SKU is a code of numbers and letters used to identify, locate and internally track a product in an online store.
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What does SKU stand for?
SKU is the acronym in English for the term Stock Keeping Unit, translated as Stock Maintenance Unit.
In addition to the SKU code, it is also known as a “product reference number.” It is beneficial for efficiently identifying each item and allowing each of these to be located throughout the production and shipping chain.
Each company has unique SKU codes, so even though two brands carry the same item at the same price and on the same platform, the products have a different internal SKU codes.
Benefits of using SKUs in your e-commerce
Now that you know what an SKU is, we share with you the main advantages of having these codes in your business:
- Optimize product catalog management
- They help to have better control of the inventory
- They help analyze sales trends and buyer behavior
- They prevent you from running out of stock of the most demanded products
- They can reduce staffing and save costs
- Improve the productivity of your business
Do we see each point in detail?
Optimize product catalog management
How many items do you sell in your online store? How do you control the entry and exit of each of them? SKUs are great tools for monitoring all the products in your catalog.
Thanks to the SKUs, you can identify how much stock you have of each item in its multiple variants (size, color, shape, material, etc.), and, best of all, you can know it at a glance. Help to have better inventory tracking.
By identifying and labeling your products efficiently, SKU codes help you have better control of your inventory.
It is beneficial for brands that have multiple storage locations or are into dropshipping. Through the SKU, they can know where these items are if they are in warehouse A, warehouse B, point of sale C, or in transit between one site and another.
They help analyze sales trends and buyer behavior.
You can use SKU codes to discover which products are best sellers ( star products ), if any size or color is sold more efficiently, and even understand which item should be promoted if you have a lot of that stock.
SKUs also help you know if certain products sell more seasonally or if you can sell them all year long. This information is precious to define what direction to take in creating or marketing new products based on buyers’ behavior.
They prevent you from running out of stock of the most demanded products
Perhaps this point is explained with the previous one, but it is worth understanding it thoroughly. The SKU codes can help you detect which items have the most movement, allowing you predict how often you have to restock them so as not to run out of stock.
Suppose you sell t-shirts for boys. Through the SKUs, you could detect that the article REM-AZU-ALG-1 – which is associated with the blue (AZU) cotton (ALG) t-shirts (ALG) size small (1) – is the one that presents the most movement, selling 3 pieces weekly. In this way, if your stock is 12 pieces, we know that this product, in that color, material, and size, should be replenished once a month, according to what the purchasing trends indicate.
On top of everything else, using SKU codes in conjunction with inventory management software can help you set up a system of personalized alerts. Thus, whenever an item has a lower volume than usual, it can generate a purchase order to recover the stock.
We invite you to learn about all the management tools for your brands, such as solutions for inventory control, organization of shipments, and much more!
They can reduce staffing and save costs.
The logistics area of a company usually requires a large number of people to keep track of stock, manage inventory, and accommodate products, among many other activities. Using SKU, it is possible to reduce the size of this area since the management of the products tends to be more controlled and straightforward, shortening times and reducing the investment of money.
Improve the productivity of your business
Related to the previous point, in general, the most significant benefit of SKUs is the improvement of the productivity of the entire business by saving time and, with it, saving effort and costs. In addition to increasing customer satisfaction by being a company with a constantly renewed stock.
What is the difference between an SKU code and an EAN code?
The difference between an SKU code and an EAN code is that, while the SKU is a variable length alphanumeric code, the EAN is a succession of numbers, precisely 12 digits, usually accompanied by a scannable barcode.
Where are SKU codes used?
Let’s look at some examples of places where you can use the SKUs, both physically and virtually:
- Database
- Sales site
- Online Catalog
- Product labels
- Item boxes
- Purchase orders
- Guides and shipping labels
Of course, you can use the SKUs in more places where you consider that they contribute to the identification and location of your products. It is a flexible tool that you can adapt according to the needs of your business.
How to create an SKU?
Now that we have seen all the theories and you have discovered what a product SKU is, it is time to put it into practice. Creating an SKU is no big deal; we explain how to generate them in five easy steps.
Steps to follow to create an SKU successfully:
- I chose the right tool to create SKUs.
- Select the information to save within the code.
- Create a recognizable pattern and make it standard on your system.
- Make sure your inventory management system works with the ones you’ve created.
- Replicate and optimize as many times as necessary.
To help you get started, we bring you our SKU generator template for Excel or Google Sheets that you can download for free.
In summary
Knowing what an SKU is and what advantages it can bring to your e-commerce is vital to improving your inventory management.
For many brands, this code became a tool that enhances productivity and that, despite seeming complex at first, simplifies processes that can turn into headaches in the long run.
Applying or not applying SKU codes in your business may seem like a very technical decision since, if you are starting to sell online, you may remember all the products you sell.
However, as your business grows and the number of items and their variations increases, the SKU codes will become your reference point to know which ones have the highest return on investment.
So, are you already thinking about how to define your SKUs?