What Is a Stock Keeping Unit (SKU)?

What Is a Stock Keeping Unit (SKU)

Stock keeping units (SKU) can be described as an alphanumeric code that is assigned to inventory, which allows retailers to monitor their stock and measure sales by category and product design store layouts and flow, as well as enhance the shopping experience. These codes are developed by retailers in accordance with the criteria they believe are essential.

Stock keeping units have a variety of applications beyond simply identifying a product. It is important to understand what these codes mean and how you can design one. It is also important to become aware of different ways in which they can be utilized to help you develop your inventory management system as well as your customer experience.

What is a Stock Keeping Unit?

Stock keeping units are a distinct code for the item being that is sold by a retailer. Retailers design their own codes, based on different aspects of their products. Most often, SKUs are broken down into categories and classifications. For example, a house improvement store may have different categories, like lawn and garden or hardware. Their SKUs could be based on their lawn and gardening classifications as well as have the letters or numbers that identify products into categories in that lawn and garden segment.

What are SKU works?

SKUs help differentiate the products from one another. It’s difficult to monitor sales and inventory without categorizing them according to make, model color, type size, color, or other distinguishing characteristics.

For instance, let’s say the retailer of a new lawn and garden store has to find SKUs before they begin their inventory processes. They could give the letter A lawnmowers A1 might refer to riding lawnmowers, whereas A2 could refer to pushmowers. The next sequence of alphanumeric codes could be colored, then and then sized. The retailer can be able to assign B2 with red lawnmowers, and B3 with mowers with black colors.

The mowers would be further classified based on the size of the deck. If 011 was assigned to 42-inch mowers and 012 was assigned to 36-inch mowers. A red 42-inch mower could be A1B2011, while a 36-inch red mower is A1B2012.

It is then entered into the SKU is then added to the system for inventory management that is connected directly to the point sale system. The retailer then has the ability to keep track of sales and inventory with the help of detailed reporting. An SKU system can also allow retailers to record data about the customers they serve, their sales, and their inventory.

What are SKUs used for?

The SKU can do more than identify a particular product or track the inventory. Through the data collected the data can be analyzed to determine the effectiveness and profitability that your business is running.


SKUs let retailers collect information that allows them to perform an analysis to determine popular products or look at the seasonal and cyclic trends in sales within their various segments of customers. This data analysis gives retailers the possibility of stocking merchandise that is in line with changes in the consumer’s behavior.

Inventory Management

The management of inventories is the primary purpose that is the primary function of the SKU system. With an SKU retailers can monitor the level of inventory, turnover, and flow. They can establish inventory levels and timeframes based on the data that is gathered from sales. These could be used as triggers for starting or stopping the inventory order.

Customer Support

The store clerk could scan an SKU in order to determine quickly what’s available to a buyer who might be looking for a different model of a product, which increases the efficiency of sales and ensures satisfaction for customers.

Marketing and Advertising

Utilizing SKUs as an effective method of marketing is a new method. In the crowded online world of retail and everyone comparing pricing, an SKU allows your inventory to be unique and allows you to recognize strategies for marketing that generate sales based on products’ identifiers. A lot of retailers promote using their SKU in lieu of the model number given by the manufacturer.

This makes it more difficult for consumers to locate the exact product at a different retailer and reduces the chance of competing stores making use of pricing strategies that are matched with the same data. This can help decrease the likelihood of customers shopping at shops to compare prices for products they are planning to purchase on the internet instead.

Product Recommendations

Businesses also utilize these codes to enhance customer experiences on their selling platforms. For instance, Amazon.com is able to choose items to display as “suggestions” when you’re shopping using SKUs. Amazon.com has assigned a unique SKU with all its distinctive characteristics, to every product. When you view one of the blenders, the shopping platform is able to show other blenders identical to the one that you are looking at.

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