigning SKUs, it’s a good idea to start them with letters. This will help your accounting team find them in a spreadsheet full of numbers. Similarly, don’t create SKUs with a zero as some applications and software will misinterpret zero as “nothing” which will result in errors.
- Order from broad to specific – The beginning of the SKU number should be the broadest top-level category. Subsequent numbers sections should gradually become more specific, ending up with the narrowest category you can qualify.
- Avoid letters that look like numbers – Since you can automatically scan some SKUs and accountants manually enter others, you can reduce errors by avoiding letters that look like numbers. For example, the letter “I” looks like the number “1”, and the letter “O” looks like the number “0”.
- SKUs should be short and simple – If you are going to enter your SKUs manually, try to minimize the number of characters. The shorter the SKU string, the easier it will be to remember and the less time it will take to enter it. Keep in mind that even if you want to make SKUs meaningful, overloading them can result in SKUs containing far too many digits
Using SKU management to control your company’s finances is one of the best decisions you can make for your brand, especially if you have a wide range of products to track across locations. Creating a system capable of scanning, tracking and analyzing them takes time. However, it is worth the effort.
What does the abbreviation SKU stand for?
The term SKU is short for “Storage Unit”. It is a unique identifier that defines each product at the stock level. For example, in a retail store, the SKU number can identify the product type, style, size, and color.
How do I find my SKU number?
The product’s SKU can usually be found on the price tag or on the packaging, often above the product’s UPC barcode. While the universal product code will be 12 digits long and contain numbers only, the SKU is distinguished by its varying length and the inclusion of alphabetic characters along with numbers. The SKU may also be listed on purchase orders, printed labels, or shipping.
Is the SKU a serial number?
While they may be similar, SKUs are not the same as serial numbers. The serial number is a unique code used to track ownership and warranty information for a specific item, while the SKU number is used to track the product in stock.
Is the barcode a SKU?
A UPC barcode is not the same as a SKU, in use or format. Barcodes are always 12 digits long and contain only numbers. They are used to identify the product and its manufacturer. SKUs, on the other hand, are usually alphanumeric codes and can vary in length. They identify items in a store’s inventory based on specific product characteristics such as color, size, or style.
How do I get the SKU for my product?
Want to establish a SKU system and organize your inventory? You can manually create your system by specifying the SKU format and developing the coding system in a spreadsheet. However, you can use a simpler method and use any POS systems or SKU generation apps to generate your own SKUs.