What are SKUs in E-commerce?

What are SKUs in E-commerce

In every business, regardless it is a physical store or an online store, requires SKUs. In fact, you can’t run a business without SKUs. Just like a cell is the unit of your body similarly an SKU is the unit of your business. In this article, we will understand all the concepts of SKUs in your business, and how to use SKUs effectively.

SKU Number:

SKU is an acronym for Stock Keeping Unit. Every product in the inventory is assigned a unique alphanumeric code which we call SKU numbers or SKU codes. These SKUs can be scanned to identify the products uniquely and manage the inventory effectively. It also lets you identify the products quickly even among thousands of products for doing both online and offline business effectively. Thus, you can easily check the number of products sold, the number of products returned, in transit, etc.

In this article, we will understand the two types of products – simple and configured.

Simple products: The products that don’t have any attributes such as size, colour, variant, etc. are termed Simple products.

Configured products: If a product is having multiple attributes then it is termed a Configured product.

You can differentiate between two different products on the basis of product attributes using SKU numbers.  For e.g. the SKU number of a white collar T-shirt would be different than a green without collar T-shirt.

Importance of SKUs in E-commerce:

These are the reasons which make it highly important to create SKUs for an e-commerce store:

a. Improves Merchandising in the Store:

As we mentioned above, you can easily check using SKUs to know how many products are in the inventory and how many have been sold out. Thus, now you can plan the store merchandising in such a way that customers see the leftover products first so they will also get sold quickly.

b. Eliminates errors in managing inventory:

Inventory errors are not uncommon even in online stores. Some of the most occurring inventory errors are:

  • If the store is losing revenue due to no knowledge of the stock quantity and not highlighting the same. It generally occurs when you are selling on multiple marketplaces.
  • Jotting and creating the SKU numbers manually.
  • Can’t manage the endless isles
  • Not on track of Max, min, buffer and replenish values

Using the right SKU design and reputed inventory management tools will help you overcome such inventory mismanagement issues.

c. Streamlined checkout process:

SKUs are also involved in making the checkout process of your store streamlined and smooth for the buyers. If you use a point-of-sale system (POS) for tracking the SKUs, the right price will be reflected at the moment of making a purchase.

After the successful checkout process, the inventory will also be updated with the reduced product quantity.

d. Better buying experience:

Since you can’t keep the track of the products available for sale without using the SKU number, you may probably showcase those products on the storefront for sale which isn’t in your stock or has been already sold out.

There are high chances that the customers may pick a product which is not in stock, and then you may have to tell them later that this product is not in stock. This will tarnish the reputation of your store and also leads to negative marketing among the customers.

e. Eliminate losses and increase profits:

SKUs purpose is to keep the track of inventory stock. It lets you don’t overstock fewer buying items or get into a shortage of high buying items. But if you are unaware of the stock present in your inventory, you may buy unnecessary stock or miss out on restocking the products.

Thus, SKUs can help you in eliminating unnecessary losses which leads to more profits. You can track inventory loss, and shrinkages, and hire a floor manager accountable for the same.

In an offline store, an SKU also increases the security of the product. You can print SKU on NFC tags, passive chips or beacons. So if a customer takes them without billing, it starts tracking or buzzing on the system.

f. Improves communication among different entities:

Streamline communication is another benefit of the SKU system. In the e-commerce industry, you would have to coordinate with multiple vendors. While working with various vendors, you will require a better SKU system for maintaining and managing the inventory effectively.

If a vendor expects a product to have high demand in the upcoming period, he/she verifies the same with you. This forecasting helps you keep a proper stock in the high-demand season.

Also, you can track which vendors’ products are not being sold out so you can think of adding more vendors.

SKUs keep transparency between the merchant, and vendor and build a solid business relationship.

How do SKUs work?

Let’s understand how these overwhelming numbers work in an e-commerce store. Regardless of the creating method of the SKUs i.e. manually or by POS system, the working of SKUs is the same in both.

After adding the products with their corresponding SKU numbers in the POS system, the products can be easily organized under different categories, suppliers or tags.

A well-established SKU number system gives you a wide range of reports of multiple parameters to make an effective business decision making like:

  • Total number of products sold
  • Present availability of the products in stock
  • Products that got re-order requests
  • Products under each category
  • Vendor-wise sales reports
  • Products-wise sales reports
  • Stock-wise restock order reports

And much more.

6 Important Things to know while designing SKUs for your E-commerce store:

There are certain factors that you must consider while creating SKUs for your e-commerce store:

▪ Number of unique products:

Check the total number of unique products you want to sell on your online store. If you know the exact number of unique products, you can easily create e-commerce SKUs.

▪ Are you a manufacturing business or a trading business?

If you are in the manufacturing business, then you have to design the SKUs of the products on your own and don’t involve any other factors.

However, if you are in the trading business then you have to create the SKUs differently to match up with the SKUs given by the supplier.

▪ Are you able to replace the SKUs number of manufacturers/suppliers with your retailer SKUs?

If yes, then you can create SKUs easily with more reliability. But you must know how to separate the pricing attributes attached to the SKU.

▪ UPC/ISBN Codes:

You can consider UPC or ISBN codes during the creation of the SKU codes. The UPC or ISBN doesn’t change product attributes. Thus, these codes in SKU codes will help to easily remember them.

▪ Purchase date of Product:

Just like the ISBN or UPC codes, you can also add the purchasing date of the product to eliminate any changes to the codes once they are ready.

▪ Cost & Storage information:

You can also add information of cost & storage and row numbers in the SKUs so that the employees can remember the location of your products easily.

Wrapping Up:

SKUs have become an integral part of the e-commerce running system. At Ceymox Technologies, we use Magento to develop an e-commerce store that utilizes the SKUs of products to its fullest in terms of product search, catalogue management, and much more. Let us know your requirements.

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