This article is part of a series educating sellers about the basics of e-commerce.
SKU stands for stock-keeping unit and refers to a distinct product in a retailer’s inventory. An SKU code is a unique identifier that includes letters and numbers to state important characteristics of a product, such as the brand, color and size.
These codes are generated by retailers and are unique to each business. This means that each product in a business should have a different code and the code is likely to be different for the same product across different retailers.
The purpose of SKU codes is to enable businesses to accurately identify and keep track of each piece of their inventory. In this article, we touch on why SKUs are crucial for businesses, how to set up SKU codes and good practices when creating them.
Types of unique product identifiers
Other than SKU, there are other types of unique product identifiers such as the Global Trade Item Number (GTIN) and Manufacturer Part Numbers (MPN).
Global Trade Item Number (GTIN)
is developed by the international organization GS1 for all trade items, including products and services that are priced and sold.
This 13-number unique identifier applies for the same product across all retailers, and provides a common language for any global entity to identify and communicate about the item.
There are different types of GTIN, namely
- ISBN: International Standard Book Number
- UPC: Universal Product Code
- EAN: European Article Number
- JAN: Japanese Article Number
Can I list a product on Amazon without a Product ID (UPC, EAN, JAN or ISBN)?
A product ID is also known as GTIN. Some products do not have a GTIN. If your product has been listed on Amazon, you need not provide a GTIN. If it has not been listed, kindly request for a GTIN exemption.
Do note that products with a GS1 approved barcode
will not be eligible for exemptions. Read more about GTIN exemption
Manufacturer Part Numbers (MPN)
MPN is a unique series of numbers and letters issued by manufacturers to identify each individual product.
This is usually optional in product data feeds
. However, if you do not have a GTIN in your feed, it is strongly recommended to provide the MPN. This applies for selling on Amazon as well.
Learn more: Amazon Standard Identification Numbers (ASIN)
ASIN is a unique 10-character code consisting of letters and numbers used to identify each product that is sold on Amazon. When selling on Amazon, you can create an ASIN using the Add a Product
If your product is not in the Amazon catalog, you will have to create a single new ASIN for the product.Note: ASINs are unique within a marketplace. This means that Amazon sites for each country may use different ASINs for the same item.
Why are SKUs important for businesses?
SKUs are key references for companies to track inventory through every stage of the business. Here are some reasons why SKUs can be crucial for businesses to grow.
Simplify retrieval of products based on orders
When orders come in, those involved in picking items will do so based on instructions stated on a packing slip. The picking process can be made more efficient if the slip includes information such as the SKU code, number of units and where it is located within the warehouse.
Order fulfillment with Amazon FBA
Fulfillment by Amazon (FBA)
allows sellers to store products in fulfillment centers. From there, Amazon will handle order picking, packing and shipping. Having SKUs allows Amazon to easily identify the inventory
that you want to send to fulfillment centers. This enables you to scale your business and potentially reach more customers.
Track inventory to prevent over or understocking
Having SKUs in place means that each item you sell has a unique code. This makes organizing and identifying products more convenient. When reviewing your inventory, it also makes it easier to identify when stocks are running low or when there is an overstock.
Amazon sellers under FBA are subjected to inventory storage limits
. There are 3 indications for your inventory level:
- Green: Less than 75% of your inventory level limit has been used
- Yellow: 75% to 90% of your inventory level limit has been used
- Red: More than 90% of your inventory level limit has been used
Using this scale, you can tell how much inventory you have left and if you are over or understocking.
Forecast demand and sales
Using SKUs in your inventory allows you to have an accurate gauge of your inventory numbers. This may translate to more precise forecasting of demand and sales and allows you to have a better estimate of the amount of inventory your business needs.
This can in turn help improve your company's inventory turnover
rate as you can reduce incidences of excess or insufficient inventory.
Streamline ordering with suppliers
Since the quantity of inventory can be determined via SKUs, businesses can set a reorder point for each product. This indicates when an order needs to be made with the supplier.
SKUs can help to facilitate the identification of items on the supplier’s end since you will be using common reference codes, streamlining the ordering process.
Restock Inventory tool: Track inventory and supplier orders
Amazon’s Restock Inventory tool
* enables sellers to track inventory and supplier orders. It provides recommendations on products to restock, proposed order quantities and dates to make reorders. This helps to ensure you have sufficient inventory to meet demand, maximizing sales effectively! *This tool is only available in selected regions.
Increase sales with product recommendations
When a product is sold out, your e-commerce
team can leverage SKUs to display similar products that customers may like. Alternatively, if the product is in stock, related or complementary products can be suggested on the product page. This can be done on the website backend using a programmed algorithm.
Similarly, in a brick and mortar store, the retail team can use their SKU knowledge to direct customers to similar products if the one that they are interested in is out of stock. This allows businesses to potentially increase sales via relevant product recommendations.
Generate sales with product recommendations on Amazon
As part of highly personalized marketing, Amazon uses data to show similar and complementary items to customers to generate sales for sellers. There are 2 main features included on product pages:
- Customers who viewed this item also viewed
- Customers who bought this item also bought
Simply put, when customer #1 views/buys product A then proceeds to view/buy product B, customer #2 who views/buys product A may be recommended to product B.
Support an omnichannel commerce strategy
commerce approach involves selling in multiple channels such as a company-owned website and e-commerce stores like Amazon. Typically, the same product may have different product names across different channels.
Having a SKU system allows each product to be identified as the same SKU regardless of the channels you are selling on. This also means that product data such as product images, details and prices can be retrieved easily and applied across other retail channels, supporting an omnichannel commerce strategy.
Examples of SKU codes
Suppose you are working in a retail store selling clothes, here are some examples of how SKU codes can be used:
- Broad category as the first few characters (e.g., “TS” to indicate t-shirts)
- Product variation as the middle few characters (e.g., “BL” to indicate the color blue and “M” to indicate size M)
- Specific details such as brand and series as the last few characters (e.g., “A” to indicate brand A and “101” to indicate the series)
- Hyphens in between each product detail
This illustrates how to come up with simple, unique and short SKUs that share vital information about the products.
How to set up SKU Codes for your inventory management system
If you are a business owner keen on adopting a SKU system, you can choose to either use a tool to generate SKU codes or come up with them manually. A mix of numbers and letters can be used; it is entirely up to your company and what makes sense for your business.
Here is a step by step process on how to create SKU codes for your inventory management system. Examples used are in the context of a retail store that sells clothes.
Note: This guide serves to be a general process. You can name your SKUs in any way that works for the products that you sell.
Do I Need A SKU To Sell on Amazon?
Amazon uses SKU
data in your inventory file to link the relevant product details in the catalog to your products. Thus, it is compulsory for all products sold on Amazon to have a unique SKU.
Do note that:
- Existing SKUs cannot be edited; it will remain as stated in the catalog until it is deleted.
- Uploading an inventory file with data for an existing SKU will replace the data from previous feeds.
Step 1: Start with an identifier for general categories
To begin with, you can start the first 2 to 3 characters of the SKU with a top-level identifier. This can be a product category, supplier name, department or store location.
The purpose of having the top-level identifier in the front is to allow your retail team to easily identify the location of the item in your store for quick retrieval.
This will be the first 2 characters of the SKU code.
Step 2: Select middle characters for subcategory or unique features
Next, the middle characters can be used to assign the subcategory (such as sleeveless or sleeved t-shirts). Alternatively, it can also indicate selected unique features like the size or color of the product.
These will be characters after the first section of the code. So, the first portion of the SKU code for a blue t-shirt in medium size is TS-BLM.
Step 3: End with characters for the brand or series
The last few characters can indicate specific information about the product. Businesses can also consider using numbers to indicate the sequence of when an item or series was put up for sale. This helps you to identify older and newer items as newer ones will be labeled with larger numbers.
Series identifier code
Identifier code brand + series
Suppose Brand A has a t-shirt series named King, you can assign an identifier code to this series e.g., 101. From here, a blue t-shirt in medium size from Brand A’s King series will have a SKU code of TS-BLM-A101.
You have full flexibility when choosing characters (numbers or letters) for SKU codes. However, remember to have some meaning to each group of characters used.
This means that if you have a 9-character SKU code separated by hyphens, each group of characters between hyphens should refer to certain things such as the product category, subcategory or features. This is heavily dependent on the products in your inventory and what is logical for your business.
Here is a list of features that you may want to include in a SKU code:
- Supplier or brand
- Product category
- Product subcategory
Step 4: Add SKU codes to your inventory management system
After coming up with SKU codes, the last step is to add them to your inventory management system. Key in the SKU codes for each product together with other details such as the product name, category, description, price and other variations (e.g., color and size).
Once the data has been keyed in, you can then manage sales and track inventory in one integrated system. Every sale can be automatically updated on the system so you are able to monitor your current stock.
How to add SKU codes to Amazon US inventory file
Read this guide to learn how to add SKU codes to your inventory file
. Note that each product should have a unique SKU code!
Tips to create good SKU codes
SKUs can be generated using a tool or created manually by sellers. However, there are certain good practices when it comes to creating them. Here are 6 tips to consider!
1. The first few characters should represent the top-level category
To start, the first few characters of the SKU code should ideally represent the top-level category of the item. This can be the product category, store location or department. This is so that your retail team can tell where the item is located in the store just by looking at the beginning of the SKU code.
For example, if you are selling beauty products on Amazon, the first 2 to 3 characters of the SKU code can indicate whether the product falls under the skincare, hair care or makeup category.
2. Create codes in sequential order
It is good to create SKU codes in a sequential order based on when the item was put up for sale. This means that any new product in your inventory will be assigned to the next available number.
This way, when your retail team looks at the SKU code, they can tell if the model is relatively old or new.
3. Refrain from starting with the number 0
Certain data storage software may interpret zeros as nothing. This would mean that “0112” may be registered as just “112”. Thus, it is not advised for SKUs to start with 0. An alternative would be to start with letters instead.
4. Avoid using letters that can be confused with numbers
By analyzing your competitors, you may have a better understanding of what works and what does not. Additionally, an effective pricing strategy can be developed to stay competitive.
5. Keep the character count to a minimum
SKU codes are meant to help your staff identify items easily. Even though the characters should represent certain categories or features, it is best not to overload your SKUs with too many characters.
Include a maximum of 3 to 4 key details in the code to keep it succinct. For example, if you carry 9 brands, instead of using an abbreviation of their names, assign a number from 1 to 9 to each brand.
A general guideline is to keep the code within 8 to 12 characters and no more than 16.
6. Avoid reusing manufacturer numbers
Reusing manufacturer numbers (such as MPN) for your SKUs may be an easier option, but it defeats the purpose of having SKU codes which is to enable a more effective inventory management system.
Ideally, the SKU code should be unique to each business and have some meaning to them. It is key for businesses to generate your own codes to cater to your inventory.
Amazon answers FAQs about SKUs
What is the difference between SKU and ASIN?
Both SKU and ASIN are used to identify products. But they have different purposes — SKUs are used to manage inventory, while ASINs are unique identifiers for each product listed on Amazon.
Additionally, SKUs are generated by businesses themselves and can be anything that works. ASINs are generated by Amazon once a product is listed.
Amazon sellers are encouraged to use both SKUs and ASINs to monitor their inventory.
What is the difference between SKU and GTIN?
SKU is a series of numbers and letters used to identify products. This is determined by each individual business and is usually different across companies and products.
On the other hand, GTIN is an international identifier determined by GS1 for all products and services. This identifier is unique to each specific product regardless of the retailer. This means that all retailers selling the same product will have the same GTIN for that product.
In other countries, GTIN may take on a different term, for example, it is known as Universal Product Code (UPC) in the United States and European Article Number (EAN) in Europe.
Here is a summary of the differences between the two:
- May consist of both letters and numbers or either letters or numbers
- Usually 8 to 12 characters
- Unique for each retailer
- For internal use only
- Printed as it is or with a barcode
- Consists of numbers only
- Always 13 digits
- Consistent for all retailers
- For broad use among retailers
- Printed as a barcode
Can two products have the same SKU code?
As long as there is some variation between the two products, they should not have the same SKU code. This may cause confusion in your retail team as they may not be able to distinguish between the two products.