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What Does SKU Stand For In Retail?

A SKU is a stock keeping unit, a code that helps a business in tracking the inventory and sales of its products.

A SKU is for internal use only, and each item your business stocks should have its own alphanumeric SKU. The complete alphanumeric reference might include information on the brand, range, size, colour, style or any other details which are relevant for your specific business and helps you easily identify the product.

A SKU can vary in length, but should begin with a letter. When beginning the process of creating SKUs, it is worth first considering how many individual products you stock. This will help decide how simple or complex your references need to be. If your stock is limited, a very simple SKU that considers only a few categories might be sufficient. For example, if you sell ten different products that come in small or large and a choice of three colours, your SKU only has these three points to cover (i.e. which of the ten products it is, small or large and red, blue or green). A SKU such as T1SMR (type 1 product, small, red) provides all this information.

If you have a very large range of stock, for example you sell clothing from ten different brands, with many product lines under each brand, which all come in a variety of colours and a wide range of sizes, then your SKU will need to identify all these points.

A SKU should start with the broadest identifier for the product. This might be the brand, the supplier or the product category (for example ‘footwear’ or ‘baked goods’). In the middle of the reference you might cover points such as subcategory (‘trainers’ or ‘sliced bread’), size or colour. At the end of the SKU, it can be useful to use a sequential number if you have stock which is updated or refreshed. For example, if you stock a product which is occasionally updated with new packaging, having a sequential number could help you identify how much of the ‘old’ stock you have vs. the new.

In short, the format of your SKU needs to cover all variables, so that each unique product can have a unique SKU.

A SKU shouldn’t be confused with a UPC, or Universal Product Code, which typically also appears with a barcode on a product. A UPC is always 12 characters and is issued by the Global Standards Organisation so it can be recognised worldwide, identifying both the item and the manufacturer.

As well as helping keep track of inventory, SKUs can assist you in tracking and monitoring sales and producing reports, from giving a stock check of all items from a particular supplier, to predicting reorder timings. Many POS (point of sale) systems can be set up with your own SKUs and pull these reports quickly and easily.

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