Everything You Need to Know About Stock Keeping Units (SKU)

When you first launch an e-commerce business, everything is so exciting and new.

Having an eCommerce business means there’s nothing that matters more than your stock—not running out of it and organizing your inventory.

Now, there’s a lot of ground to cover in eCommerce guides, but today we’re starting off with the most important thing of them all:

SKU numbers!

To keep your inventory organized, you need to develop a coding system. This is where SKUs come into play.

What is an SKU?

A SKU, also known as a stock-keeping unit number, is a number that is assigned to a product for the purpose of inventory management and ease of tracking. It is a scannable bar code, most often seen printed on product labels in a retail store. It is composed of an alphanumeric combination of eight or so characters. The characters are a code that indicates the price, product details, and manufacturer. It may also be applied to intangible but billable products, such as units of repair time in an auto body shop or warranties. Each SKU is unique to each product and, in some cases, only differs slightly based on minor variations. For example, if you run an online clothing store, you may offer one shirt style in three colors: blue, red, and black. In this case, the SKU may be identical except for a slight color variant on the end.

Why is SKU important to e-commerce websites?

Creating SKUs for your e-commerce website is important for a few reasons. That is why you should get into the habit of creating and organizing a list of SKUs from the start. The more you automate from the get-go, the better.

1. Inventory Management

   Inventory Management is the core function of an SKU system. With an SKU, retailers are able to track inventory levels, turnover, and flow. They can set inventory levels and timeframes using the information gathered from sales, which can act as triggers for initiating or stopping inventory orders. You will be able to track inventory more effectively by assigning an SKU to every item you offer. This will help you determine how many available stocks you have, how many items you have sold, etc. Knowing stock availability is imperative when it comes to effective customer service and overall growth.

   In this regard, each unique SKU will support inventory counts, which should be performed at regular intervals. This will help ensure that your current stock levels match what is recorded in your inventory management system. This is particularly useful for tax purposes.

2. Analysis

   SKUs allow retailers to collect data that allows them to conduct an analysis to determine product popularity or view seasonal and cyclic sales trends in their different customer segments. This analysis grants them the ability to stock inventory that coincides with trends in consumer behavior.

3. Advertising and Marketing

   Using SKUs in advertising is a modern technique. With the competitive online landscape of retail and everyone matching prices, an SKU allows your inventory to appear unique and enables you to identify marketing techniques that are generating sales based on the product identifiers. Many retailers advertise their SKU instead of the manufacturer's model number.

   Doing so makes it more difficult for a consumer to find the exact model at another store while decreasing the chances of competitors matching pricing strategies with the same information. It can also help reduce the practice of consumers visiting stores to compare prices for items they intend to buy online instead.

SKU vs. UPC

If you are an e-commerce business owner or you have read up on the terminology, you have probably come across UPC (Universal Product Codes).

But an SKU is not the same as a UPC. UPCs are only legible with barcode scanners. On the other hand, people should be able to read SKU numbers. Also, they are specific to your business.

Conclusion

Whether you want to better understand all aspects of business analytics, helping you understand what’s selling and to whom, or want a more effective system to replenish stock, SKUs are the way to go. By following SKU trends, you will be able to achieve greater control over your product line, which will allow you to focus more on the products that sell.

We hope this post has given you a little insight into why you should be using SKUs (if you aren’t already). Have any inquiries for us? We’re all ears. Contact us Now!