A SKU, or Stock Keeping Unit, is a unique alphanumeric code that businesses use to identify and track products in their inventory. Unlike barcodes or UPCs, which are universal and assigned by manufacturers, SKUs are custom-created by businesses to organize their inventory and manage operations more effectively.

SKUs act as shorthand for product details such as category, brand, size, color, and location. For instance, a SKU like “SHOE-BLK-8” could represent a black shoe in size 8. This simple yet powerful system allows businesses to quickly locate, track, and manage products across warehouses, stores, or eCommerce platforms.

The importance of SKUs goes beyond inventory tracking. They enable businesses to:

• Prevent stockouts and overstocking.
• Simplify order fulfillment.
• Generate detailed sales insights for better decision-making.

Whether you run a small online store or a large retail chain, implementing a good SKU system can transform your inventory management process, ensuring smoother operations and a better customer experience.

Table of Contents

1. Understanding SKU Numbers
2. Benefits of SKU Numbers
3. How to Create SKU Numbers
4. How to Use SKU Numbers Effectively
5. Frequently Asked Questions (FAQs)
6. Summary

Understanding SKU Numbers

What Does SKU Stand For?

SKU stands for Stock Keeping Unit, a term widely used in retail, eCommerce, and supply chain management. It is essentially a unique identifier for a product, enabling businesses to distinguish items at the most granular level. While barcodes and UPCs serve as universal identifiers for products across industries, SKUs are internally generated, giving businesses the flexibility to create codes that align with their specific operations.

How SKUs Differ from Other Identifiers

SKUs are often confused with other product identifiers like barcodes or ASINs (Amazon Standard Identification Numbers), but they serve different purposes:

• SKUs: Customizable by the business for internal inventory tracking.
• UPCs: Universal codes assigned by manufacturers, used across all retailers.
• Barcodes: Machine-readable codes tied to SKUs or UPCs for scanning.

Unlike barcodes and UPCs, SKUs provide meaningful information at a glance. For example, “TSHRT-BLU-L” tells you it’s a large blue T-shirt, making it easy for staff to identify products without needing additional details.

Key Features of SKU Numbers

A well-constructed SKU number typically includes:

1. Product Category: Defines the type of item (e.g., “TSHRT” for T-shirts).
2. Attributes: Highlights specific traits like size, color, or material (e.g., “BLU” for blue, “L” for large).
3. Unique Identifier: Ensures each SKU is distinct within the system.

For example, a SKU like “SHOE-BLK-9-2023” might represent black shoes in size 9, produced in 2023. This structured format simplifies inventory tracking and ensures no two products share the same code.

By integrating SKUs into your inventory system, you gain not only better organization but also the ability to scale operations with efficiency. They form the backbone of inventory management for businesses large and small, making processes like stocktaking, order fulfillment, and reporting far more effective.

Benefits of SKU Numbers

1. Simplified Inventory Management

SKUs make it easy to organize, track, and locate products across your inventory. By assigning a unique code to every item, businesses can quickly identify stock levels, locations, and variations. This system reduces the chances of misplacing items or mismanaging stock, particularly in high-volume operations. For example, if you sell shoes in multiple sizes and colors, SKUs let you differentiate between “SHOE-BLK-8” (black, size 8) and “SHOE-WHT-9” (white, size 9) without confusion.

Key benefit: Better control over stock levels minimizes overstocking and stockouts, boosting operational efficiency.

2. Improved Customer Experience

SKUs enable faster order processing and accurate fulfillment. When products are organized and easy to find, employees can pick, pack, and ship orders quickly, reducing errors. Customers are less likely to experience delays or receive the wrong product, leading to higher satisfaction and repeat business.

Example: A customer orders a “SHOE-RED-10” SKU online. With a clear SKU system, your team can locate the exact item in your warehouse and ship it promptly.

3. Actionable Data Insights

SKU-specific sales data helps businesses analyze product performance, identify trends, and make data-driven decisions. By tracking which SKUs sell the most or the least, you can adjust pricing, restocking, or marketing strategies accordingly.

For example:

• Top-performing SKUs indicate which items to prioritize in promotions.
• Slow-moving SKUs highlight products that might need discounts or discontinuation.

Key benefit: SKU data empowers businesses to optimize inventory, pricing, and marketing for maximum profitability.

4. Efficient Multichannel Selling

Managing inventory across multiple platforms—such as Shopify, Amazon, or Lazada—can be challenging without SKUs. A centralized SKU system ensures your stock levels are synchronized across channels, reducing the risk of overselling or underselling.

Example: Using tools like OneCart, you can update stock in real time across multiple platforms. This way, when an item sells on Amazon, the inventory count automatically updates on Shopify and Lazada, thanks to the shared SKU system.

5. Enhanced Business Scalability

As your business grows, so does the complexity of managing inventory. A robust SKU system lays the foundation for scaling operations seamlessly. It allows businesses to manage thousands of products with ease, ensuring that even as you expand to new locations or platforms, inventory remains organized.

Key benefit: SKUs reduce the administrative burden, freeing up resources to focus on growth and innovation.

By integrating SKUs into your operations, you gain more than just a tracking tool—you create a foundation for efficiency, data-driven insights, and exceptional customer service. Whether you’re managing a single store or multiple eCommerce platforms, SKUs are essential for sustainable success.

How to Create SKU Numbers

1. Best Practices for SKU Creation

Creating effective SKUs requires a structured approach to ensure clarity, uniqueness, and ease of use. Follow these best practices:

• Keep It Simple: Use clear and concise codes that are easy for employees to understand and identify.
  • Example: Use “TSHRT-BLU-M” instead of “T-SHIRT-BLUE-MEDIUM-2023.”
• Avoid Confusing Characters: Exclude characters like “O” and “0” or “I” and “1” to minimize errors during manual entry or visual identification.
• Ensure Uniqueness: Every product should have a distinct SKU to avoid mix-ups, especially when managing variations like size or color.
• Use a Consistent Format: Standardize the structure of your SKUs across all products to simplify management and training.

2. Components of a SKU

SKUs are typically made up of several segments that provide key product details at a glance. Here’s a common format:

1. Product Type: Indicates the category or type of product.
   • Example: “TSHRT” for T-shirts or “SHOE” for shoes.
2. Attributes: Highlights unique features like size, color, or material.
   • Example: “BLK” for black, “M” for medium, “COT” for cotton.
3. Unique Identifier: Differentiates products within the same category.
   • Example: A code for the season or production year, such as “2023.”

Example SKU: “TSHRT-BLU-L”

• TSHRT: T-shirt category
• BLU: Blue color
• L: Large size

3. Tools to Generate SKUs

Manual SKU creation works for smaller inventories, but as your catalog grows, automating the process is essential. Use tools and software to generate and manage SKUs effectively:

• Spreadsheet Software: Use Excel or Google Sheets to build a list of SKUs with formulas or concatenation tools.
• Inventory Management Systems: Tools like OneCart automate SKU generation and integration across platforms, ensuring consistency and accuracy. Try out our free AI SKU Generator!
• ECommerce Platforms: Many platforms like Shopify or WooCommerce include built-in features to help assign SKUs to products during setup.

4. Examples of Well-Structured SKUs

Here are a few examples of practical SKU structures for different industries:

• Fashion: “DRSS-RED-M” (Dress, Red, Medium)
• Electronics: “HEAD-BLU-WL” (Headphones, Bluetooth, Wireless)
• Furniture: “TABLE-BLK-RCT” (Table, Black, Rectangle)
• Seasonal Products: “CNDL-PUM-SML-2023” (Candle, Pumpkin, Small, 2023)

5. Common Mistakes to Avoid

• Overcomplicating SKUs: Lengthy or overly detailed SKUs can confuse staff and slow down operations.
• Inconsistent Naming: Mixing different formats (e.g., “SHOE-L-BLK” and “BLK-L-SHOE”) creates confusion.
• Neglecting Scalability: Ensure your SKU format can accommodate new product lines as your business grows.

By designing clear and efficient SKU systems, you can ensure smoother operations, fewer errors, and better insights into inventory and sales. A well-thought-out SKU system is a long-term asset for any growing business.

How to Use SKU Numbers Effectively

1. Organizing Your Inventory

SKUs help businesses organize inventory in a systematic way, ensuring that products are easy to locate, track, and manage. By grouping products based on SKU patterns, businesses can simplify processes like restocking and order fulfillment.

Tips for Better Organization:

• Group by Categories: Use the first segment of your SKU to identify product categories (e.g., “TSHRT” for T-shirts, “SHOE” for footwear).
• Utilize Storage Locations: Assign SKU segments for specific storage areas, making warehouse navigation easier.

Example: SKU “TSHRT-WHT-S-L1” could mean a small white T-shirt stored in Location 1.

2. Real-Time Inventory Management

Using SKUs with real-time inventory tools ensures that stock levels are updated automatically across all channels, reducing the risk of overselling or stockouts.

Key Benefits:

• Accurate inventory visibility.
• Instant updates across eCommerce platforms like Amazon, Shopify, and Lazada.
• Faster replenishment decisions.

Example: OneCart’s inventory management system tracks SKU levels in real time, syncing data across platforms to ensure consistent stock availability. Learn more about inventory forecasting.

3. Improving Order Fulfillment

When every product has a unique SKU, it becomes easier for staff to pick, pack, and ship orders accurately. This reduces errors and improves customer satisfaction.

Steps to Streamline Fulfillment:

• Use barcodes tied to SKUs for faster scanning and identification.
• Organize picklists by SKU for efficient retrieval during busy sales periods.

Example: For an order containing SKU “MUG-RED-M,” staff can quickly locate the medium red mug in the warehouse and prepare it for shipping.

4. Powering Data Analytics

SKU-level data provides actionable insights into sales performance, inventory trends, and profitability. Businesses can use this information to optimize operations and make informed decisions.

Insights Gained from SKU Analysis:

• Top Performers: Identify best-selling SKUs and prioritize their promotion.
• Slow Movers: Spot low-performing products and implement clearance strategies.
• Profitability by Product: Analyze margins for each SKU to determine their contribution to overall revenue​.

Example: If “TSHRT-BLU-L” consistently sells out, increasing stock or running a targeted ad campaign could boost sales further.

5. Synchronizing Multichannel Operations

For businesses selling across multiple platforms, SKUs ensure seamless integration and consistency. Assigning the same SKU to a product across platforms helps avoid discrepancies in stock levels and pricing.

How It Works:

• Synchronize SKUs across Shopify, Lazada, and Amazon using tools like OneCart.
• Enable automatic inventory syncing to reflect sales in real time, no matter the channel.

Example: A customer purchases SKU “LAMP-WHT-M” on Lazada. The inventory count updates automatically on Amazon and Shopify, preventing overselling.

6. Enhancing Customer Service

SKUs simplify customer inquiries and returns by providing a quick way to identify the product in question. Customers can refer to SKU numbers for faster resolutions, ensuring a better experience.

Example: If a customer contacts support about “SHOE-BLK-8,” your team can instantly locate the product details and resolve the issue efficiently.

By effectively using SKU numbers, businesses can streamline operations, improve accuracy, and drive better decision-making. Whether you’re a small business or a growing enterprise, leveraging SKUs strategically ensures smooth inventory management and enhanced customer satisfaction.

Frequently Asked Questions (FAQs)

1. What is the purpose of a SKU number?

A SKU number helps businesses efficiently manage inventory by assigning a unique identifier to each product. It simplifies tracking, organizing, and locating items across warehouses, stores, and eCommerce platforms.

2. How do I find the SKU of a product?

SKUs are typically displayed on product labels, packaging, or listings in inventory management systems. In eCommerce, the SKU may appear in product details on platforms like Shopify or Amazon.

3. What is the difference between a SKU and a barcode?

• SKU: A custom alphanumeric code created by businesses for internal tracking.
• Barcode: A machine-readable code often tied to SKUs or UPCs, used for scanning and data capture.

While barcodes are used universally across systems, SKUs are specific to a business’s inventory.

4. Can small businesses use SKUs effectively?

Yes! Even small businesses benefit from SKUs as they improve organization, streamline inventory tracking, and simplify order fulfillment. Tools like OneCart can automate SKU generation, making it accessible for businesses of any size.

5. How do I create an efficient SKU system?

Follow these steps:

1. Use consistent formats (e.g., “CATEGORY-COLOR-SIZE”).
2. Avoid special characters or confusing combinations.
3. Keep codes short but descriptive.
4. Leverage tools to automate SKU generation for accuracy.

6. What happens if SKUs are not unique?

Duplicate SKUs can lead to inventory errors, fulfillment mistakes, and reporting inaccuracies. It’s crucial to ensure every product variation has a distinct SKU to maintain efficiency.

7. How do SKUs help with reporting?

SKU-level data enables businesses to:

• Identify top-performing and slow-moving products.
• Analyze sales trends and customer preferences.
• Optimize inventory decisions for profitability.

8. Can SKUs be reused for new products?

To avoid confusion, it’s best to avoid reusing old SKUs. Instead, archive discontinued products and assign new SKUs to incoming items for clear differentiation.

9. How do SKUs work with multichannel platforms?

SKUs unify inventory across multiple sales channels, ensuring consistent stock levels and accurate reporting. Using the same SKU on platforms like Amazon and Shopify helps prevent overselling and simplifies management.

10. Can I automate SKU management?

Absolutely! Inventory tools like OneCart automate SKU creation, syncing, and reporting, making it easier to scale operations and manage inventory efficiently.

Summary

SKU numbers are essential tools for effective inventory management and business operations. By assigning unique alphanumeric codes to products, businesses can organize stock, track sales, and streamline order fulfillment with ease. SKUs not only help avoid common inventory issues like overstocking or stockouts but also enable data-driven decisions through actionable insights into product performance and customer trends.

Using SKUs effectively:

• Simplifies inventory tracking and management.
• Enhances the speed and accuracy of order fulfillment.
• Powers real-time inventory updates across multiple platforms.
• Provides insights for optimizing sales and marketing strategies.

Whether you’re a small business just starting out or a growing enterprise managing complex inventory, a well-structured SKU system lays the foundation for scalability and operational efficiency. Tools like OneCart can automate SKU management, ensuring consistency, accuracy, and integration across all sales channels.

Ready to take your inventory management to the next level? With OneCart, you can automate SKU creation, synchronize stock across platforms, and gain real-time insights into your business performance.