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How to Set Up SKU Numbers in 5 Steps
  • Step 1: Start SKU Numbers With a Top-level Identifier. …
  • Step 2: Use the Middle Numbers to Assign Unique Identifiers. …
  • Step 3: Finish SKU With a Sequential Number. …
  • Step 4: Add SKUs to Your POS or Inventory Management System. …
  • Step 5: Create SKU Barcodes Labels.

How to Manage Your Shopify SKUs

What is an SKU?

An SKU is a scannable code for a product that is unique to the retail store. It is a unique code assigned to a product for an easier way to identify information including the price, product variation and manufacturer of the merchandise. Generally, companies put the code on the shelf where they stock the product. This code helps staff identify a product from invoices, order forms or lists. This way, staff members can easily track the movement of inventory. They can use information about how different inventory is selling to determine pricing.

An SKU is different from the Universal Product Code (UPC) found on products. A UPC is the same for the product across all companies and retailers. A UPC is a barcode the cashiers scan that tells them what the product is and how much it costs. An SKU is unique to the company or individual retailer.

The code of an SKU is an alphanumeric combination that has about eight characters. The characters are usually an abbreviated description of the product.

For example: The SKU for a pair of red spring/summer sandals in size 8 would be SS-RD-08. Companies usually use just numbers and letters to make it easier to format SKUs in Excel and other programs.

Other examples of codes include:

When establishing the code, the most important information should come first. Its helpful to avoid using the letter O and the number 0 as they look very similar and could cause mistakes. SKUs are usually separated into categories and classifications. An SKU code can include the following attributes:

Usually, point of sales systems will give you the option to create a unique SKU architecture. Before you start building the architecture, consider the most important information you should log. For shoes, it might be size, style and color, while for notebooks it could be color, number of pages and the rule type.

How do companies use SKUs?

Companies use SKUs for several important reasons. The following is a list of ways that companies can use SKUs:

Manage inventory

When a company takes inventory of available stock, staff will count the quantity of each SKU. Counting SKUs helps companies track how quickly they move inventory and their sales amounts.

Indicate sales

SKUs tell staff which products need to be reordered and which items are selling faster than others. Staff will access the point of sale or accounting system to track the unique information of the SKUs found in the system. This information can tell them the number and price of each item sold.

Re-order products

Because a POS system or cloud inventory management system houses the SKUs, staff can create threshold limits so that when an item is low in stock, the system will send a reminder to reorder the item.

Increase sales

For online shopping, SKUs can recommend similar items to shoppers based on their searches. Companies usually design SKUs so they can group them together based on different specifications. When customers search for one product on the website, the company suggests similar items that could drive more sales.

For example: If youre searching for a bike rack on an online retailer, the system will automatically suggest other bike racks that are closely related to your search. The SKU for the bike rack you searched for could be 10098821, so the system finds bike racks labeled with 10098822 and 10098823 SKUs since theyre similar numbers. The online retailer can provide similar items because the company group bike rack SKUs together so the systems could easily pull the information and show related items.

Improve customer experience

Stores with physical locations can also increase sales and improve customer experience by grouping together SKUs. A salesperson can perform a quick search to check if a shoe comes in another color or if there are more sizes in the store for a better customer experience.

Marketing campaigns

SKUs are also great for marketing campaigns. Retailers are more likely to provide the SKU when they are advertising a discounted sofa, for example. If they were to give the UPC instead, potential customers might do some research to see if other retailers are selling the sofa at an even cheaper price.

Simplify inventory checks

Employees should perform inventory checks regularly. Inventory checks can help staff record the exact number of items available in-store to see if that number matches what the inventory management system indicates.

Reduce inventory shrinkage

Tracking inventory shrinkage is also important for a business. Inventory shrinkage includes items that are missing or ones that cannot be sold, usually due to damage or defects. This is an important process as it shows business owners where or when the stock is going missing to minimize theft and loss of profit.

Reduce costs

Keeping track of inventory through SKUs can also reduce costs. SKUs help staff keep track of the inventory that creates more costs. It could be that a product is not selling as well as other products or maybe many customers returned the product, resulting in a loss of sales. Owners know they should remove that product from inventory to

Track profits

Besides tracking underperforming products, SKUs can also track products that are best sellers according to the specific color, size or material of the item. This is a great way for sales and marketing teams to know what they should re-order and the items that will do well to generate more profit.

Improve communication

SKU codes make it easier for staff to communicate. Rather than describing a product at length or using the long name of the product every time, staff can use the codes for a more efficient work environment.

FAQ

What is a good SKU?

An SKU is typically eight alphanumeric digits long. Products are assigned different SKU numbers based on various characteristics, such as price, manufacturer, color, style, type, and size.

Can 2 products have the same SKU?

SKU names should be simple, straightforward, and self-explanatory. This helps different departments within your company – such as operations, logistics, customer support staff, and the sales – efficiently understand exactly which product the SKU refers.

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