How to create SKUs and manage inventory in your ecommerce store

Retailers use stock-keeping units (SKU) to track their inventory levels and monitor various product sales. 

In many stores, a SKU appears on both the shelf and on the packaging of individual products. But why should you care about these systems? And how can they help you manage your business better? This article provides you with valuable information regarding SKUs and some crucial tips on using them. 

What is a SKU?

A SKU of a product is a unique alphanumeric code containing the data of an item in an inventory. The data includes the manufacturer, price, size, type, colour, and more. Stock-keeping units help you track inventory to maintain a steady supply of products. 

What is a SKU example?

Here is an example of a SKU for a shoe retailer.

Supplier1st IdentifierColour2nd IdentifierSequence IdentifierSKU

How do I get a SKU for my product?

There are a few ways business owners can generate SKUs. If you are using an ecommerce platform like WooCommerce, you can let the software automatically generate a SKU for you as you upload each product. If you’d like to create your own SKU architecture, you can use SKU generators such as TradeGecko or Primaseller or create the codes by hand.

Can two products have the same SKU number?

No. Giving products the same SKU number defeats the purpose of having one in the first place. You are free to create SKUs using whatever pattern fits your business, but each product needs its own number. 

Tips for your SKU naming convention

SKU numbers are meant to make inventory management easier. If your SKUs are created randomly or without a strong naming convention, they will just be confusing. Here’s our best tips for creating SKUs:

  • Start with the most purchased product to simplify work for your sales team
  • Follow an easy to remember pattern
  • Avoid using zeros or special characters
  • Use the same number of characters for all products. The final format is up to you, but most SKUs have between 8 and 12 characters. 
  • Start your SKU with letters, such as the initials of your manufacturer

What’s the difference between a SKU and a UPC?

Both Universal Product Codes (UPCs) and SKUs are identification numbers used to track products through a supply chain. The difference lies in how each unit is used. 

SKUs identify items internally and are created by the seller. UPCs identify the product globally and are issued by the GS1 when a product is manufactured. For example, when Fuji makes a new camera, it gets a UPC for that camera specific to that model from GS1. When camera shops start selling that camera, they assign it a SKU that fits in with internal SKU naming conventions. 

Ten different online retailers will assign the new camera to completely different SKUs, but the camera will still have the same UPC.

It’s usually easy to tell the difference by looking at the number. SKUs are usually between eight and twelve characters and contain numbers and letters. UPCs are always 12 characters, only use numbers and are also expressed as a barcode. 

Are SKUs and barcodes the same?

No, barcodes and SKUs are not the same. A barcode is a scannable version of a UPC code, which is what a clerk scans at point-of-sale.

Onlines stores and retail stores use SKUs for internal inventory purposes. A series of letters and numbers in text format comprise SKUs. 

How to use SKUs to grow your ecommerce business

SKUs may seem like small details when you’re first starting out. After all, you know what you’re selling. As your ecommerce business grows, using SKUs with a good naming convention will save a lot of time and misunderstandings. 

A single dress that comes in five sizes and three colours is 15 different products in your inventory management system, for example. 

Communicating with customers, marketing, sales and accounting is much easier when everyone knows exactly which items are being discussed. Here’s how SKUs can help you grow your business

  • Easily manage inventory. Since SKUs contain the characteristics of each product, you can use them to identify items that are running out of stock and plan when to order them. This is known as a reorder point.
  • Build customer loyalty. Selling out quickly does create a sense of urgency and desirability for customers, but too many out of stock items are frustrating. SKUs can help you manage your reorder points to hit the sweet spot between popular and not available.
  • Stock more of your most profitable products.SKUs make it easy to see which products are selling the most. And also which products are not connecting with your customers at all. Adjusting your product range based on sales data is one of the best ways to streamline your inventory and increase your sales.  
  • Provide customers with new alternatives. SKUs are the foundation of customer suggestions. With the right data, you’ll be able to see which items customers bought together and then make predictions about what a new customer might want to see. You can recommend new products or suggest alternatives when something is out of stock.

Grow your business with Mollie

Managing SKUs is an essential part of a successful ecommerce business. You can manage stock levels, forecast growth, and anticipate customer needs. Reliable payment gateways are essential, too. When your inventory management is running smoothly, you can tie payments and sales directly to specific products. If your business is in need of a payments solution to integrate with your inventory management software, learn more about how Mollie can help your business grow. Find out more here.

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