SKUs: How Do Businesses Use Them?

SKUs. You’ve probably heard of them before and are wondering what they all mean. Also known as stock-keeping units, SKUs are alphanumeric codes found on products that serve as identification numbers. These codes help to distinguish items from one another and enable businesses to track sales and manage inventory levels, allowing them to maintain adequate stock at all times.

If you’re planning to start a retail business or have a massive inventory that needs accurate tracking, you may want to consider implementing SKUs. This article will discuss the basics of stock-keeping units and how you can use them for better inventory management.

What is the purpose of SKUs?

SKUs serve a clear purpose in helping businesses identify different products through their price, color, size, style, and more. By assigning unique codes to each product, retailers can monitor their stock levels and determine which product generates the most sales. When you sell multiple products in large quantities, assigning SKUs to each item allows for more efficient performance and inventory management.

Say you sell clothing in various styles and colors. Without a proper SKU structure, you’ll find it difficult to track sales and inventory due to the numerous variations of your products. Here’s an example:

The codes correspond to different categories like style, size, and material. A small cotton t-shirt will have a code of T1S01CN, while a linen v-neck that’s a size large will have a code of V1L01N.

SKUs are company-specific, meaning it’s up to you how you want to categorize your products and which codes you want to use.

What are the benefits of using SKUs?

There’s more to SKUs than just categorizing products and monitoring inventory. Some of the benefits of using SKUs are:

1. Identify sales trends

SKUs provide valuable insights into a product’s performance. By monitoring sales figures, retailers can identify which products perform well in any given season. For example, if a product is popular during Christmas, retailers can stock up on that particular item to ensure adequate stock levels.

2. Improve customer satisfaction

SKUs help customer support teams make relevant product recommendations to improve customer satisfaction. For example, if a customer wants an alternative for a similarly designed shirt, the customer rep will simply scan the SKU and find products that match their needs/expectations.

Customer reps can also scan SKUs to quickly determine the product’s availability, which is crucial during peak retail season.

3. Enhance your marketing strategies

One of the best ways to use SKUs is through marketing. As the e-commerce landscape becomes increasingly competitive, SKUs help your inventory appear unique in the eyes of your audience. Marketers advertise a product’s SKU in place of the manufacturer’s model number.

By emphasizing the SKU, competitors will find it hard to match your price, and customers will have an easier time making a purchase decision. Since you’re advertising the product’s SKU, customers are less likely to compare prices online, thus ensuring they follow through with their purchase intent.

4. Forecast sales numbers

You can use SKUs To optimize profit based on the data collected from each product. Gathering data through SKUs allows you to create rapport and predict future sales, which you can use in inventory management and improve your profit margins.

5. Enable faster product shipment

A faster shipping process leads to more satisfied customers, and SKUs can help facilitate this through accurate inventory control. Warehouses can quickly monitor stock levels and most importantly, locate the products more efficiently.

You can find almost any product inside the warehouse by simply looking at the database and pinpointing the item’s exact location. This process saves time and energy, allowing you to ship products on time and meet customer expectations.

How do you create SKUs for your business?

While the alphanumerical codes may look intimidating, creating SKUs is easier than you think. To help you get started, here are five steps to creating SKUs for your products:

1. Start with alphabetical codes

The first identifier of an SKU should always begin with an alphabet. Looking at our previous example, you can use one or two letters to start your SKU code to create a general classification for your products. The first code should highlight the product’s most important attributes, such as item type, style, etc.

It’s always a good idea to use unique letters to avoid confusion with other products. For example, you can use one letter on a specific style and two letters on another style to differentiate the items from each other.

2. Insert numerical codes into the middle

Once you’ve classified your products, the next step is to use numerical codes for the item variations. Size, material, and color are examples of product variations, and using numbers can make it easy to identify the product’s other attributes.

Businesses that carry a wide assortment of products will benefit from longer SKUs to successfully locate and find each product with ease. Keep in mind that your SKUs can be anywhere from 8-12 characters long, and the more products you have, the lengthier your SKUs should be.

3. Use SKU generator tools

If you feel overwhelmed with all the numbers and letters, don’t worry. There are plenty of free SKU generator tools online that will help you generate codes for your products. These tools help make your SKUs look more consistent and allow you to highlight the most important attributes of your products.

Look for an SKU generator tool that provides concise coding architecture along with an easy-to-use interface. BigCommerce and 3Dsellers offer amazing SKU generators that come equipped with the features you need to create reliable, accurate codes for your products.

4. Input your SKUs in a point-of-sales system (POS)

Now that you have the SKUs for your products, what do you do next? Input them into a point-of-sales system (POS). POS handles all the transactions and stores product information like name, description, price, and SKU number.

Managing hundreds if not thousands of SKUs manually is a daunting task, which is why you need a point-of-sales system to track sales and inventory. When choosing a POS for your business, you want to choose one that provides forecasting, scanning, barcoding, and in-depth analytics. After uploading your SKUs in the database, you can access reports to better manage your stock levels.

5. Print barcodes and attach them to your products

Once you have a point-of-sales system in place, the last step is to print the SKU barcodes and attach them to your products. Your chosen POS should be able to create barcodes for each item uploaded to its database. Barcodes are handy for tracking inventory, as scanning them during checkout automatically updates your stock levels whenever an item gets sold.

Wrapping up

Stock-keeping units might seem trivial in the grand scheme of things, but they play a vital role in keeping your inventory in check. These unique alphanumerical codes help categorize your products and make it easier to track their stock levels. If you plan on using SKUs for your business, follow the tips here for accurate inventory management and simplified product scanning.

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