Creating SKUs is an important piece to managing an ecommerce store. Organizing a SKU list should begin right away. The process can be done by hand or automatically with SKU generating software.
Once established, SKUs will prove useful to your business. A well-organized list will help you track inventory effortlessly and lead to greater customer satisfaction down the road.
Pro Tip: A solid SKU design makes integrating with automation software, like Sync with Connex, easy. See, How does Connex Match Products?
What is a SKU?
Firstly, a SKU – or Stock Keeping Unit – is an alphanumeric code used to track inventory and sales. They help distinguish an item sold on your website.
The SKU sequence is unique for each individual product. Additionally, it should include relevant characteristics about the item as well. For example, use product attributes such as size, color, and variant.
SKUs can be random but it is better to use key information about the items you are selling.
SKU Format
Although there is no set format for creating SKUs, consider following these best practices:
- Characters – Use only letters, number, dashes or underscores. Avoid special characters, symbols or spaces as these will be problematic for computer software. Plus, they can make searching an item hard. However, dashes or underscores are handy. They separate the groups that define the product details.
- Length – Keep your SKUs short. Stay between 8 to 16 characters maximum. The shorter the better. Try to use the smallest combination of letters and numbers possible.
- Understandable – The naming pattern should be simple and easy to understand. A random jumble of letters and numbers will not make sense to you, or your staff.
- Unique – For SKUs to be effective, they have to be unique. Make sure your product codes are part of a system that can be easily expanded to accommodate new products.
Example SKU Formats
A shoe retailer has opted for a combination of letters, numbers and dashes. The SKUs below represent a trail running shoe, offered in different colors and sizes:
- TRAIL-BLK-10
- TRAIL-BLU-11
- TRAIL-GRN-12
SKU numbers can help you differentiate one product from another based on product attributes.
Further Reading: SKU management: best practices to get your inventory sorted
Why are SKUs important?
SKUs are important for identifying and organizing your inventory. Effective stock management is crucial to customer satisfaction and business growth.
Once built, a good SKU system lets you to track all your items easily. Plus, SKUs can show useful analytical data about your products. In return, you gain a better understanding of your business. You will know what is selling, who it is selling to, and what items need restocking.
Further Reading: Connex can help automate inventory management between QuickBooks and your website. To see more information visit: How Inventory Syncing Works
How are SKUs used?
Inventory management: Inventory checks should be done at regular intervals. This is useful for tax purposes and to ensure accurate counts. When each product has a unique SKU, stock availability is quick and easy to determine.
Restocking: Using SKUs can help identify reorder points, so you know when to get more supply. This way, you know when to restock while also reducing your holding costs. Furthermore, SKU codes help you identify the items that are selling and what products might need to get cut.
Enhance marketing strategy: The more you learn about what your customers like, the better equipped you’ll be to serve them. Plus, when products have a traceable code, you can identify popular stock and avoid displaying products that are not available.
Understand product results: SKUs are generally the easiest way to obtain detailed product reporting. Thereby identifying best sellers and underperforming products. Business owners can quickly see the effectiveness of their product mix.
Identify inventory shrinkage: Inventory shrinkage is the difference between the physical count of your stock and the amount your records say you should have. In other words, it consists of the stock/product/inventory that goes missing due to human error, theft, damage, miscounting etc.
Further Reading: Forbes 'Inventory Shrink Cost The US Retail Industry $46.8 Billion'
Use SKUs to Boost Your Business
Track Inventory Accurately – When SKUs are used to track product traits, you can ensure availability. Continuously knowing the status of items helps you to keep high demand items in stock. In return, your business achieves efficiency and productivity.
Predict Sales – Now that your inventory is accurate, you can start anticipating your business needs. By keeping your items in stock, you become a dependable supplier for your customers.
Identify Profit Generators – Again, using SKUs helps you identify your most coveted items. Knowing when to reorder dwindling stock and when to remove a poor seller is important for generating profits. In turn, you can strategically showcase the sought after items and make sure they are readily available.
Increase Customer Loyalty – Since using SKUs to determine reorder points, your customers face minimal out of stock issues. As a result, brand loyalty and satisfaction grows.
As you can see, SKUs can help set your business up for success. Sync with Connex understands how important it is to keep accurate inventory counts. We work with the most popular market places, shopping carts, shipping solutions, and online platforms on the market to make managing your inventory needs a reality.
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- Scale your business by automating syncing sales & inventory from multiple e-commerce platforms to QuickBooks Desktop or Online.
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