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What does SKU stand for? How to supercharge your stock management

Small business owner packaging boxes

If you run a retail business then you’ll be well aware of the need to keep track of stock – but have you tried using digital codes to make product tracking and forecasting even easier? That’s where a SKU system comes in.

But what is a SKU – and how do you use it to make managing your inventory a breeze? Whether you have an online shop or a high street business, setting up a system of SKU codes for all your products could save you time and money as a small business. Keep reading to learn more.

What is a SKU number?

SKU stands for ‘stock keeping unit’ and is used by businesses to keep track of inventory. It’s a collection of letters and numbers (alphanumeric) that are coded to identify an individual product.

SKUs include a set number of characters for each product identifier, which might include:

  • product name
  • product category
  • origin
  • colour
  • size

A SKU is included on barcodes or QR codes on products, but shouldn’t be confused with UPC codes and the barcodes themselves.

By creating a unique identifier for each product, you’ll instantly be able to see what stock you have left, when you need to reorder, and whether you should put something on backorder.

Your point of sale system will automatically remove an item from your inventory once the SKU is scanned after you make a sale.

You don’t have to use SKUs but an organised, digital system like this can make your life easier as your business grows.

Not sure what product to sell next? Read our guide to finding a new product to sell online.

Why create a SKU for your products?

These are just some of the benefits of setting up an inventory system and creating SKU numbers for your products:

  • quick reference for stock levels (our stocktaking tips can help you here too)
  • manage orders and deliveries more efficiently
  • use tech to find a product’s location
  • easily track exchanges and returns
  • support sales reporting and forecasting

Using SKUs also form a crucial part of supply chain management, as this digital data will help you by triggering low stock warnings or tracking order status.

For example, a customer comes into your homeware shop and wants to know if you have a particular vase in stock in another colour. You can simply scan the SKU of the vase you have in store, and your digital system will show what you have available in the storeroom (or even at another store or warehouse).

Do I need a SKU generator?

A SKU number is specific to the business, so you can create your own system for generating codes. A quick Google search shows there are plenty of SKU generators online, or you can create your own using Excel if you have the expertise.

Every SKU follows a set format and details specific aspects of your product, such as category, size, and colour.

Here’s a SKU example format for a dress sold in a clothing shop:

4857–289-SUM-GRN-12

The SKU is referencing the item through set codes and letters. The brand (4857), product (289), style (summer dress), colour (green), and size (12).

What is SKU on Facebook Marketplace and Facebook Shops?

Facebook has two platforms you can use to sell products online: Marketplace and Shops.

For each product listing, you’ll have the option to add a SKU code to keep track of what you’re selling. It’s not essential but can be useful if you’ve got a lot of products in a warehouse somewhere.

When you create the item listing on Facebook Marketplace, there’s the option to add ‘More details’ about your product. Click the dropdown menu and you’ll see a box where you can input ‘SKU’. This is optional, so you don’t need to complete it if you don’t have a SKU for your item.

Read more:

Creating a SKU code for products you sell on Amazon

Similarly, if you’re selling products on Amazon then you’ll probably want to use a SKU for each item.

As with any other online shop, SKUs on Amazon help you manage stock, deliver to customers more quickly, and keep track of your sales. This can be particularly useful if you’re shipping lots of products.

It’s worth noting though, a SKU is different to the Amazon Standard Identifier Number (ASIN). Your ASIN is automatically generated by Amazon whenever you list an item for sale. This appears in the product details section of each product listing.

Protect your stock

Losing stock to theft, fire, or a flood can be disastrous to your business. Whether you store your products in a warehouse or in your home, make sure you have stock insurance as it can cover your costs if your products are destroyed, lost, or damaged. It also can cover materials you need to run your business if something happens to them too.

Read more guides for small businesses

Are you setting up a SKU code system for your retail shop or online business? Let us know how you get on in the comments below.

Get personalised insurance for your business

Whether your company needs public liability insurance, business interruption insurance, or something else entirely, we’ll work with you to find the cover you need. Get a quote online, or talk to our expert team on 0333 016 4307.

Photograph: Dragana Gordic/stock.adobe.com

Catriona Smith

Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.

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