What is a Product SKU? A 2-Minute Rundown for Retailers

The business world is chock-full of unnecessary and silly acronyms that describe meaningless ideas, like TED (tell, explain, and describe to me). But for retailers, SKU is actually an incredibly useful acronym -- it represents one of the most important concepts that allow stores to operate as smoothly and efficiently as possible.

What is a Product SKU?

A SKU (which stands for stock keeping unit) is a distinct string of letters and numbers that helps retailers identify every product in their inventory and each product’s specific traits, like its manufacturer, brand, price, style, color, and size. Retailers create their own internal SKU codes to quickly and accurately pinpoint and track every single piece of inventory in their retail stores, e-commerce stores, catalogs, warehouses, and product fulfillment centers.

Besides helping retailers account for all their inventory, SKUs can also help salespeople run stores more efficiently, and help retailers manage their inventory better.

For instance, salespeople can use portable scanners to scan a floor sample’s SKU to see how much of that specific product is left in stock instead of going to the back and manually checking how much inventory is available.

SKUs also help retailers track how fast certain products sell out, which shows them what their most and least popular products are. And when retailers can predict how fast their most popular products will sell out, they’ll always be able to buy more inventory when stock gets low, ensuring they’ll never run out of their most popular products.

Additionally, SKUs can help retailers determine their business’ anticipated demand and sales forecasts, allowing them to contact their vendors and verify that they can fulfill their minimum orders.

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

While SKUs are a set of unique codes that companies create for their own internal inventory tracking, UPCs are universal and help businesses track basic product information. Each product, regardless of the retailer, has its own UPC code. In other words, SKUs are unique to each individual store, while UPCs are the same for all retailers.

Picture Credit: FitSmallBusiness

A UPC Explained in More Detail

A UPC, or universal product code, consists of a 12-digit numeric code and a barcode that you scan when you go through a store’s self check-out. The American branch of GS1, an organization that develops and maintains global business communication standards, assigns a permanent UPC to a product for its entire shelf life. So even if multiple retailers sell the product, it’ll still have the same UPC at each store. For example, every box of a certain brand’s blackberries will have the same UPC at every store they’re sold at.