What is Stock Keeping Unit (SKU) in eCommerce in 2024? Definition with Examples


28 December, 2023

Stock-Keeping-Unit

Last updated on 28 December, 2023

Written by Content Team

What is Stock Keeping Unit (SKU) in Ecommerce 2024

Simplify your business operations with Stock Keeping Unit (SKUs). Discover how these alphanumeric codes can transform your inventory management.

Introduction

Whether you're running a small in-house business with a dozen unique products or a bustling eCommerce empire featuring thousands of items, keeping a robust control of your inventory is crucial for the seamless operation of an e-commerce store. Inventory management is not about organizing stock; it's a strategic element that influences marketing, sales, and customer support.

In this article, we'll understand what is stock keeping unit and how these unique identifiers reinforce tracking, managing, and optimizing your product inventory.

What is a Stock Keeping Unit?

A Stock Keeping Unit (SKU) is a unique identifier or code used by businesses to manage and track individual products in their inventory. SKUs are alphanumeric and have distinctive labels for each specific item, enabling e-commerce businesses to organize, locate, and monitor their stock effectively.

The basic structure of an SKU full form commonly includes:

1. Product Type or Category: A code or abbreviation indicating the general category or type of the product

2. Product Attributes: Details such as size, color, style, or any other relevant attribute that distinguishes one variant of the product from another

3. Manufacturer or Brand Information: Codes or initials representing the manufacturer or brand of the product

4. Unique Identifier: A specific number or code ensures the uniqueness of the SKU within the inventory system

Why Are SKUs Important for E-commerce Businesses?

What product SKU means and how it offers a multitude of benefits for the growth and efficiency of e-commerce enterprises. Let us understand in detail:

Simplify Retrieval of Products Based on Orders

When orders flood in, a streamlined picking process becomes paramount. SKUs, embedded with essential product information, simplify this retrieval process. With SKU codes readily available on packing slips, those responsible for picking items can swiftly locate and assemble products based on precise instructions, boosting operational efficiency.

Track Inventory to Prevent Over or Understocking

SKUs provide a unique code for each item, offering a convenient and organized way to identify products. It eases the process of organizing and locating products and helps in tracking inventory levels. By reviewing SKUs, businesses can identify when stocks are running low or when there's an overstock, preventing costly issues related to stockouts or excess inventory.

Forecast Demand and Sales

Accurate inventory numbers facilitated by SKUs empower businesses to forecast demand and sales more precisely. Its enhanced forecasting capability aids in optimizing inventory turnover rates, reducing instances of excess or insufficient inventory and providing a clearer estimate of the inventory required to meet customer demands.

Streamline Ordering with Suppliers

The use of SKUs facilitates efficient communication with suppliers. By determining the quantity of inventory through SKU codes, businesses can establish reorder points for each product. It ensures orders are placed with suppliers at the right time, streamlining the entire ordering process and enhancing collaboration between businesses and their suppliers.

Increase Sales with Product Recommendations

SKUs help in upselling and cross-selling strategies. When a product is sold out, businesses can leverage SKUs to recommend similar or complementary products to customers. It enhances the shopping experience and has the potential to increase sales by showcasing relevant alternatives or additions.

Support an Omnichannel Commerce Strategy

In the era of omnichannel commerce, where businesses operate across various platforms, SKUs offer a unified language. With a well-structured SKU system, a single product can be identified consistently across different channels. It allows for seamless integration of product data, including images, details, and prices, supporting a cohesive omnichannel commerce strategy.

Examples of Effective SKUs in E-commerce:

Let's delve into the importance of properly named SKUs through different SKU number examples.

SKU number Example 1: ADMWALKWHI7213

1. AD: Manufacturer (Adidas

2. M: Mal

3. WALK: Walking Sho

4. WHI: White Colo

5. 7: Shoe Numbe

6. 213: Item Numbe

This SKU artfully communicates details about a male walking shoe from Adidas in white, size 7, with a unique item number 213.

SKU number Example 2: BBHGTSHBLK02003

1. BBH: Baby Hu

2. G: Gir

3. TSH: T-Shir

4. BLK: Blac

5. 02: Ag

6. 003L: Item Numbe

This SKU represents a black T-shirt for girls by Baby Hug, suitable for a 2-year-old (Age 02), with a unique item number 003L.

Example 3: NIKRUNBLU1056

1. NIK: Nik

2. RUN: Running Sho

3. BLU: Blue Colo

4. 10: Shoe Siz

5. 56: Item Numbe

This SKU identifies a running shoe from Nike in blue, size 10, with a unique item number 56.

Example 4: ELPNTJEANSBLK3045

1. ELPNT: Elegant Pant

2. JEANS: Jeans Typ

3. BLK: Blac

4. 30: Waist Siz

5. 45: Item Numbe

This SKU denotes black jeans in the elegant pants category, with a waist size of 30 and a unique item number of 45.

Example 5: TPTOYCARRED1002

1. TP: Toy Plane

2. TOYCAR: Toy Ca

3. RED: Red Colo

4. 10: Ag

5. 02: Item Numbe

This SKU signifies a red toy car suitable for a 10-year-old from Toy Planet, with a unique item number 02.

Conclusion

At first instance, SKUs might seem like a jumble of letters and numbers, but don't let their appearance fool you. Once you give them a purpose, these little codes can work wonders for your business. They aid in internal processes and enhance the customer experience on your e-commerce platform. So, don't let those alphanumeric codes remain untapped potential—integrate stock keeping unit into your business model and watch as they drive efficiency and success in your venture. Remember, e-commerce SKUs are not just numbers; they're your key to seamless operations and customer satisfaction. Head on to GoNukkad for professional business advice!

Q. Can SKUs help forecast demand and sales?

A. Yes, SKUs with accurate inventory numbers facilitate precise forecasting of demand and sales, assisting businesses to plan their inventory effectively.

Q. Is the Product’s ID Number the Same As the SKU?

A. While both are unique codes, SKUs and product IDs differ. Retailers can choose and edit SKUs, while product IDs are usually auto-assigned and unchangeable.

Q. Are SKUs Used in Physical Stores or Only Online?

A. SKUs are utilized in both physical stores and online platforms. They provide a universal language for inventory tracking, irrespective of the sales channel.

Q. What Happens If a Product Runs Out of Stock and Doesn't Have a SKU?

A. Without an SKU, tracking and restocking become challenging. It emphasizes the importance of assigning SKUs to all products for efficient inventory management.

Q. Can two diverse products have the same SKU code?

A. Having identical SKUs for distinct products can lead to confusion within a retail team, impacting their ability to differentiate and manage inventory effectively. Each product should have a unique SKU code for clarity and precision in inventory tracking and management processes.

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