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How to Read SKU Numbers: The Ultimate Guide

If you’re a retail store owner, then you know how important it is to keep track of your inventory. And one of the best ways to do that is by knowing how to read sku numbers. But what exactly are these codes and how can you read them?

In this guide, we’ll teach you everything you need to know about how to read SKU numbers so that you can better manage your inventory. We’ll cover topics like: What SKU numbers are and why they’re important for store owners. How to set up SKU numbers in 5 steps. Barcode ready!

How to Read SKU Numbers: SKU Numbers Vs UPCs

If you are purchasing any products, each will have its own unique Universal Product Code (UPC). If you are producing your own, you will need to get your own.

Every product needs to have a UPC code shown on its label.

The UPC symbol is a 12-digit code that is assigned to products by the Global Standard Organization in order to identify them.

While a Universal Product Code (UPC) can be used as the sole identifier for a product, most stores will assign their own unique SKU number identifiers to each product. These identifiers can be anything that makes sense for your business and your products, so they are a preferred method to track inventory internally.

Here are the main differences between the sku number and upc code.

A stock-keeping unit (SKU) is an identifier for a product. The UPC is a barcode that uniquely identifies each product.

The SKU number for a product is printed on the product label, along with the product’s UPC and other information. The SKU number helps retailers keep track of inventory for their store.

Retailers can tag their merchandise with information about anything from the department to style and color.

For instance, at my shop, we utilized an SKU architecture where the first 2 letters of every sku corresponded using the kind of item it was connected to, for instance,

Every product had a unique stock-keeping unit (SKU), such as our shirt’s beginning with an “SH”, our pant’s with a “PA”, and so on.

The 5-digit code after the sku number indicated the store, size, and product traits. This made it simple for us to track our goods and categorize them accordingly.

If you’re looking for a way to streamline your inventory management, a POS system with SKU tracking capabilities can be a valuable asset. By automating the inventory process, POS systems can save businesses time and money.


Why SKU Numbers Are Important for Store Owners

A well-thought-through inventory management system is essential for any successful business. By assigning a unique product code to each of your products, you can track your inventory, speed up your check-out process, and make more informed decisions about your purchases.

Store Appearance & Shopping Experience SKU Numbers

A product’s SKU number helps both you and your staff easily identify and locate your products.

Easily track your inventory by product, category, or supplier, making it simple to locate items on the showroom floor and in storage.

Using an SKU architecture system to organize your inventory will not only help your employees, but your customers as well.

SKUs can help to improve the overall appearance of a store and make it more inviting for shoppers. This, in turn, can lead to increased sales.

If you don’t use a stock keeping unit (SKU) number, it’s easy to forget where products are located. This can cause confusion and frustration for staff and customers, which can result in a loss of potential revenue.

Square For Retail SKU Tracking

A system with a simplified product code, or SKU architecture, makes it easier for customers to find what they want and for staff to process their orders.

The on-hand quantity for sold items is automatically reduced when customers check out.

When customers can’t easily find items in your store, a SKU lookup in your point of sale system can quickly help your staff locate the item and make a sale.

With square point of sale, you can automatically track your inventory with each purchase.

Inventory Management & Profits Shrinkage Costing Retailers More and More Each Year

Inventory shrinkage is a huge problem for retail businesses. Each year, they lose millions of dollars to employee and customer thefts and to errors in tracking their inventories.

Did you know?

Did you know that the retail industry lost over $61 billion to shrinkage in 2020 alone? That’s according to the National Retail Federations Security Survey.

While theft is a serious issue, so are errors and typos. With skus, you can prevent these kind of small mistakes and stay on top of your inventory.

SKU numbers are essential for tracking inventory and preventing loss of profit. For example, SKU numbers can help you to:

Using item codes, you can organize and keep track of your stockroom, including overstock. Item codes can also help you manage and track your shipment, and allow you to pull a count for one vendor. Lastly, you can pull up a sales and profit report on a specific item.

If you’re looking for a way to keep track of your inventory, we suggest using an all-in-one point of sales (POS) software. This can help you keep track of sales, as well as manage and reorder your stock.

Setting Up SKU Numbers in 5 Steps

Now that you understand the importance of an SKU architecture, let’s look at the five steps for creating your own. Whether it’s manually or using a POS system, the process is still the same.

1. Decide what product information you want to include in your SKU numbers. 2. Assign a code to each piece of information. 3. Put the codes together to form the SKU number. 4. Test your system by creating SKU numbers for a few products. 5. Implement your system company-wide.

SKU Numbers – Step 1: Identify Store Locations

The first two or three letters of each of your stock keeping units (SKUs) should represent a top-level category. This can be a department, a subsection, or a brand.

The first few characters of each SKU typically represent a broad categorization. This can be Departmental, product or location code. Doing so would enable you to easily identify broad categories as well as the location of any products in your stores.

Step 2: Use the Middle Numbers of Your Products to Assign Unique Identifiers

Use the middle of your SKU number to add product traits, such as size or colour.

Step 3: Finish the SKU With Sequential Number

Sequentially numbered final series for a product’s stock-keeping unit (SKU) makes it easy for you to identify which items are new and which are old. This comes in handy when linking a sequential number of an SKU to a manufacturer or distributor part number.

Sometimes, it can be useful to link the last number of an SKU to a Supplier Product Number. This can help you keep better track of your inventory and make sure that everything is accurately recorded.

Again, use the method that makes sense for the product you’re selling.

Step 4: Add the SKUs to Your POS

If you’re trying to track your inventory, using a spreadsheet or notebook is doable, but isn’t nearly as efficient as a point of sale system.

You can track as much or as little product info as you’d like with a point-of-sale system.

Most small stores will need to enter the following product information to get started:

Be sure to add your products to your point of sale or inventory management system. Include the following for each product: the item’s name, its type, its description, its price, and its sku. If you have different variations of the same product, make sure to list those too.

You can track inventory of your products on your inventory page. You can even add a unique code to each of your product pages, making it easy to keep track of which products are selling and which aren’t.

Having this system in place makes managing sales, tracking stock, and updating information much easier. Every sale is automatically updated in your inventory database, so you always know what’s in stock.

Barcode ready!

You can include barcodes that are easily scanned at checkout and for inventory management. This can help speed up the check-out process and make it easier to count your inventory.

If you use inventory management software or POS systems, your barcodes should be already created for each product. All you have to do now is print and attach them to your merchandise.


After reading this guide on how to read SKU numbers, you should have a better understanding of how to use them to manage your inventory. By following the steps outlined in this guide, you can ensure that your business is running smoothly and efficiently. So don’t wait any longer, get started today!