When you first launch an ecommerce business, everything is so new and exciting!
Although the world is your oyster, it is critical that you crack down on some of the most important concepts and strategies. To begin, you must learn the ins and outs of running an online business – especially in terms of the products you sell.
In order to keep to keep your inventory organized, you need to develop a coding system. This is where SKUs come into play.
What Are SKU Numbers?
SKUs – also known as a stock-keeping unit number – are essentially a string of numbers and letters that represent each individual product you offer. These codes help you and your team identify the products you sell through your ecommerce shop.
Each SKU is unique to each product and in some cases, only differ slightly based on minor variations. For example, if you run an online clothing store you may offer one shirt style in three colors – blue, red and black. In this case, the SKU may be identical except for a slight color variant on the end.
Red t-shirt, style no. 1 — TS01-R
Blue t-shirt, style no. 1 — TS01-B
Black t-shirt, style no. 1 — TS01-B
Learn more: Maximizing Product Options Functionality
As a general rule: your SKUs should include key pieces of information based on a product’s most important characteristics such as – the price, style, brand, color, type or size.
Please note: A SKU is not the same as a UPC (universal product code). For example – if you are selling the same item as another company – your products will have the same UPC numbers but your product SKUs will be unique to your business. Here is a barcode generator that will help you address your UPCs.
Why Do SKUs Matter?
Creating SKUs for your ecommerce store is important for a number of reasons. That is why you should get into the habit of creating and organizing a list of SKUs from the start. After all – the more you automate from the get-go – the better.
By assigning a product code to each item you offer, you will be able to track inventory more effectively. This will help you determine how many items have sold, how many are currently in-stock, etc. Knowing stock availability is imperative when it comes to effective customer service and overall growth.
In relation, each unique SKU will support inventory counts – which should be performed at regular intervals. This will help ensure that your current stock levels match what is recorded in your inventory management system. This is particularly useful for tax purposes.
Whether you want to better understand all aspects of business analytics–helping you understand what’s selling and to who–or want a more effective system to replenish stock, SKUs are the way to go. By following SKU trends, you will be able to achieve greater control over your product line which will allow you to focus more on the products that sell.
The Importance of SKUs for Merchant-Vendor Relationships
Since your SKUs will be used internally – unless they’re printed somewhere on the product’s packaging – your customers may never see them. However, when it comes to your vendor partners, having an effective SKU system in place will allow for smoother, more efficient communication.
As your business grows, it's likely that you'll begin to work with more vendors. By effectively implementing SKUs – your inventory becomes much easier to manage – this is particularly the case in terms of forecasting. If a vendor is able to anticipate the potential demand based on how quickly certain SKUs sell, they can communicate their needs more efficiently.
In turn, all associated challenges for both you and your vendors are minimized. Whether that means you’re able to discuss desired time frames more effectively or determine if you can meet minimum requirements – SKUs allow for a more streamlined process.
When creating SKUs for your ecommerce store, please consider the following:
The first 2-3 digits within each SKU number should represent the highest category. Instead of starting with specifics, begin with a broader description of what it is you offer. In relation to the example above, the category of t-shirts was listed first, followed by the style — and lastly — the color.
Never start SKUs with the number zero, as some systems will interpret that digit as nothing. Instead, begin with letters, as this will help your products stand out when listed in a spreadsheet. Each SKU should be simple but easily identifiable.
To avoid further confusion, do not use any letters that may be interpreted as numbers. For example, a lowercase “L” may be confused with the number 1 or a capital “i." Alternatively, you can break SKUs up into sections that only contain letters and then only contain numbers. For example, BOR-120.
Once you have created your SKUs, you will then need to implement a system that effectively tracks the products you offer. Not sure where to begin?
Here are a few additional resources to get you started:
- All About Your Store's Product Codes
- The Inventory Extension
- Create Upsell Opportunities with "Jump to Product Code" + "Is Product Code"
Do you still have burning questions? Our Help Center is the perfect place to start.