SKU Management 101: Here's All You Need to Know

A robust automated inventory management system is as crucial to customer experience as the quality of the product itself. If a high-quality product falls prey to logistical failures, it can still hamper a customer’s experience.

‍If you’re in the retail industry, the chances are that you might have come across the acronym ‘SKU,’ popularly pronounced as ‘skew.’

Now you must be wondering, what even is this?

Well, don’t fret!

We are here to break it down to you.

In this guide, you’ll learn what SKUs really are, how to create one and how to use them to keep your inventory organized and your customers happy.

What is an SKU?

SKU stands for ‘Stock Keeping Unit.’

Any warehouse or inventory manager could immediately relate to and elaborate upon the importance of SKUs.

An SKU or Stock Keeping Unit is essentially created as a unique identifier for the different products that a retailer deals with. SKU codes are often characterised by the features of the products sold by a retailer, fundamentally segregated based on classification and category.

For instance, let's consider Amazon has several sections - menswear, womenswear, electronics, home, accessories, etc.

So the SKUs for their products may be classified as the clothing across the categories - menswear (denoted by M), womenswear (denoted by F), and electronics (denoted by E) - all at the e-retailer’s discretion.

Let’s now follow how can you use SKU numbers?

SKU numbers don’t just revolve around tracking. There’s a lot that effective SKU management can help you accomplish:

1. Trend analysis and forecasting: Retailers can easily collect and analyze data, sales trends, product performance, or seasonal fluctuations in the demographics they cater to using SKU management.

As a result, retailers can better anticipate consumer needs and optimize their inventory accordingly so that their stock overlaps the ongoing consumer demands.

2. Inventory management: If inventory management is the backbone of a business ecosystem, then SKU management is the backbone of an inventory management system. SKU management enables retailers to track inventory levels, movement, and sales to ensure a smooth end-to-end flow.

With inventory management software like Sumtracker, you can use SKU codes to set low stock alerts that get triggered whenever the level dips below the minimum threshold.

3. Customer support: SKU management can help retailers identify stock alternatives for consumers seeking a swap. A quick SKU scan makes the job much more efficient, thereby amplifying customer satisfaction.

4. Personalised marketing and advertising: SKUs are a boon for marketers too. SKU management enables marketers to send out product recommendations for similar products when a consumer is surfing an online store.

Additionally, you can compare and analyze how your marketing or ad campaigns performed for a particular product or service, corresponding with the sales.

SKU management also gives your products an edge over your competitors - by advertising your SKU number instead of a generic model number, you can safely track information without prompting potential leads to review competitor deals.

SKU Management: Understanding SKU Numbers

An SKU typically consists of an alphanumeric string of eight characters that helps vendors maintain an optimum inventory level. With an SKU label and an automated inventory management software, retailers and vendors can easily track their inventory movement.

Warehouses, fulfillment centers, e-stores, brick and mortar stores, catalogs, and service providers - all use SKUs to manage their inventory stock systematically.

For a retail store, a quick SKU scan at the Point of Sale can successfully facilitate the job of a store manager or supervisor. They can use the SKU codes to keep up with the stock levels and identify the need for restocking in the early stages, thus avoiding a stockout.

Normally, when a customer makes a transaction at the Point of Sale, managers scan the SKU barcode for that product. The system automatically removes the item from the inventory as soon as the code is scanned.

Plus, if you’ve integrated with an inventory management system like Sumtracker, you won’t have to worry about manually syncing the listings across other inventories.

Sumtracker auto-syncs your inventory levels for all your eCommerce channels so that you don’t spend your precious time crunching numbers. When you add an SKU code to the products in your inventory, tracking the stock quantity becomes much less cumbersome and error-free.

Storeowners can create low stock alerts so that they can make purchase orders as soon as there's a dip in the stock levels below the threshold limit. Retailers create SKUs based on the products and services they offer.

For instance, consider an interiors store like IKEA, which deals in furniture and lighting - sofas, lights, and beds is likely to create SKUs that denote the characteristics of the product - such as classification, category, and style, brand, manufacturer, etc.

So the SKU may look something like this: 02-SO-6S-IKE, where 02 is the classifier denoting 'furniture,' SO denotes 'sofa,' 6S denotes the style' 6 seaters', and IKE is the brand or manufacturer 'IKEA.'

SKU Management Use Cases by Business Type:

How to Create SKU Numbers Effectively

Most retailers generate stocking keeping numbers automatically through their inventory management system or POS — it’s quick, consistent, and less error-prone.

If you’re pressed for time or have hundreds of products, you can also use online SKU creators to speed things up.

What Makes Up an SKU Number

Here’s how a typical SKU is structured and broken into simple parts:

First Part — Broad Category
This section defines the biggest classification: supplier, department, or product category. Usually, it’s 2–3 letters or numbers.
Example: ‘AD’ for Adidas, ‘NI’ for Nike.

Middle Part — Product Details
Next comes info about key product features: style, brand, size, color, or model. This adds specificity and makes each SKU unique.
Example: ‘CO’ for Continental style, ‘JO’ for Jordans.

Last Part — Sequence or Variant
Finally, add a short string (2–3 characters) to indicate size, color code, or a unique sequence number. This helps you track stock levels or the order items were added to inventory.
Example: ‘07-FF’ for size 7, Female.

Quick Tips for a Strong SKU Naming Convention

• Make each SKU unique and easy to read.
• Aim for 8–12 characters — short but descriptive.
• Avoid special characters like !, @, $, or %.
• Start with letters, not zeros — Excel can drop leading zeros.
• Skip ambiguous letters like I, L, and O, which look like numbers.
• Base codes on product details that matter most to your customers (like color, size, or model).

Now, that you are equipped with the know-how's of SKU generation. You can create your own with the help of our free SKU generator tool:

SKU Management Best Practices for E-commerce and Retail

1. Use a Clear and Consistent Naming Convention
Implementing a standardized SKU format, such as “TSH-BLK-M” for a medium black t-shirt, enhances warehouse efficiency by reducing picking errors and improving fulfillment speed. ​

2. Assign Unique SKUs for Every Product Variant
Assigning distinct SKUs to each product variant—like size or color—ensures accurate inventory tracking and reduces errors during order fulfillment. ​

3. Keep SKU Codes Short but Descriptive
Utilizing concise SKU codes, ideally 8–12 characters, facilitates quicker identification and reduces manual entry errors, thereby enhancing warehouse picking efficiency. ​

4. Centralize SKU Usage Across All Sales Channels
Maintaining consistent SKUs across all sales platforms prevents overselling and stock discrepancies, leading to improved inventory accuracy and customer satisfaction. ​

5. Leverage Inventory Software to Automate SKU Tracking
Employing automated inventory management systems, like Sumtracker, enhances stock level accuracy and streamlines order fulfillment processes, reducing errors and saving time. ​

SKU vs. UPC: Key Differences Explained

Is SKU the same as UPC?

The short answer is no.

Many people confuse SKUs with UPCs because of the similarities in their naming conventions - but they are both different functions of a product.

SKUs are typically internally generated codes that facilitate the process of inventory tracking and overall warehouse management. The data derived from the various SKUs helps marketers design campaigns without prompting interference from other retailers.

For instance, if stores provide a particular SKU code in their ad, customers cannot hunt for the same product at different stores based on the SKU alone. That's how SKUs prevent competitors from matching your advertised rates and poaching your potential customers.

On the other hand, UPC, or Universal Product Code, is a 12-digit numeric code that denotes just the item and its manufacturer.

UPCs are universally assigned codes generated by the Global Standards Organisation and are consistent across retailers, unlike SKUs, which are uniquely generated by retailers for each product.

When differentiating a UPC code from an SKU number, check for the number of digits - UPC is always a 12-character code, while SKUs can range between 8 and 12 characters.

SKU vs. Barcode: What’s the Difference?

SKUs are unique to each product of each retailer or seller. On the contrary, barcodes are patched with all products alike, regardless of whether they are sold.

A barcode is essentially a machine-readable code consisting of a pattern of parallel lines of different widths. Retailers scan barcodes at the POS when a customer is completing their purchase.

Some retailers use UPC and barcodes interchangeably - however, both accompany an SKU number.

How Sumtracker Helps You Manage SKUs Easily

Sumtracker makes managing SKUs effortless for retailers and e-commerce sellers by treating each SKU as the single source of truth across all your sales channels.

When you use the same SKU for a product listed on multiple platforms, Sumtracker automatically links those listings and keeps the inventory synced in real time.

This means you only update stock once, and Sumtracker adjusts it everywhere instantly, reducing errors and preventing overselling.

It also combines sales and purchase data for each SKU, so you always have clear, up-to-date reports without needing to merge spreadsheets manually.

With Sumtracker, your SKU tracking stays organized, accurate, and stress-free, no matter how many products or channels you manage.

FAQS

What is an SKU, and why is it important?‍

An SKU (Stock Keeping Unit) is a unique identifier assigned to each product. It helps businesses track inventory, streamline sales, and make data-driven restocking decisions across sales channels.‍

How do I create an effective SKU naming convention?‍

Start with product category codes, then add attributes like color or size. For example: TSH-BLK-M for a medium black t-shirt. Avoid special characters and keep it under 12 characters.

Can I use the same SKU across different platforms like Amazon and Shopify?‍

Yes, and you should! Using consistent SKUs across platforms ensures accurate inventory tracking, simplifies fulfillment, and reduces the risk of overselling or stockouts.‍

What’s the difference between an SKU and a UPC?‍

SKUs are internal codes you create for managing stock. UPCs (Universal Product Codes) are standard barcodes used globally for identifying products at the point of sale.‍

How does Sumtracker help simplify SKU management?‍

Sumtracker links the same SKU across all your listings, auto-syncs inventory, triggers low-stock alerts, and provides real-time, SKU-level reports—all from one clean dashboard.