What is SKU?

An SKU (Stock Keeping Unit) is a code that identifies stock kept in a warehouse or shop. This allows the retailer to get reference information such as product details, price, and manufacturer while selling this product to customers. Sometimes it is also called a supplier's part number. SKU is a scannable bar code that appears on printed product labels in stores. This label allows vendors to automatically track the movement of inventory. The label is composed of an alphanumeric combination of eight-or-so characters. These alphanumeric characters usually serve two purposes that include identifying and sorting information about price and product details as well as who manufactured the products.



An example of an SKU being used is on the label of packaged products that has a barcode, e.g. in Tesco this is printed on all items so they can track products by scanning the barcode with an item scanner which will return all relevant information about the product.

Where are SKUs used?

SKUs are used by stores, catalogs, e-commerce vendors, service providers, warehouses, and product fulfillment centers to track inventory levels. With SKUs and a POS system (or Point-of-Sale system), it is easy for managers to detect which products need to be restocked. When a customer buys an item from the register at a store or point of sale (POS), the item's SKU is entered into the POS computer system where it is automatically removed from a stock in addition to recording other data like sale price or items description details or features that might be specific to the model number of the product.

How does SKU work?

SKUs are used widely in retail. They help mark inventories because it can be difficult to keep track of, categorize and identify all products at a store with any measure of tidiness without them. An SKU might be a combination of numbers and letters that indicate a specific product attribute - like 32” wide screen TV (SKU: ABB-001) using the first “A” to signify that its screen is at least 30 inches across and the second “B” to represent its HDTV status. Some products come with variants that differ by brand or version while others may have several models within one SKU. For instance, a makeup company might use only the first few letters from their primary product names for their SKUs to make those particularly unique items easier to locate on store shelves where there could easily be thousands on display. It’s a unique number that ties together an item's inventory with its sales in a retail environment. The SKU should not contain any spaces or special characters, and it should stay uniform across a product line if you are using the Universal Product Code system.

What are SKUs used for?

SKUs are more than simple identification numbers. They collect information that will help you determine whether or not your products are selling as well as help you understand how much resources should be allocated to them to make them profitable in the future.
1. Analysis

SKU provides the retailer with useful data that allows them to manage products more effectively. This analysis grants them the ability to be able to stock inventory in a way that coincides with trends in customer behavior.

2. Inventory Management

Inventory management is the core function of an SKU system. With an SKU, retailers use sales information to help determine inventory levels, streamlining their inventory orders.

3. Customer Assistance

Store assistants can quickly scan an SKU to find out what is in stock for a consumer who wants an alternative version of a product, creating sales efficiency and customer satisfaction.

4. Advertising and Marketing

SKUs also help retailers promote their products. In the past few decades, this marketing technique has proven to be effective when it comes to drawing in new consumers and encouraging sales, as demonstrated by its increased utilization among different types of retailers. SKUs can give marketers a tool for keeping their brand exclusive and producing successful targeting strategies through customer segmentation.

5. Product Recommendations

Online merchants often use SKUs to track and monitor the sales of each product. For example, Amazon.com has attached a unique number that identifies the make and model of every product on its platform. This is what allows them to present users with product suggestions when they are shopping for certain items.

Can two products have the same SKU numbers?

No, two products cannot have the same SKU numbers. Each product would have a different SKU. Even a small change, such as size or color, will require a separate SKU. Remember that if there are any differences, no matter how small, between two products, their SKUs must be different.

How to create SKU numbers?

There is no right way to go about creating SKU numbers. The important thing is to find a system that works for your business. This guide will give you some examples to help you get started:

1. Identify attributes that you want to use

Before you can start creating your SKUs, you need to establish a standard format to follow. This includes listing all attributes and identifiers you want to include for each product. This will help you keep your SKUs organized and distinguishable from other products.

Some identifiers you would want to use are:

  • Brand

  • Category

  • Product name

  • Product color

  • Product size

2. Create a code system

Creating a list of codes for manufacturers, brand colors, sizes, and other attributes can make it easier. By using excel spreadsheets, we can assign a code to each one and have it all organized in one place.

Let's see a few examples:

For manufacturers/brand

Brand Code
Nike NKE
Adidas ADD
Reebok REE


For item

Item Code
T-shirt TSH
Shoes SHO
Socks SOC


For Size

Size Code
Small SM
Medium MD 
Large LG


For color

Color Code
Red RD
Blue BL
Green GN


3. Putting it together

Now that you have identified the attributes you will want to use and the code for all the attributes, it is a matter of putting it together.

Let’s look at a few examples

Identifiers SKUs
Nike, T-shirts, Small, Red NIK-TSH-SM-RD
Addidas, Shoes, Blue, 10.5 ADD-SHO-BL-10.5


SKU numbers are like a superpower for businesses. By assigning each of your products a code, you can keep an eye on your inventory and make more strategic decisions for your company. You can also make things simpler for your employees. Once you have the numbers set up properly, you should be able to keep track of orders and stock more easily.

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