Female Inventory Manager Shows Digital Tablet Information to a Worker Holding Cardboard Box, They Talk and Do Work. In the Background Stock of Parcels with Products Ready for Shipment. Concept: What is a SKU Number
Betsy Wise
By: betsy_wise
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What is a SKU Number and How to Set it Up?

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What is a SKU number? 

Shoppers often think SKU numbers are those annoying bar codes that fail to scan when they’re rushing through self-checkout. However, retailers know that SKU numbers and barcodes (UPC numbers) aren’t the same.  

SKUs can help you understand your customers and get prepared for any eventualities related to your inventory. And like Alexander Graham Bell said:

Before anything else, preparation is the key to success. 

All in all, SKU numbers help you make smarter decisions for your business so that you can succeed. So why not use them in your business?

In this post, we’re going to find out how SKU numbers work. You’ll also learn how to create and set them up, and how SKU and UPC numbers differ.

So get ready to be wowed and amazed at how SKUs can literally change how you do business.

What is a SKU number?

A SKU number, or Stock Keeping Unit number, is assigned to each product a retailer sells. This alphanumeric coding system enables business owners to track inventory and sales simultaneously. Not only that, SKU numbers include information relating to the price, brand, and individual product options. 

SKU, stock keeping unit. Concept with keywords, letters and icons. Colored flat vector illustration on white background. Concept: What is a SKU Number

Is a SKU the same as a serial number?

No, SKU numbers are not the same as serial numbers.

Serial numbers are created by the company that produced the article. A serial number can vary between two identical products, because they are used to track each different product, mostly for warranty reasons. Serial numbers are alphanumeric codes.

SKU numbers are used by retailers, warehouses, and product fulfillment centers like Amazon, but SKUs aren’t used comprehensively all over the world. They are unique identifiers. The SKU of two identical products in the same store will always be the same. Each retailer can establish their own set of SKU numbers categorized into classifications. SKU numbers are alphanumeric codes.

What is a SKU number? Example

As mentioned, not all SKU numbers are the same, each store had different ones depending on what they want to track. For example, you could have the SKU: TSH-M-SM-GR-M03, that tracks for the following: T-shirt, men’s, small, green, model 3.

Where can I find the SKU number?

A SKU number will most times be found on the product’s price tag (not on the instructions or the package), or in the receipt.

The advantages of using SKU numbers

Not only do people wonder, “What is a SKU number?” but they want to know whether they should use them in their business. Here are some practical reasons to use SKU numbers:

  • Order stock

Because SKU numbers keep track of inventory, you’ll know which merchandise inventories are too low and need to be replenished. Furthermore, they’ll help you manage and organize your small business inventory.

  • Review sales

By having a history of what sells and what doesn’t, you can predict future purchases. Since retailers set up SKUs any way they want, they keep tabs on colors, sizes, brands, and other sales information to know what customers buy the most.

  • Advertise popular items

SKU numbers alert retailers as to which products sell quicker. Since those items sell the best, retailers can use specific advertising campaigns to generate more profit.

  • Anticipate reorders

Loyal customers keep coming back for products they like. You can reward customer loyalty by making sure their products are always in stock.

  • Suggest new products

Retailers set up SKU numbers to include information about products with similar features. If a favorite product is out of stock, your staff can suggest another product to a customer. 

African-American Female Fashion Designer with mobile phone. concept: what is a SKU number

How to create and set up SKU numbers

Now that you know what a SKU number is, this step-by-step list will help you set up a unique system so you can manage your product lines. As you read through the steps, you’ll see how to use SKUs to your business’s best advantage.

1. Consider what information is most important

Think of your SKU system as a hierarchy by placing the most vital information at the beginning and the least significant data at the end of the number. For example: 

Maybe another retailer has SKUs with this order: Price-gender-size-brand

However, your store may need to set up the SKU as Brand-size-gender-price or some other configuration with different data.

2. Know what your customers like

What questions do customers usually ask? 

Are they more concerned about features, sizes, or something else? 

Tailor your SKUs to suit your customers, the type of merchandise you offer, and ease of use (keep it simple). SKU numbers should be easy to understand so you can manage product lists and orders. There’s a reason SKUs are called unique identifiers.  

3. Set up a pattern

As a general guideline, SKUs should be between 8-12 characters in length (both letters and numbers). Make sure to begin with a letter and never include zeros. Likewise, to avoid confusion, you shouldn’t use special characters or spaces but only dashes. 

Most people don’t use the letters “O” and “I” because they can be interpreted as the numbers zero and one. Although it really depends on how you use them. In this example, BLU-MED-W10-TOP, Blue-Medium-Women’s Size 10-Top is easily understood. 

4. Make sure your SKU system works with existing software

If you use inventory management software or plan to purchase a program in the future, set up your SKUs to work with your point of sale system. 

5. Keep tweaking the numbers

You may need to change your SKUs along the way to optimize their usage. Because they’re your numbers, you can set them up to accommodate how you operate your business. You may need to change how you rank the information or track merchandise differently as product sales and the type of inventory you offer changes.

Young Asian man worker doing stocktaking of product in cardboard box on shelves in warehouse by using digital tablet and pen. Physical inventory count. Concept: what is a SKU number

SKU numbers versus UPC numbers

You probably realized how different SKUs are from barcodes (or UPCs). But just to make things even more precise, let’s see how SKU and UPC numbers are different.

SKU – Stock Keeping Unit UPC – Universal Product Code
Internal coding system Universal coding system
Includes information about a product Provides information about manufacturer and item
Alphanumeric Numeric
Varies between 8-12 characters Always 12 characters
Retailer create their own SKU numbers Barcodes are set up by the Global Standards Organization
Placed above or near UPC barcode It is the barcode

What is a SKU number? A number that rocks

We’ve not only answered the question “What is a SKU number?” but provided further information to understand its importance. If you haven’t been using SKU numbers in your business, there are numerous reasons why you should. 

As you’ve seen, SKU numbers provide analytical data that can improve your relationships with vendors and customers and smooth out kinks in your operation. 

Besides that, these stock keeping unit numbers help retailers see when inventory shrinks or stockpiles. They save you time because you don’t need to walk to a shelf or display room to see what’s in stock. You simply pull up the SKU information from your computer.

On that note, Camino Financial knows that your time is valuable. That’s why we invite you to subscribe to the Camino Financial newsletter to become a part of our community and receive more management tips and ways to grow your business. 

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