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What is SKU Number and How to Create One

If you manage inventory for a business, then you know how important it is to keep track of your products. One way to do this is by assigning each product an SKU number. But what is SKU number?

I remember when I first started managing inventory for my company, I had no idea what SKU numbers were or why they were so important. My boss told me that I needed to start tracking our products using SKUs and I was like “Okay… but what is that?” Turns out, a lot of people don’t know what SKU numbers are or how to create them – even though they’re super important if you want to accurately track your inventory!

So in this blog post, we’re going to demystify the whole concept of SKU numbers. What is SKU number, why do businesses use them, and most importantly, how YOU can create your own unique set of SKUs for the products you sell.

What is SKU number?

SKU (stock keeping unit) is a unique number that is assigned to an item in order to keep track of inventory levels. This number is typically eight alphanumeric digits long.

Products are given SKU numbers to identify them by certain characteristics like price, manufacturer, color, style, type, and size. This helps businesses keep track of inventory levels for each product.

These codes are customizable and can be tailored to fit the needs of the company and its vendors or its customers.

The SKU code is essential for tracking a product from vendor to customer and keeping accurate records for your business.

Product codes, or SKUs, are essential for identifying products and keeping track of inventory. By understanding how they work and why they’re important, merchants can better manage their businesses.

No matter what your business is, you likely have an SKU architecture in place. This may be something you’re looking to add if you’re a new business owner, or something you already have if you’re a retail veteran. This refers to the way you organize your products by SKU.

Why are SKUs Important?

SKUs are important for inventory management because they provide a unique identifier for each product. This helps to prevent overstocking or selling products that are out of stock, and ensures that customers can always find the products they need.

Can Two Items Share The Same SKU Number?

While barcodes and EAN/UPC numbers are the same for different products, the SKU number is unique to each item. This makes it easier to keep track of which products are selling well and which aren’t.

With Shopify, you can keep track of inventory across both your online store and your physical store, so there’s no need to manually track or adjust it.

Why Use SKU Numbers?

SKU numbers are a powerful inventory management tool that can help businesses keep track of a large number of items. By using SKU numbers, businesses can easily keep track of their inventory and ensure that they always have the items they need on hand.

SKU numbers are important for businesses because they help track inventory, make inventory counts easier, enable companies to identify shrinkage, assist in setting accurate reorder points, and aid in calculating revenue and profits. SKUs are also helpful in finding related products.

How to Create SKU Numbers

A product’s stock keeping unit (SKU) is a number that uniquely identifies a product. It tells vendors how many of an item you have in stock, and it helps you keep track of sales.

Before you can access the data that SKUs provide about sales and inventory movements, you must create your products’ SKU numbers. Your SKU architecture will be beneficial for your relationships with vendors and customers.

The simplest way to create product codes is by utilizing your POS and inventory systems.

There are a few ways you can create product codes, depending on how many you need and what kind of system you have in place. If you have an inventory management system or point of sale (POS) system, you can generate codes from there.

If you don’t have any systems in place for managing your inventory, you may want to consider using an online generator like Primaseller or Tradegecko. These tools can help make the process easier and more efficient.

Now, let’s take a look at the structure of a product SKU.

The first section allows you to map the department, product, or vendor. This allows for easy and accurate identification when ordering or stocking products.

The next characters are specific product attributes — their color, size or brand name.

The last few numbers in an SKU code are used to identify the order that items were received. This lets you track how many of each product you have in stock and in what order they were purchased.

Tips for SKU Naming

When creating a SKU naming convention, it is important to keep a few things in mind.

First, try to keep the SKU between 8 and 12 characters. This will help ensure that the product can be easily identified and tracked.

Second, begin the SKU with a letter that corresponds to the supplier or brand. This will make it easier to understand and remember.

Third, it is best to avoid using zero or special characters like !, @, or &amp when creating SKUs. These can be confusing and difficult to remember.

Fourth, create a format that is easy to understand and unique.

Fifth, start with the most-shopped product characteristics.

By following these simple tips, you can create an effective SKU naming convention that will be easy to use and remember.

How to Use SKUs to Grow Your Retail Business

There are several ways that SKUs can help you grow your retail business.

1. Accurate Inventory Tracking

Using unique stock keeping units (SKU), businesses can track their inventories and know when to restock products. This is referred to as your “reorder point”.

2. Forecast Demand and Sales

Accurate inventory numbers also mean better and more accurate sales and demand forecasting. 

What is the ideal amount of staff needed on the shop floor during a specific season? What is the ideal inventory level for each product? How often should products be restocked? What is the maximum amount of payroll that can be covered by cash flow in different seasons?

If your SKU data indicates that certain products are not selling well, don’t get rid of them right away. Some customers may still want to buy those items, so it’s best to just reduce your inventory instead.

3. Focus on Your Profit Generators

Your SKU architecture can help you identify your most popular items as well as those that are less desired. In addition to knowing your reorder points and what products to discontinue, your SKUs can also give you ideas for new ways to market your best-selling items.

Data surrounding your most profitable products can inspire in-store product displays and visual merchandising decisions, as well as strategic marketing campaigns that help turn over popular stock quickly.

4. Boost Customer Satisfaction and Loyalty

SKU numbers are important for more than just anticipating reorder points. They can also help customers always find the product they need, leading to a shopping experience with little to no stockout issues. This, in turn, increases brand loyalty and satisfaction among shoppers.

When a product goes out of stock, customers might be willing to wait rather than take their business elsewhere.

5. Direct Customers to New Products

SKU product data is not only extremely valuable for inventory management and sales analysis. It can also be applied on the sales floor to help with customer service. For example, if a product is out of stock, retail associates can use their SKU knowledge to direct customers to similar products. Alternatively, if a product is in stock for your customer, your associates can suggest related products to complement their purchase.

This is a common technique used by many online retailers. When you are browsing products on a website, similar items will often be displayed to you as suggestions. This is usually done through the retailer’s SKU architecture, which employs an algorithm to provide suggestions for items with similar characteristics or features.


If you sell products, it’s important to understand what is SKU number are and how to create a system around them. By tracking your inventory with SKUs, you can ensure accuracy and avoid potential problems down the road. So don’t wait – get started creating your own unique set of SKUs today!