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How To Optimize Your SKUs & Win Online Merchandising

SKU or Stock Keeping Unit is a vital part of your inventory management, it helps you organize and keep track of product information as relevant to your business.

SKUs and Their Relevance in Retail Merchandising

You sell a large number of products in your shop. Even if you just own one small store, you still need to keep track of and manage a number of different products. You will have various information about the product stored in your database like the product name, manufacturer/supplier, current stock, prices, etc. Each product will have a unique identifier. Books come with an ISBN number, most products come with a UPC (Universal Product Code).

So, shouldn’t these general product identifiers be enough? Why can’t you just make use of the existing UPCs and ISBNs? Why do you need SKUs?

What is an SKU?

Have you ever used a Walmart inventory checker? These tools ask you to enter the SKU of the product. You get accurate information about the stock availability, price, in which locations it is available etc. The Walmart inventory checker tool does an SKU lookup on walmart inventory data in the relevant location according to your zip code to provide you this information.

An SKU or Stock Keeping Unit is a unique identifier for each product sold in your shop. It is specific to your business, and it helps you keep track of various items in your inventory.

Designing Your SKUs

You can design your SKUs to help you quickly identify some important information about the product like its brand, category, type, color etc. Stock Keeping Units can be as simple or as complex as you like.

They are different from other general identifiers like UPCs and ISBNs because they are specific to your own store or retail chain. UPCs and ISBNs are common across the retail landscape, they don’t hold any data relevant to your business.

With SKUs, you can properly encode various information relevant to your own store. You can then use an SKU lookup to track and manage items in your inventory.

What Can You Encode into Your SKUs?

With an SKU, you can encode product category or department, product type, size, color, and other relevant information. For instance, if you sell clothes, you may have categories and variations within them:


Gender Category Type Size Color
Male (M) Shirt (01) Casual (1) Large (L) Blue (BU)
Female (F) Pants (02) Formal (2) Small (S) Black (BK)
Female (F) Skirt (03) Party (3) Medium (M) Red (RD)
Girl (G) Pants(02) Jeans (4) Medium (M) Green(GN)
Boy (B) Pants (02) Jeans (4) Medium (M) Grey (GY)


So, your SKU for a blue jeans large size for a man may look like this – M024LBU008. A Red Casual Shirt for a woman, medium size, may look like this F011MRD003. A Girl’s casual shirt, small blue may have this SKU – G011SBU005. These make an SKU lookup easier and more meaningful.

The codes for gender, size, category, type, color etc, once defined, may be used in different combinations to identify various garments. The final three numbers are just sequential numbers used to number the items in that category/type/size/color for that gender/age. This section can also help you keep track of whether the item is old or new if you number the stock as they come in.

You may also choose to include more information like brand/manufacturer. For instance, you may have an encoding for brands like this:

Levi’s – X01    Wrangler – X02      Lee Jeans – X03

In this case, you may identify a men’s medium size Blue Levi’s jeans like this – M024X01MBU453

If your business is a retail chain, you may want to keep track of inventory and sales by each store. So, you may have an encoding for your store locations like this – S01, S02, S03.

In that case, you may identify an Allen Solly women’s blue shirt, formal, large size, sold in your store location 3 as- S03F012X12LBU054.

Using this type of encoding lets you extract a lot of information about the item just based on the SKU, without doing an SKU Lookup in your database to retrieve more information. Just a visual SKU lookup lets you know in which store this sale was made, the brand, whether it was for a man or woman or a child, the type, size, color etc.

SKU Format Best Practices

When designing your SKU structure, it is good to follow certain rules:

  •    No Zero at the Start: Never begin with a zero. Computers are designed to deal with numbers. If you use a pure number format in your SKUs and you begin with a zero, your inventory system or your analytics program might eliminate the 0 at the beginning, as a zero at the start has no value. Always begin with a nonzero number, or a letter
  •    Make it Alphanumeric: Use alphanumeric SKUs, they provide more flexibility and can help you provide visual cues as to whether you are looking at brand info, gender, type, size, etc.
  •    No Spaces: Never use spaces, these too might get truncated during processing. If you need separators in your SKUs, use “_” or “-”. Do not use “/”, “%”, “$” or other special characters, these too might cause confusions
  •    Keep It Short: Do not make your SKUs too long, try to limit the SKUs to 8 to 12 characters. If you are a huge store chan, selling multiple products from different braids, you may need longer SKUs. Even in these cases, try not to go beyond 16 or 18 characters. In some instances your employees or your customers might need to write down the SKU by hand – for instance, to do an SKU lookup. Having a 32-character SKU is just going to make this task a lot harder.
  •    Avoid Number-Letter Confusions: Try to avoid using letters that look like numbers, like I, l etc, as they may be confused with each other or the number 1. The letter O might also be confused with zero (0). These letters make it harder to get quick visual cues from the SKUs
  •    Do not use manufacturer numbers or UPCs as your SKU, they will not provide information that is relevant to your business.

The Uses of SKUs

  •    Designing a good SKU structure can help you get a lot of information about the item from the SKU code itself
  •    A simple visual SKU lookup on a customer receipt for instance, may help identify the brand, the gender, style, size, color and even the store location where it was sold
  •    Your SKUs help in correctly retrieving prices and in updating your inventory to reflect up-to-date stock levels
  •    You can convert your SKUs into barcodes to automatically scan in product information at checkout
  •    You can track and compare  competitor stocks and optimize your stocks to fill gaps and take advantage of shortages
  •    You can use your SKU format to determine relationships between products, and provide suggestions to customers about related or alternative products when they’re shopping. All this depends on how well you have designed your SKU format, and your SKU lookup system
  •    Many customers check product availability in big box stores in their region, for instance by utilizing a Walmart inventory checker. If your store competes with walmart on certain items, you can also use these Walmart inventory checker tools to compare and adjust stock levels and prices
  •    You may also provide such an SKU lookup utility on your own website for customers to use, allowing them to quickly check availability while shopping online, or to find where the item is available before they visit a brick & mortar store
  •    SKUs have another use, you can lookup similar products listed on competitor websites. For instance, Intelligence node provides a SKU API along with its retail solutions. This can be used to search for product matches, using images. descriptions, UPCs etc. You will get clear and structured information that includes product images, description, and price, You can get matches across different retailers

Stock Keeping Units (SKUs) are useful codes that help you organize, track, and manage your inventory. They make it easy to find relevant information from a product identifier, information that is highly specific to your business. They provide a way for your employees and even your customers to quickly use an SKU lookup to check for product availability. Using SKUs is vital even for small retail businesses. So, design a good SKU format and begin using them to make merchandising and inventory optimizations quick and easy.

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