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What Is A SKU?

May 26, 2021 Published by

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Keeping track of your inventory is vital if you want to ensure the success of your order fulfillment. However, good inventory management requires a well-built SKU architecture to keep all your products accounted for. Today, we’ll go over what SKUs are, how they work, and some of the benefits they can offer for your business.

What is a SKU?

SKU stands for Stock Keeping Unit, which is a unique number used to internally track inventory. SKUs are alphanumeric and should provide information about the most important traits of a product like price, style, color, brand, etc. SKU information ideally needs to be placed in order from most important to least important, in other words, the information you need the most to the least.

It’s also important to note that SKUs are not universal. They are meant to be unique to your store, and they can be customized to represent the information your customers or vendors ask the most about your products.

How Do SKUs Work?

Companies have their own methods for creating unique SKUs, but they are always built to be human-readable.

For example, a SKU for a pair of orange Crocs in a KINGSIZE® style, size 15 could be: CROC – KS – ORNG – 15

There is no one way to create a SKU, but if you want to build your own system, you’ll want to have a method that everyone can understand.

Why Are SKUs Important?

In essence, the purpose of a SKU is to help businesses more accurately and quickly account for all of their inventory.

Here are a couple of benefits of using SKUs:

  1. Improve Your Inventory Tracking

SKUs are used to track product traits, which means they can be used to ensure your inventory is being tracked accurately overall. This can help with tracking the availability of your products. When you’re continuously aware of the availability of your products, you’ll know the “reorder point” of your stock and ensure you don’t run out.

  1. Improve Customer Loyalty and Satisfaction

Because SKUs can be used to find reorder points, you’ll be able to help your customer consistently find the product they wanted to purchase. With a SKU system, you’ll also be able to create a shopping experience with minimal out-of-stock- statuses, which can result in more satisfaction and increased brand loyalty among your customers.

  1. Find New Product Suggestions

When you track multiple product characteristics with your SKU architecture, if a product is out of stock, you can use your SKU knowledge to direct your customer to a similar product.

You can even use your SKU architecture in your Ecommerce store. Think of the last time you went shopping online. The product page you visited likely also included similar items you might like. This is probably done using a retailer’s SKU architecture – where they used an algorithm to provide recommendations for products with similar SKU features.

Creating Your Own SKU System

Remember, SKUs are not universal, so be sure to customize your architecture to suit your business’s specific needs. The more useful a SKU system is for your own internal tracking purposes, the more your Ecommerce store will be set up for success.