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Multi-channel operations

What Does SKU Stand for? How Do Online Businesses Use SKU?

What Does SKU Stand for? How Do Online Businesses Use SKU?

Oh no, spare me from that hassle. My retail business is doing pretty well without an SKU listing system. I am not really into squandering my time on setting SKU numbers to the products I know like the palm of my hand.

That’s what you might be thinking. And you are free to hold this belief. But listen, SKU product numbers are crucial if you would like to upscale your business and have a well-organized system that would help you and your customers find the item they need easier and faster.

So, in this article, we will explain what is an SKU, why it’s important for your business, and how to create an effective and convenient SKU system for your retail business.

What Is SKU?

Are you sure you know what’s the SKU meaning? If you happen to hesitate, that’s ok. We will put out an SKU definition for you so that there’s no room left for hesitation.

SKU (stock keeping unit) is an alpha-numeric product identifier that holds information about the product like the brand, category, color, size, pattern, or just any other prominent feature that makes it stand out among other goods.

Product SKUs are assigned by a seller, so they are unique to every store. In a nutshell, every merchant generates a special code (a letter, number, or combo) for a specific item feature and then combines them so that they make approximately an 8-digit identifier.

It might sound complicated, so let us show you that it’s actually as easy as a cakewalk. See the chart below.

SKU
CATEGORY BRAND COLOR SIZE
T-shirt
A1
Zara
B1
White
C1
6
D1
Polo
A2
H&M
B2
Black
C2
8
D2
Shirt
A3
ABLE
B3
Red
C3
10
D3

So, let’s say a red H&M T-shirt in size 8 would get an SKU A1B2C3D2. This is a simple example that illustrates how SKUs work, but it’s a bad example =)

Why SKU Are Important

You might be tempted to keep running your eCommerce business without SKUs. You don’t have product variations, after all. And your inventory is very limited, so what’s the use in them?

After we show you the benefits of using SKU-stock keeping unit, you’ll change your mind.

Easy and Effective Inventory Management

I use the product title to manage my inventory and that has never been an issue. Well, almost never.

We understand you completely. When you run a tiny inventory and work by yourself, managing your inventory using the product title might create an illusion of complete control. You know exactly what item to pack for your customer, how to measure your inventory level, and order more stuff when you run out of some goods.

But as your inventory grows and you hire staff to handle all the orders, listings, and inventory (and we are pretty sure this time will come one day or another), your card house built on the illusion of effectiveness and order will collapse.

Your employees might have a different idea of what stands behind the blue T-shirt (especially when you have multiple similar product models in stock). They would be making mistakes replenishing the inventory ordering more items you already have at hand and fewer goods your customers crave for.

But once you introduce a set of SKU digits to identify your goods, you upgrade your card house to the status of the fortress. The code is much easier to handle as you’ll be able to use it when optimizing your work with inventory management software or filling out the documentation. The app would be updating any inventory logs automatically, either when the order happens or new items enter the warehouse. Besides, SKU systems would be simplifying the product quantity process and enabling an easier and error-free restocking process.

Multiple Sales Channels Connect through SKU

A products SKU system is indispensable when you rely on multiple sales channels. As a smart seller, you do not want to let your business drown in chaos. When you set a unique SKU to your products, you make it possible to track the quantity of your inventory much easier and faster. Especially, when you are using a multichannel inventory management tool like SellerSkills. Our app will create a hub spot for all your Amazon, eBay, Walmart, and Shopify listings. With the use of the app, you’ll be able to use SKUs to match your listings across all your sales channels and:

  • Publish multiple listings on all the marketplaces at once
  • Control inventory level more efficiently with an auto-sync feature
  • Edit listings on all the channels right away
  • Import listings from one platform to another (or multiple) in one click

Use SKU on Amazon, Shopify, eBay, Walmart to unify your inventory, listings, and order management for greater business performance.

Customers Search for Items by SKU

Did you know that some customers use product identifiers like SKU or UPC to find the best deal online?

Yes, that’s right. Once the customer settles for a specific product, they use product identifiers to compare offers and define the best price when conducting their Google research. If you miss this out and do not add SKUs to your listings, you are losing your prospects and revenue.

Another side of the coin is that SKUs help returning customers find the exact product they want. Just imagine that the customer purchased an item from you and they loved it. They want to order some more from you, so what do they do?

They might search the product by its title (but face it how many offers might pop up in the search results, and they might not be yours) or enter a SKU and get exactly what they want. This is especially beneficial if the customer uses Shopify, eBay, Walmart, or Amazon SKU search because they will find YOUR product rather than competitor’s.

How to Create SKU Numbers

By this time, you should be convinced that SKU identifiers would benefit your business in many ways.

And you already know that your SKU is a unique alphanumeric code you use to identify, categorize, and manage the information about every individual product.

So, how do you make sure that all SKU details make sense and help your team or customers find the right product page or item information? Follow these simple tips we’ve listed below.

Best Practices for SKUs

If you are questioning yourself how to build an effective and understandable SKU system, here you go. These are the basic guidelines that would allow you to create a robust SKU model that works.

  • Keep it unique — each inventory item or product variation should get an exclusive SKU code. Avoid reusing an SKU for the unit you do not sell anymore for a new product.
  • Make it short — the optimal length of an SKU is 7-8 characters. An SKU size will depend on the inventory size (the more products you have, the more features you might need to use to identify your goods).
  • Important things first — put the most important and general product features at the beginning of the code.
  • Do not use spaces or special characters — your SKU code should be friendly for people and software systems. Special characters like |, /, {}, &, *, and more should NEVER be in your SKU.
  • Never start your SKU with 0 (zero) — some search engines and even Excel will remove 0 at the beginning, so you’ll end up having a wrong SKU code that would mess things up.
  • Refrain from using letters that could be confused with figures — avoid using O and I as they might be easily confused with numbers and that would lead to errors.

SKU vs UPC: What’s The Difference?

So, SKU and UPC are both product identifiers, but do they stand for the same thing?

On the one hand, they serve the same mission — to identify products to simplify business processes. But on the other hand, they have a completely different algorithm of generation and use.

You already know what are SKUs, but let us stress the important features once again. SKUs are not universal, they are unique for every store and are generated by the seller. They are built of a combination of numbers and letters and, generally speaking, there’s no rule of how they should look like and how many characters they should have.

Unlike SKU, UPC is a universal identifier (i.e. every seller uses it) you can see on almost any package in the USA and Canada (Europe and other countries use EAN). It’s made of two parts: a barcode represented by a series of black vertical lines and a unique 12-digit code below. You can’t generate it on your own. At first, you’ve got to apply to GS1, the Global Standard Organization, to get your unique company prefix and only then purchase the UPCs from UPC generators.

The Final Thought

SKUs are not a must in the retail business, but the SellerSkills team will recommend you implement them to simplify all the processes, especially connected with the listing, inventory, and order management. Not only SKUs make your life easier, but they also boost your earning potential and increase the level of customer satisfaction.

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