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SKU for eCommerce: An ultimate guide for using SKU numbers effectively

Dec 2, 2019 11 min read
Ecommerce SKU - What are SKUs in Retail and how to create SKU numbers

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SKU for eCommerce: An ultimate guide for using SKU numbers effectively

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Every business, whether selling offline or online, needs an SKU. In fact, you can say that without SKU, it is impossible to do online business.

Let us understand the basics of it and later how to use it effectively.

What is SKU number?

SKU stands for Stock Keeping Unit. A unique, alphanumeric code is assigned to each product that is called SKU numbers or SKU codes.

SKUs are the scannable bar codes that identifies your products to track or manage your inventory. With SKU, you can identify products quickly and decode the attributes which can help you do business effectively. 

For example – No. of products in stock, No. of products sold, No. of products in transit, etc. In an article here, we discussed that there are two types of products- simple and configured.

Simple products are the products that don’t have attributes such as size, color, and more. And, configured products are the products that have varied attributes.

SKU numbers help you differentiate one product from another based on the product attributes. 

For example, the SKU number of apparel with M size and green color will be different than apparel with M size and blue color.

What is a SKU, UPC, Barcode Number? - SKU for eCommerce

Some people also use UPC numbers in their barcode printing and labeling. Don’t confuse SKU with UPC (Universal Product Code) as the UPC of a product can be the same for different eCommerce business owners selling the same product. But, SKUs are always unique. UPC is defined by a manufacturer and all sellers use it. Whereas SKU is defined by a retailer or stockist as per his own process. So SKU will always remain unique and no two sellers will have the same SKUs.

SKU Vs. UPC - SKU for eCommerce

Why are SKUs important in eCommerce?

Creating SKUs is important in eCommerce for the following reasons-

1. Improves store merchandising

SKUs in eCommerce help you understand how many products you have and how many of them are sold out. 

So, now you can plan your store merchandising in a way that attracts the customer for the products left in your eCommerce store by displaying them at the right place, right time, and at the right price.

2. Eliminates inventory management errors

Certain inventory management errors occur even with the eCommerce stores are-

  • Losing revenues due to unawareness of the stock quantity and unable to highlight the same in the stores. This specifically happens when you’re selling on multiple online marketplaces
  • Creating and writing the SKU numbers manually
  • Not able to manage endless isles
  • Not on track of Min, Max, Buffer, and Replenish values

Such inventory mismanagement can be avoided with the help of the right SKU design and inventory management tool.

3. Simplifies checkout process

The purpose of SKUs is also to make the checkout process hassle-free for your customers. When you track SKUs using a point-of-sale system (POS), the moment a purchase is taking place, the right price is reflected. 

And once the checkout process is done, your inventory gets updated with the reduced product quantity.

4. Enhances the shopping experience

Without SKU number, you cannot keep track of how many products you have for sale, and hence, you may end up showcasing the products that are for sale as well as the ones that are sold out.

Your customers may choose the products that are not available in stock, and you may have to tell them that the product they chose is out of stock. The customers do not readily accept such incidents, and you might lose them forever.

With product SKUs, you can track the similar product available at your other store, and order for the customer to manage thier experience. 

5. Prevent losses and Boost profits

The purpose of using SKUs is to track the stock in inventory. This purpose helps you avoid buying overstock and get into inventory shortages. Because when you’re unaware of the stock present in the inventory, you may buy extra products or miss out on restocking the products.

Hence, product SKUs save you from making unnecessary losses, which ultimately boosts your profits. You can also track inventory loss, shrinkages and make floor manager, shop manager accountable for the same. It also helps you increase the security of your products

You can print SKU on NFC tags, passive chips or beacons, so whenever a customer or employee takes away goods without billing, it starts tracking and create buzz on your system.

6. Improves vendor-merchant / wholesaler-retailer communication

If you have your SKU system streamlined, communication with your vendor becomes much smoother and efficient. That’s another reason why SKU is important.

Being into the eCommerce industry, you won’t be working with just one vendor. While working with multiple vendors, you need a better SKU system to manage and maintain the inventory effectively. 

If a vendor expects a certain product’s sale to be booming in the coming period, he/she can verify the same with you. With such forecasting, it becomes even easier for you to keep a healthy stock of that product. 

Also, sometimes, you can keep track of which product SKUs are unable to sell out with one vendor, you can think of joining more vendors to grow your business.

SKUs keep things transparent between the vendor, and merchant and hence improves their business relationship.

When it comes to B2B transactions and bulk orders, there is a well-known facility called importing order list. It is a text file with SKU and quantity to order faster.

7. Reduces communication errors between your stores and warehouses

SKUs in eCommerce make it easy for your staff members to identify and find the right products. If the warehouse manager receives an order of a particular product, he/she can verify whether the product is available in the stock with the help of its SKU and can quickly update to the respective store manager. 

It gives ease of communication and reduces errors.

8. Helps in implementing RPA (robotic process automation) at the warehouse

Robotic process automation (RPA) is growing faster to automate warehousing processes, which includes picking, packing, retrieval, sorting, storage, loading, and unloading.

Warehouses having more than thousands of products with appropriate SKUs can leverage this automation to speed up the operations and reduces costs at the same time.

Without proper SKU design, it becomes challenging for the robots to identify the products and manage their end-to-end packaging.

Hence, SKUs are the most important factor in doing online business efficiently.

How do SKU numbers work?

Let’s check out how SKU numbers work for your eCommerce store.

Whether you create SKU numbers manually or automatically using a POS system, it works the same in both the ways.

Once you add products with SKU numbers in your POS system, you can organize your products under various categories, suppliers, and customized tags. 

If you have a streamlined SKU number system, you can have a wide range of reports to fetch from your SKU-integrated POS-

  • Number of products sold out
  • Products that are in stock
  • Number of products that have re-order requests
  • How many products are available in each category
  • Vendor-wise sales reports
  • Product-wise sales reports
  • Store-wise restock order reports
  • And, more

8 Things to consider before designing SKUs for your eCommerce store

Before you create SKUs for your eCommerce store, you need to consider the following things-

1. The unique number of products

Identify how many of the unique number of products you have to sell on your eCommerce store. If you know the exact number of unique products you deal with, you will be able to create the eCommerce SKUs more easily.

2. Are you a manufacturer or a trader?

If you are a manufacturer, you would need to design your product SKUs on your own and don’t need to depend on any other factors. 

But, if you’re trading some products, then you need to create SKUs differently in order to match up with the SKUs and UPCs provided by the supplier or manufacturer.

3. Can you replace manufacturer SKU numbers with your retailer/online SKUs?

If the answer to this question is yes, creating SKUs become more reliable and hassle-free. But, to implement this, you need a better understanding of how you will separate the pricing attributes attached to their SKUs.

4. Does your business future seem to have to merge or acquiring opportunities?

This question is not a direct one that would influence the way you create your SKU numbers. But, look at the examples of Myntra and Jabong. They’ve been acquired, and no changes have been made in their SKU number system.

So, forecast on how your SKU numbers will get impacted if you merge or get acquired with a business having a completely different set of products.

5. UPC/ISBN codes

While creating SKUs, you can consider including your Universal Product Code or ISBN code at the beginning. See UPC or ISBN codes are not going to change with the changing product attributes. Hence, having such codes in your SKU numbers will help you remember the pattern easily.

6. Product purchase date

Similar to UPC/ISBN codes, you can consider including the product’s purchase date in your SKUs to avoid any changes to your SKU codes once they’re ready.

7. Cost & Storage information

Well, consider cost and storage information like shelf and row numbers in your SKUs to help your staff to remember the location of your products easily.

8. Training team members in generating, interpreting and using SKUs

Once you finalize how you would create SKU, make sure you train your team members about the same. Train them on how they should be further creating new product SKUs, what parameters they should consider, and more.

Also, provide the SKU interpretation training to the staff regularly taking orders and dispatching them. A better understanding and interpretation of SKUs can only lead to better communication and business growth.

How to create SKU numbers?

Before you create SKU numbers for retail or eCommerce, add the codes in the following sequence-

  1. Brand (if marketplace) – It always remains as the top identifier for creating SKUs
  2. Product category code – It can be first or second identifier depending on the number of brands you sell products of
  3. Attributes (color/style/length/weight) – Choose any important attribute based on your requirements
  4. Price hint (code) – This identifier depends on whether you need to use or not
  5. Size – The products whose selling depends on its size, it’s mandatory to have it in your SKU
  6. Month/Year – You can either use it or skip it depending on the product type you sell

Here is an example of how to create SKU numbers for your eCommerce business-

How to create SKU numbers with example - SKU for eCommerceThe length of your SKU depends on how long you want to manage and how many unique products you have. For example, here is a sample SKU for legal services- SKU code example - SKU for eCommerce

You have two options to create SKU numbers-

1. Manually

You can create SKUs manually only if you have a limited number of products. Here is how you can create SKUs manually-

How to create SKU number manually? - SKU for eCommerce

Use Microsoft Excel or Google Sheets to create SKUs in the above way.

2. Using automatic or online SKU generator

Online SKU generating tools such as TradeGecko and Zoho helps you generate SKUs faster and efficiently.

After generating SKUs using these online SKU generators, you can export or download the created SKU list in Excel, which you can refer to even later.

SKUs: 7 Best practices to create them

Designing or creating SKU is not that simple for eCommerce businesses. Follow the below SKU creation best practices (can also be called Dos of creating SKUs) to ensure you create the most efficient SKU numbers that will help you in managing inventory effectively-

  1. Make it unique– Yes! When you create SKU numbers automatically using the inventory system, you don’t need to worry about its uniqueness. But, when you’re creating SKUs manually, you need to be double sure to create only unique SKUs.
  2. Use necessary information– While creating SKUs, always consider adding necessary information such as product type, cost, etc. that can help you track and manage your inventory easily.
  3. Take appropriate software to create them– To avoid all confusion and manual errors, it is one of the best practices to use software for generating SKU numbers.
  4. Use 8 digits or 12-14 character long SKU– Another best practice is to limit the length of your SKU number to less than 14 characters or maximum 8 digits so that adding them in your POS and referencing doesn’t become confusing.
  5. Only use dash (-) and underscore (_) other than letters and numbers– This best practice helps you maintain consistency and easy separators while creating alphanumeric SKU system.
  6. Use capitals in SKU– The code that you design must be in capitals and not in lower case to ensure that it looks like code and nothing else.
  7. Convert it to the barcode– Once you finalize the SKUs, don’t forget it to converting it to the barcode to make it scannable.

5 Don’ts of creating SKUs

What are the practices that you should avoid while creating SKU numbers? Here are some don’ts-

  1. Never start with zero
  2. Don’t use product description while creating SKUs as it may confuse while tracking the SKUs with a similar product description
  3. Avoid using the letter I, O, and L as these letters can be easily misinterpreted in numbers and updating the inventory can go wrong
  4. Don’t make it too long so that you don’t make errors while uploading or editing the products in your inventory system
  5. Don’t use spaces because spaces won’t be remembered and if you give one more space, your product SKU system can become inefficient

SKU FAQs

Here are a few frequently asked questions about eCommerce SKUs-

What is the SKU number?

SKU number or SKU (Stock Keeping Unit) code is an alphanumeric, unique number assigned to each product, which is used to identify it and track it within the inventory (eCommerce, retail, or wholesale).

Do I need an SKU number?

Yes, if you are selling products online or offline. And, no, if you are selling services online or offline.

Where to find SKU number?

The changing code above the price tag in the below image is the perfect SKU example-

SKU example

Is SKU number the same as a serial number?

No. SKU number is different than the serial number. But, it is difficult to differentiate by looking at it as they both are combined into a barcode.

What is the SKU example?

Here is an example of SKU number from Myntra, one of the top fashion eCommerce brands

SKU code example from Myntra - top fashion eCommerce brand

Here is another SKU example from ReviseAtHome – S3-M-WB.

SKU example from an eCommerce brand - ReviseAtHome

Is SKU a model number?

No, SKU code is completely different than a model number. The model number refers to the number assigned to a product irrespective of their attributes, while SKUs differ from product to product and attribute to attribute.

What is the use of SKU?

The use of SKU is to identify each product with different attributes such as sizes, colors, and styles uniquely and maintain its stock in inventory.

What SKU stand for in retail?

SKU stands for Stock Keeping Unit for retail as well as for eCommerce.

Is SKU number unique?

Yes, SKU number is unique for each product having different attributes such as size, style, color, and more.

Are SKU numbers universal?

No. SKU numbers differ from store to store and business to business. A single product being sold on marketplaces can have different SKUs for each seller.

How many numbers are in SKU?

SKU numbers need to be a combination of letters, special characters, and numbers. Hence, you can have as many numbers as you want in SKU, but with a combination of different letters and special characters.

Can 2 items have the same SKU?

No. If two items have the same SKUs, then identifying them uniquely and maintaining their inventory becomes challenging. Hence, no two items have the same SKUs.

Get detailed assistance on SKUs from an expert

If you have a marketplace or a niche eCommerce brand, and if you’re looking forward to getting assistance in generating SKUs, let’s discuss your product line.

Our eCommerce consultants help you understand and personally guide you on creating SKUs that enhance your inventory management and reduces costs. Say ‘Hello’ at [email protected] now.

Vatsal Shah is a co-founder of Pragmatic Consultancy and DIMC and has transformed various IT, E-Commerce, Chemical, Retail, Service sector organizations for 15 years now. Vatsal has been invited as a speaker by WordCamp, Meet Magento, GTU, ETail India, AMA, GLS University, etc. As a business coach and mentor, he has influenced more than 48 organizations in India, China, the UK, Africa, and the USA and trained more than 4700 people. Vatsal is the most artistic personality at eComKeeda because he is an amazing singer, dancer, artist, gold medalist in the corporate writing, and so much more.