Introduction:

A Stock Keeping Unit (SKU) is a unique identifier assigned to each product in your inventory. SKUs are essential for tracking inventory levels, managing sales, and distinguishing between product variations efficiently.

Definition:

An SKU is a distinct alphanumeric code assigned to a product to identify and track it within a business’s inventory system.

How It Works / Examples:

In your online shoe store:

• SKU Assignment: Each shoe style, size, and color combination is given a unique SKU (e.g., “SHOE-RED-8” for a red shoe in size 8).
• Inventory Tracking: When a customer purchases the red shoe in size 8, the corresponding SKU is scanned at the point of sale, automatically updating your inventory system to reflect one less item in that specific category.
• Reordering: If the inventory level for “SHOE-RED-8” falls below a certain threshold, your system can prompt you to reorder that specific variant, ensuring popular items remain in stock.

Why It Matters:

For new ecommerce entrepreneurs, implementing an effective SKU system offers several benefits:

• Efficient Inventory Management: SKUs allow for precise tracking of each product variant, helping prevent overstocking or stockouts.
• Improved Sales Analysis: By analyzing sales data tied to specific SKUs, you can identify which products are performing well and make informed purchasing decisions.
• Enhanced Customer Experience: Accurate inventory tracking ensures that customers have access to the products they want, in the right sizes and colors, leading to increased satisfaction and loyalty.

Additional Resources:

Learn more about Stock Keeping Units.