What Is an SKU Number? A Complete Guide
Brigitte is a retail specialist and staff writer with brick and mortar management experience. She is versed in retail sales analysis, merchandising, and buying with an emphasis in retail sales and marketing across platforms. She has a BA in writing from Washington University, St. Louis.
Meaghan has provided content and guidance for indie retailers as the editor for a number of retail publications and a speaker at trade shows. She is Fit Small Business’s authority on retail and ecommerce.
A stock-keeping unit (SKU) is an alphanumeric code that identifies a product and helps you track inventory for your retail business. The information your SKU includes is completely up to you—distinguishing it from a universal product code (UPC), a standardized 12-digit code manufacturers use to identify products. Depending on the type of inventory, your SKU number can include identifying information for everything—from department to style, gender, size, and color. You can create SKU numbers manually or automate the process with an inventory management or point-of-sale (POS) system.
At my store, we used an SKU system in which the first two letters of each SKU code corresponded to the type of product it was attached to, e.g., all of our shirts had SKUs starting with an SH, all of our pants had PA, jewelry JE, and so forth. The remaining digits corresponded to store location, size, and other relevant product information. With this custom identification system, it was easy to keep track of our products and label our goods.
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Creating & Managing SKU Numbers
Follow the steps below and watch our video to create an SKU number system and management process that fits the unique needs of your business:
With Square for Retail, you can add SKUs to each of your products, generate corresponding barcodes, and print them on product tags. Then, as you scan your SKUs for sales or counts, Square’s inventory system will automatically track product levels, locations, and more for free. Visit Square for Retail.
Step 1: Choose a Top-level Identifier
The first two or three digits/characters of each SKU should represent a top-level identifier. This can be a department, store category, or even a supplier. With this, a glance at an SKU number identifies the top-level merchandising group and location of any product in your store. You can also use this section to identify store locations if you run multiple stores.
Some retailers prefer to use the most general trait as the first identifier and then work down from there. For example, start with the identifier for jeans before getting into style and size.
Top-level Identifiers to Consider
If you run more than one store or sell some items solely online or via fairs or markets, you can also use a Store Identifier to group items by sales outlet. This helps track sales by location or outlet and makes it easier to track inventory quantities per store. Even if you don’t sell in multiple locations yet, if you think that’s in your future, leave a placeholder for this identifier in your SKU framework so that you won’t have to reinvent your system later.
Departments are broad top-level identifiers that help you track merchandising and location within your store. You can use a Department Identifier to quickly tell where an item will be located or displayed on the sales floor. If you use a department identifier in your SKU number, you can also segment sales reports by department to spot troubled areas of your store. If you have a department with overall lackluster sales, you might need to move that section, adjust your store’s traffic flow, or boost your featured displays in that area.
Step 2: Assign Unique Identifiers
It’s helpful to use the middle section of SKU numbers to assign unique features, such as size, color, item type, or subcategory, to your product―whatever makes sense when organizing the products you sell.
To prevent user error, don’t use numbers that look like letters and vice versa when assigning your SKUs.
Unique Identifiers to Consider
If you sell on multiple sales channels—like in-store, an online website, and on social media—you might consider adding an identifier to differentiate each channel. This helps you understand and compare your ecommerce and brick-and-mortar efforts. For example, if you sell on Amazon and your own branded store on Shopify, you might use AMZ or SHO as identifiers. You can take this approach even if you sell on just one digital channel—the option for expansion will always be available.
Learn how to start an ecommerce store with our step-by-step guide: How to Start an Online Store in 8 Steps: A Beginner’s Guide.
If you sell products in different colors or sizes, a variation identifier can greatly help both your customers and sales floor staff. Plus, it lets you easily track which colors and/or sizes are most popular. Here’s a look at how easy it is to add a variation identifier to our sample SKUs:
01120001M = Jeans (01), Flare-leg (12), Medium (M)
09120001L = Dress Pants (09), Flare-leg (12), Large (L)
For small retailers, this level can be a bit fussy, But if you wish to track inventory and sales at a very granular level, you can add a Subcategory Identifier to your SKU. For example, if you have a Candy category, you can assign a numerical code for subcategories such as Candy Bars, Lollipops, and Boxed Chocolates.
Step 3: Finish With a Sequential Number
Using sequential numbering―like 001, 002, 003―for the final series of an SKU number makes setup easy and also helps you identify older versus newer items in a product line. In some cases, tying the final series of an SKU number to a supplier product number can be helpful too. Again, use whatever makes logical sense for the products you sell.
Step 4: Add SKUs to Your Inventory Management System
With your SKU number system set to go, it’s time to add your SKUs to the products in your inventory management system. You can add your SKUs and track inventory by hand in notebooks or by using spreadsheets, but it is far easier and more efficient to use a retail POS with inventory tracking.
As you can see in the images below, on Square for Retail, as you add products to your inventory catalog, each product page will have a field where you can add your custom SKU number. With Square, there is also the option for the software to generate your SKUs for you if you don’t want to spend time creating your own SKU system.
Read our Square for Retail review to learn more about its features before signing up for your free account.
Step 5: Create & Print Barcodes Labels
Use our barcode generator below to start printing your barcodes straight from your computer.
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Once you have added your SKU codes into your inventory system, you will want to create scannable versions of your SKUs, or barcodes, to include on your product labels for easy checkout and inventory counting.
Check out our guide to the best barcode label printers to make this process as easy as possible.
Alternatively, using Square for Retail will allow you to print product labels with your SKU numbers and corresponding barcodes directly from your inventory catalog. Then, as you scan items, your inventory system can track products based on their SKUs.
You can print labels with your custom SKU directly from your Square for Retail inventory catalog.
SKU Number Examples
Now that you know how to create SKU numbers, let’s look at some additional examples of this SKU number framework strategy in action.
Here’s a simple numeric SKU number system that uses just one top-level identifier in a six-digit SKU to manage inventory at a convenience store. Notice that the first two numbers represent each category of goods at the store. The next four numbers are a sequential numbering system. As long as you don’t have more than 99 departments, or over 9,999 products in a given department, this system works and is simple to enter and maintain in any POS system.
Category
Category #
SKU Numbers: Category+Sequential #
Dry Grocery
01
010000, 010001, 010002
Pet Food
02
020000, 020001, 020002
Snacks
03
030000, 030001, 030002
Canned Soda
04
040000, 040001, 040002
Candy
10
100000, 100001, 100002
If you want an SKU number to convey more information about each item, a different system with more identifiers is needed, as in the example below.
Here’s an eight-digit SKU number system that uses two identifiers to represent a top-level category plus an item type for each product. This type of SKU system helps staff recognize key details of any product at a glance. For that reason, it’s a very handy SKU number system for stores, like fashion boutiques, that have item types—like styles or materials—that cross multiple categories.
SKU Number Example for a Fashion Boutique
Category
Code
Item Type
Code
SKU Numbers: Category+Item Type+Sequential #
Jeans
01
Straight-leg
11
01110000, 01110001, 01110002
Jeans
01
Flare-leg
12
01120000, 01120001, 01120002
Blouses
02
Sleeveless
21
02210000, 02210001, 02210002
Blouses
02
Long-sleeve
22
02220000, 02220001, 02220002
Dress Pants
09
Flare-leg
12
09120000, 09120001, 09120002
In this sample, the first two numbers represent the top-level category for this fashion boutique for items like Jeans, Blouses, and Dress Pants. Then, the next two numbers identify different item types like straight-leg, flare-leg, sleeveless, short-sleeve, and so on. The last four numbers are sequential.
Note: With this system, your item types don’t have to be category-specific. For example:
01120000 = Jeans (01), Flare-leg (12)
09120000 = Dress Pants (09), Flare-leg (12)
Here, flare-leg (12) applies to more than one category since it’s a style common in both jeans and dress pants.
Sometimes it’s helpful to have supplier information tied to your SKU number. This is an especially helpful SKU number system in fulfillment warehouses where goods are stocked and tracked by the supplier rather than merchandised in a mix as in a retail store. If you display or store products based on brands or suppliers, this two-identifier, 10-digit SKU number system can cover all the bases.
SKU Number Example for an Ecommerce Business
Supplier
Code
Item Type
Code
SKU Numbers: Supplier+Item Type+Sequential #
Bentley Plastics
BP
Tumbler-Lg
063
BP063-0001, BP063-0002, BP063-0003
US Acrylic
UA
Wine Glass
064
UA064-0001, UA064-0002, UA064-0003
Prodyne
PD
Wine Glass
064
PD064-0001, PD064-0002, PD064-0003
Merritt USA
MT
Dinner Plate
166
MT166-0001, MT166-0002, MT166-0003
Tervis Tumbler
TT
Tumbler-Lg
063
TT063-0001, TT063-0002, TT063-0003
In this type of alphanumeric SKU number system, staff can determine the supplier and item type of any product SKU number they encounter easily. Plus, being alphanumeric, it’s easy for new and seasonal staff to understand and remember. This system also uses item types that cross multiple suppliers, for example:
BP063-0001 = Bentley Plastics (BP), Large Tumbler (063)
TT063-0001 = Tervis Tumbler (TT), Large Tumbler (063)
Here’s a simple numeric SKU number system that uses just one top-level identifier in a six-digit SKU to manage inventory at a convenience store. Notice that the first two numbers represent each category of goods at the store. The next four numbers are a sequential numbering system. As long as you don’t have more than 99 departments, or over 9,999 products in a given department, this system works and is simple to enter and maintain in any POS system.
Category
Category #
SKU Numbers: Category+Sequential #
Dry Grocery
01
010000, 010001, 010002
Pet Food
02
020000, 020001, 020002
Snacks
03
030000, 030001, 030002
Canned Soda
04
040000, 040001, 040002
Candy
10
100000, 100001, 100002
If you want an SKU number to convey more information about each item, a different system with more identifiers is needed, as in the example below.
Here’s an eight-digit SKU number system that uses two identifiers to represent a top-level category plus an item type for each product. This type of SKU system helps staff recognize key details of any product at a glance. For that reason, it’s a very handy SKU number system for stores, like fashion boutiques, that have item types—like styles or materials—that cross multiple categories.
SKU Number Example for a Fashion Boutique
Category
Code
Item Type
Code
SKU Numbers: Category+Item Type+Sequential #
Jeans
01
Straight-leg
11
01110000, 01110001, 01110002
Jeans
01
Flare-leg
12
01120000, 01120001, 01120002
Blouses
02
Sleeveless
21
02210000, 02210001, 02210002
Blouses
02
Long-sleeve
22
02220000, 02220001, 02220002
Dress Pants
09
Flare-leg
12
09120000, 09120001, 09120002
In this sample, the first two numbers represent the top-level category for this fashion boutique for items like Jeans, Blouses, and Dress Pants. Then, the next two numbers identify different item types like straight-leg, flare-leg, sleeveless, short-sleeve, and so on. The last four numbers are sequential.
Note: With this system, your item types don’t have to be category-specific. For example:
01120000 = Jeans (01), Flare-leg (12)
09120000 = Dress Pants (09), Flare-leg (12)
Here, flare-leg (12) applies to more than one category since it’s a style common in both jeans and dress pants.
Sometimes it’s helpful to have supplier information tied to your SKU number. This is an especially helpful SKU number system in fulfillment warehouses where goods are stocked and tracked by the supplier rather than merchandised in a mix as in a retail store. If you display or store products based on brands or suppliers, this two-identifier, 10-digit SKU number system can cover all the bases.
SKU Number Example for an Ecommerce Business
Supplier
Code
Item Type
Code
SKU Numbers: Supplier+Item Type+Sequential #
Bentley Plastics
BP
Tumbler-Lg
063
BP063-0001, BP063-0002, BP063-0003
US Acrylic
UA
Wine Glass
064
UA064-0001, UA064-0002, UA064-0003
Prodyne
PD
Wine Glass
064
PD064-0001, PD064-0002, PD064-0003
Merritt USA
MT
Dinner Plate
166
MT166-0001, MT166-0002, MT166-0003
Tervis Tumbler
TT
Tumbler-Lg
063
TT063-0001, TT063-0002, TT063-0003
In this type of alphanumeric SKU number system, staff can determine the supplier and item type of any product SKU number they encounter easily. Plus, being alphanumeric, it’s easy for new and seasonal staff to understand and remember. This system also uses item types that cross multiple suppliers, for example:
BP063-0001 = Bentley Plastics (BP), Large Tumbler (063)
TT063-0001 = Tervis Tumbler (TT), Large Tumbler (063)
SKU Number Frequently Asked Questions (FAQs)
Click through the questions below to get answers to some of your most frequently asked SKU number questions.
SKU stands for stock-keeping unit, which is an alphanumeric code that serves as a unique product identifier. Retailers create their own SKUs to help them track inventory.
Learn more about retail inventory best practices.
- Inventory tracking
- Sales analysis
- Customer checkout
- Product identification
You can create an SKU code system for your inventory by following the steps in this post. If you just need to quickly print an SKU code, use our barcode generator and a barcode label printer.
SKU numbers are important because they can help you keep your store and excess inventory organized, improve customer service and checkout flow, and streamline your inventory management processes.
A Universal Product Code (UPC) is a standardized 12-digit product code that manufacturers and those making original products acquire from the Global Standard Organization (GS1) and use to identify their products. A stock-keeping unit (SKU), on the other hand, is a unique, custom product code that retailers assign to their products based on their needs and organizational method.
Unlike UPC codes, SKU numbers are not universal. Retailers create their own SKU numbers for products according to their own naming systems and conventions.
Here is an overview of the difference between a UPC and an SKU number:
SKUs
UPCs
Length
Custom
12-digits
Composition
Alphanumeric
Numbers only
Source
Created by retailers to fit unique business needs
GS-1 in conjunction with manufacturers
Price
Free
10 codes for $250
Bottom Line
SKU numbers help you organize, track, find, and identify inventory using a system that’s meaningful to you and your staff. Because SKU numbers can include both letters and numbers, there’s a tremendous amount of flexibility, making it easy to create a system that’s totally tailored to your business needs.
Done right, your SKU numbers help you merchandise your sales floor, better serve customers, and maximize sales. Essentially, having a thoughtful and well-maintained inventory management system can make your business more efficient and profitable.
Pairing a meaningful SKU number system with a POS like Square for Retail gives you every tool you need to maintain your inventory and sales floor efficiently. Square provides streamlined, user-friendly inventory management and reporting tools so retailers can put SKU numbers and their data to work.
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