SKU Management 101: The Ultimate Guide for Ecommerce Brands

In the world of ecommerce, SKUs play a crucial role in the success of any online business. They are unique product identifiers that help businesses track inventory, manage orders, and ultimately drive sales. But how do you create effective SKUs that work for your business? And once you have them, how do you manage them effectively to optimize your ecommerce operations? 

‍

In this guide, we'll explore everything you need to know about SKU management in ecommerce, from understanding the basics of SKUs to best practices for organizing and managing them effectively. By the end of this guide, you'll have a solid understanding of how to create, manage, and leverage SKUs to take your ecommerce business to the next level.

‍

Table of Contents:

• What is a SKU?
• SKU vs. UPC
• Creating Effective SKUs
• Managing SKUs
• Benefits of Proper SKU Management
• Tools & Tech for Managing SKUs

‍

What is a SKU?

Before we dive into SKU management and best practices, it’s important to understand exactly what SKUs are. A SKU, or Stock Keeping Unit, is a special code assigned to a specific product. These codes are used for tracking inventory, managing orders, and providing valuable data to business owners (such as sales trends and return rates).

‍

Every SKU in the ecommerce world is alphanumeric - and can include numbers, letters, and special characters (-, / , # ,etc.). An absolutely crucial aspect of SKUs to keep in mind is every business creates their own distinctive SKU for each product they carry. For example; a blue, small sized t-shirt might be categorized as “BT-SM-BLU,” and every other size, color, or other variation gets a different, equally unique SKU.

‍

SKUs vs. UPCs

With the vast range of products available in ecommerce, relying on one kind of classification for tracking products can get overwhelming very quickly. Where SKUs help businesses track products internally, a different code system called UPC helps businesses track products universally.

A UPC,  or Universal Product Code, is a standardized code assigned by a manufacturer, rather than the business. When a consumer buys products from a store, these are the barcodes that get scanned at the register. Both SKUs and UPCs are used globally by every ecommerce business, but there are crucial differences between the two highlighted below:

SKUs

• Internal code assigned by the business
• Unique to each business
• Typically includes product attributes and variations in each code
• Mainly used for inventory tracking and order management
• Not standardized - varies across sales channels and retailers

‍

UPCs

• Unique to each product - but does not include variations
• Code can be used across various retailers and sales channels
• Used for identifying products and retrieving product information at the point of sale
• Standardized/regulated by organizations such as GS1

‍

Creating Effective SKUs

Now that we’ve covered the basics of SKUs, it’s time to dive into how to create effective SKUs for your ecommerce business. Below, we’ve outlined some best practices for implementing SKUs:

‍

1. Keep it simple and consistent 

When creating SKUs, it’s important to make sure the codes are simple and easy to read. Create a standard naming convention to make creating new SKUs easier. 

2. Use descriptive codes

It may seem to counter the previous point, but always make sure to include important details about a product in its SKU. If an efficient naming convention is in place, you’ll be able to create all the SKus you need without muddying up your internal tracking.

3. Minimize use of special characters

While SKUs can include special characters like the ones mentioned above, certain characters like punctuations and spaces should be avoided. These can cause issues when inputting SKUs into a management system, especially using spaces.

4. Avoid duplicating SKUs

In the same vein as using problematic characters for SKUs, make sure to avoid duplicate SKU as much as possible. If unchecked, this will surely cause your business to run into problems like mispicks. 

5. Use a SKU management system

As your business grows, managing SKUs can become more and more complex. Consider using a SKU management system or WMS (Warehouse Management System) to help keep track of your products.

‍

Managing SKUs

Creating effective SKUs is only one part of the equation. Once you have your SKUs in place, it's important to manage them effectively to optimize your ecommerce operations. Here are some of the best ways to manage your SKUs:

1. Organize SKUs

To make inventory tracking easier, organize your SKUs by grouping them based on category, supplier, or other qualities. 

2. Keep SKUs current

As your brand grows and you expand your product offerings, make sure to keep all of your SKUs up to date as you integrate new items. This will help avoid SKU duplication and keep tracking efficient. 

3. Use SKUs for inventory and order management

As we mentioned earlier in the blog, SKUs are ideal for internal tracking of inventory levels and order status. They enable you to have real-time updates on your business day in and day out. 

4. Implement a barcode system

With SKUs, implementing a barcode system will increase their efficiency even further, by enabling operators to simply scan products in and out of inventory in a flash. 

‍

Benefits of Proper SKU Management

Effectively managing your SKUs brings with it a myriad of benefits. In addition to streamlining operations and driving sales, here are some other perks of implementing proper SKU management:

‍

1. Accurate order fulfillment

Having SKUs properly set up virtually eliminates mispicks, and ensures your operations are running smoothly throughout the order fulfillment process.

2. Improved customer experience

Accurate order tracking also leads to an improved shopping experience, as customers are more likely to return to a store that fulfills their order(s) accurately and on time.

3. Increased sales

In addition to improving the shopping experience overall, being able to precisely track inventory levels ensures brand owners always have enough stock to fulfill orders, and can offer a wide variety of product offerings.

4. Data-driven decision making

As mentioned earlier, well-configured SKU systems allow for valuable insights into sales and returns. This data can be used to make informed decisions about product offerings, pricing, and other ecommerce operations.

‍

Tools & Tech for Managing SKUs

Managing your SKUs can be a complex and time-consuming process - fortunately, there are many tools and technologies available to help you streamline the process. We put together yet another short list of resources for you to get started managing SKUs with the right foot forward. 

‍

1. Inventory management software

IMS is the most basic form of software that allows you to track inventory, orders, and track SKUs across sales channels.

2. Barcode scanners and printers

Paired with an IMS, being able to create and scan your own SKUs will greatly improve the efficiency of your SKU system by streamlining the entire process. 

3. Product Information Management (PIM) software

PIM software is used to not only manage SKUs, but also to make sure that the products behind each SKU are also accurately represented. This helps with keeping inventory accurate across sales channels.

4. Enterprise Resource Planning (ERP) software

ERP software does everything that the above software does, but also extends past order fulfillment. This is most ideal for brands who prefer to handle their fulfillment in house.

5. Cloud-based platforms

Many modern ecommerce brands have begun moving to more cloud-based services to manage their operations. These tend to offer more flexibility and scalability than some of the other options, but using cloud-based services also means you are relying on a third party to handle all of your internal product data. 

‍

Conclusion

Effective SKU implementation is crucial for an ecommerce brand to successfully grow. However, it’s also important to remember that SKUs are almost always internal, and vary wildly from brand to brand. Ultimately, this means that when creating SKUs you should always follow what works best for your brand. In finding what works best for your brand, you’ll find the best way for your brand to scale even further!

‍

Pro tip: If your brand is using/looking into a fulfillment partner - make sure they are capable of creating new SKUs for any new product offerings you may introduce. This will make scaling much easier for both you and the fulfillment partner, meaning both parties benefit! Or just reach out to us and we'll help you!

‍