Glossary

Here’s Everything You Need To Know About Stock Keeping Unit

August 28, 2023 | By Aryan Jakhar

A unique alphanumeric code assigned to each distinct product or item in a company’s inventory.

Table of Contents

What Is A Stock Keeping Unit (SKU)?
How Do SKUs Define a Company’s Scale?
Why D2C Brands Should Have A Good Number of SKUs?

What Is A Stock Keeping Unit (SKU)?

A Stock Keeping Unit, or SKU, is a unique alphanumeric code assigned to each distinct product or item in a company’s inventory. SKUs serve as a universal identifier that facilitates efficient tracking, management, and categorisation of products throughout the supply chain process.

How Do SKUs Define a Company’s Scale?

SKUs provide businesses with a scalable framework for managing their products. As companies grow and diversify their product offerings, SKUs allow for granular categorisation and differentiation of items. This scalability empowers businesses to maintain control over a vast array of products while optimising inventory turnover, order fulfilment and customer satisfaction.

Example of an SKU:

Imagine a clothing retailer that offers t-shirts in various sizes (S, M, L) and colors (Red, Blue, Green). To create distinct identifiers for each unique combination, the retailer assigns SKUs like “TS-R-S” for a red small size t-shirt, TS-B-M for a blue medium t-shirt, and so on. These SKUs help maintain accurate inventory records and streamline order fulfilment.

What Is The Difference Between SKUs & Universal Product Codes (UPCs)?

Aspect	SKUs (Stock Keeping Units)	Universal Product Codes (UPCs)
Definition	Unique internal identifiers used by retailers to manage inventory and track products.	Standardised barcode system used globally to uniquely identify products and facilitate scanning at checkout.
Purpose	Used for inventory management, warehousing, and internal tracking within a business.	Used for point-of-sale transactions, inventory management, and supply chain operations across different businesses.
Format	Alphanumeric code assigned by the retailer or manufacturer.	12-digit numeric code (UPC-A) or 13-digit numeric code (UPC-E, UPC-12, UPC-13) represented as a barcode.
Customisation	SKUs can be customised by retailers to reflect specific attributes, such as size, color, and style.	UPCs are standardised and do not carry additional product attributes.
Business Use	Used primarily within a single business or retailer.	Used across various businesses, manufacturers, and retailers to ensure product identification and traceability.
Geographic Scope	Limited to a specific business or retailer’s operations.	Globally recognised and accepted, used across different countries and regions.
Product Differentiation	SKUs allow for finer product differentiation and tracking within a retailer’s inventory.	UPCs do not provide detailed differentiation and are primarily used for product identification.
Consumer Interaction	Not typically seen by consumers; used for internal purposes.	Consumers often encounter UPCs when products are scanned at checkout.
Generation and Assignment	SKUs are generated and assigned by retailers or businesses.	UPCs are obtained and managed through the GS1 organisation, responsible for assigning unique codes.
Product Variants	SKUs can represent different product variants or attributes within a product line.	UPCs do not inherently represent product variants and are focussed on unique product identification.

Why D2C Brands Should Have A Good Number of SKUs?

For direct-to-consumer (D2C) brands, having a substantial number of SKUs can offer several advantages:

Product Personalisation: D2C brands often cater to niche markets or offer customisable products. A wide range of SKUs enables personalised offerings to meet diverse customer preferences.
Market Penetration: More SKUs provide an opportunity for D2C brands to enter multiple market segments and target a broader customer base.
Competitive Edge: A diverse SKU portfolio enhances a brand’s competitiveness by demonstrating versatility and meeting various customer needs.
Data-Driven Insights: Managing a larger number of SKUs generates valuable data insights, aiding in demand forecasting, trend analysis, and informed decision-making.