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SKUs in Retail

SKU stands for “Stock Keeping unit”, represented as a number used by retailers to differentiate individual products and track inventory levels. It typically consists of a chain of eight alpha-numeric digits, and each product receives a different number based on various factors – price, type, manufacturer, style, size, and colour, to name a few common attributes.

A product SKU number is not universal. They are unique to your retail business and you can tailor them to fit your needs as well as those of your customers and resellers.

Why are SKUs important for retailers?

SKUs in retail are important because they help to track inventory accurately and avoid ‘phantom’ inventory (a mismatch between inventory levels on the system and items actually in stock). For fast and efficient eCommerce operations, using inventory management, POS and a PIM to manage your product data, you are alerted when products are out of stock and need re-ordering.

Creating unique SKU numbers

Product SKU numbers must be unique to the specific retailer. Nevertheless, two products could have the same barcode or UPC (Unique Product Code) number.

But first things first. Before accessing that data, you need to create a set of SKU numbers for products – the SKU architecture. Nowadays, generating SKU numbers is relatively straightforward, using inventory management and Point of Sale (POS) software. 

The only fixed rules for creating SKUs are a minimum of eight digits and a maximum of twelve. Best practices suggest:

  • Starting with a letter (for instance, the first letter of the brand or manufacturer)
  • Avoiding using non-standard characters like &, @, or !
  • Creating a user-friendly format for your retail sales force
  • Starting with the most frequently searched and purchased product attributes

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SKU vs. UPC (Universal Product Code)

The UPC is what you see printed on retail product packaging to help identify a product. It contains two elements – a machine-readable barcode, and the unique 12-digit number underneath the barcode. On the face of it, SKUs and UPCs look similar, but while the SKU can have variable length and mix numbers and letters, a UPC must be a 12-digit number.

Why are SKUs important for retailers?

SKUs are essential, as they help to accurately track inventory and avoid the presence of phantom inventory. They also alert you when you need new products, so products are never out of stock.

How to create SKU numbers

We’ve established how SKUs provide data for inventory movements, which assist relationships with vendors and customers. Below is a short explanation of how you go about setting up an SKU. 

1 Top-level Identifier

The first two or three digits are called top-level identifiers, which can be a department, store category, or even supplier.

2: middle numbers for Unique Identifiers

This section usually ascribes unique product features – item type, size, colour, and subcategory. Obviously, this is unique to each retailer and the range of product categories and catalogs they sell.

3: Sequential Number

Using sequential numbering (0001, 0002, 0003 …) for the end of an SKU number is the most common practice, as It helps to identify older versus newer SKUs in a product line.

4: Add SKUs to an inventory management system

Some retailers still create SKUs and track inventory by using spreadsheets, but spending time entering data information manually into Excel sheets is prone to mistakes.

It’s much easier to use a retail POS system which tracks inventory. You can enter as much product data as you want to track but, as we’ve mentioned, in most cases, the minimum requirements are:

  • item name
  • item category
  • product description
  • type of item
  • pricing
  • SKU number
  • variants like size or colour


It is now easier to manage sales and to track inventory, which is automatically updated after every transaction, so it is always clear in real time what’s in stock for each SKU.

Managing all your product information

Product SKUs are only part of the equation for retailers. You also need an absolute guarantee that the rest of the product information is reliable, correct, up to date and accessible. Deploying a Product Information Management (PIM) solution to automate many processes saves a lot of time and eliminates mistakes occurring with manual data entry. A PIM stores the ‘single source of truth’ for all your product data – attributes and descriptions, technical specifications and more – to form a guaranteed error-free and unique version.

A common problem for e-Retailers is product returns. Inaccurate product information leads to dissatisfied customers. If they feel misinformed when they try to purchase online, the root cause of an incorrect product SKU is your product data. As search engines rely on your product descriptions for searches, high-quality, accurate, and relevant information is essential.

Download our free PIM Buyers Guide

SKUs for marketplace retail - Facebook

If we Take an SKU in Facebook marketplace as an example, it stipulates four fundamental components to provide for listings:

  • Enhanced digital assets such as product images:
  • Detailed product descriptions with compelling copy to make the product stand out. That also means the description, such as size, weight, dimensions, and other attributes.
  • Product size and weight information, which can be entered alongside product information so as to print accurate shipping labels.
  • SKU number for each Product

For retailers, quality product data means useable SKUs

Do you want to convert more shoppers to buyers and reduce the downstream costs and risks associated with bad product data? At Start with Data, we provide the expertise and focus you need to meet your business goals and deliver accurate, clean product data to your customers.

Get in touch with us to have a more in-depth conversation about our product data and product content service so you can realise the real business benefits of efficient, governed processes and high-quality product data which is available wherever and whenever it is needed.

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