What Is a SKU Number? How to Use SKUs in Retail (2025)

SKU numbers (or stock keeping units) help retailers track products within their inventory system. Here’s how to create SKU numbers for your retail business.

A SKU number is used to identify and track products. Retailers rely on SKUs to retrieve purchases from the stockroom, organize merchandise, and sort items by factors such as price, color, and size.

Whether you run an ecommerce website or a brick-and-mortar store—with a massive inventory or a limited stock—assigning SKU numbers to products will help you fulfill orders more efficiently.

In this guide, learn what a product SKU number is, how to create one, and how to manage SKUs to organize your inventory.

What is a SKU number?

A stock keeping unit (SKU) is a scannable code retailers use to identify and track a product. SKUs tend to be eight to 10 characters long and contain strings of characters that represent different product features, like an item’s price, manufacturer, color, and size.

SKUs are alphanumeric and provide information on the most important characteristics of a product. This information is encoded into SKUs in order of importance, so that the most useful information appears first.

Unlike other types of product coding, SKUs are created by individual businesses. Retailers using SKUs will assign a unique code to each item in their inventory management software. They may be customized to meet the needs of vendors or customers, and accurately track inventory.

SKU format for a wine retailer.

Where to find SKU numbers

Here are common places where you can find SKU numbers:

• Product packaging: Manufacturers print the SKU number on product packaging. Look for a small label or printed number.
• Receipts: When you sell a product, the receipt may list the SKU number alongside the product description. 
• Price tags: Retailers include SKU numbers on price tags, especially when selling in store.
• Inventory management systems: Your inventory management system or point-of-sale (POS) system will have SKU numbers for all your products. 
• Product listings: Online retailers that sell through Amazon and eBay typically include SKU numbers in the product details section of their listings. 

How to create SKU numbers for products

Because stock keeping units are made for internal use, there are no rules to follow when creating your own SKU system (also known as a SKU architecture). But sticking to a few conventions will help keep your own SKU numbers compatible with external companies and software, should you need to work with a fulfillment partner.

Automated SKUs 

The easiest way to generate SKU numbers is through an inventory management system (IMS) or point-of-sale system (POS).

These SKU systems track customer orders and the status of stockroom goods. Most include an automated SKU code creation feature, so each product entered into your own system will be assigned a unique number.

💡 Assign product barcodes and SKUs with a Shopify app.

Manual SKUs

If you’re a retail store with a small product catalog and turnover, you may be able to create different SKUs by hand and on an as-needed basis.

To do this, you’ll need a codified system for identifying the major features of your products.

• The first part of a SKU represents the broadest product feature, such as the product category or supplier.
• The following SKU characters represent increasingly specific product features, such as color, size, or brand. 
• The final SKU character(s) is a unique identifier, showing the amount of products you have and the order in which they were purchased or processed.

Where possible, create codes with visual meaning, such as the first few letters of a supplier or brand name. This will make your SKUs easier to recognize and process manually.

Also, stay within 10 characters to keep your SKU numbers compatible with third-party software if you decide to transition to a digital tool in the future.

How to use SKUs

1. Monitor trends and inventory levels

Each product is assigned a unique SKU number, so it’s easy to track individual items. You can track products at a very detailed level, including variations like size, color, and style. 

SKU numbers enable accurate reporting and help you streamline inventory management. Many retailers need SKUs to reduce phantom inventory, prevent stockouts, and predict when to order new products. 

Plus, SKU systems update inventory levels in real-time as sales occur, so you get accurate and current stock levels. You can anticipate future trends, evaluate sales (like which product variants are most and least popular), and optimize inventory levels to prevent under- or overstocking.

2. Calculate reorder points

Using SKU data, you can monitor product statuses and calculate reorder points—the date or time when you need to order replacement stock. This is typically when your inventory level drops to a predetermined number. 

By tracking how quickly each SKU sells over a given period, you can predict when you should place another order with your supplier.

💡 The Stocky app by Shopify automatically calculates reorder points based on supplier lead times, so you won’t run out of your most popular SKUs.

Stocky shows real-time inventory management data to optimize stock.

3. Forecast demand and sales

Using a SKU system also means more accurate sales and demand forecasting. Run your SKU data through an ecommerce analytics tool and you can answer questions like:

• How much staff do I need on the shop floor during a specific season?
• How much inventory should I have ready for weekends?
• How much payroll can my cash flow cover in different seasons?

If your SKU data highlights low-selling items, you can monitor sales and reduce inventory accordingly. That way, you can continue to meet customer demand without losing money on dead stock.

4. Plan product displays

A well-produced SKU architecture highlights a store’s most- and least-popular items. Another way to harness this information is to create product displays and make visual merchandising decisions based on SKU data.

For example, you could place high-selling SKU items at eye level on your store shelves, or feature them prominently on your website’s homepage.

5. Upsell and cross-sell products

SKU product data can also be applied on the sales floor or within an ecommerce checkout.

For instance, SKUs enable cross-selling and product recommendations. If a customer is purchasing a laptop, SKU data can suggest compatible items like a laptop bag or wireless mouse, enhancing the customer’s shopping experience and increasing your sales.

If a product is out of stock, SKUs make it simple for retail staff or an online store to recommend alternative similar products.

6. Improve the customer experience

Because no two products have the same SKU number, SKUs may be the only systematic way for a retailer to identify a specific item or customer order. For this reason, SKUs are also useful for customer service and support.

Plus, because SKUs help you track inventory, you can reduce the risk of stockouts that contribute to a poor retail experience. You know exactly how much inventory you have on hand. If you’re running out, you’ll have plenty of time to restock before shoppers visit your store looking to buy.

Best practices for SKU management

Use a SKU management system

A SKU management system is a place to store your SKU numbers and attach the codes to products. 

Shopify, for example, has a SKU field for each product listing—even supporting variant SKUs, like a different code for each size of t-shirt, for example. This data is unified across your POS and ecommerce platform, which allows you to effectively track inventory and fulfill orders accurately when using multiple sales or distribution channels.

“I used to spend at least four hours manually counting inventory every month, and I always had to ensure our platforms were syncing up properly,” says Mandalyn Renicker, owner of Offbeat Bikes. 

“I don’t have to do that anymore, because Shopify’s inventory system is so robust and easy to manage. I’m flying through service invoicing at the end of each day faster than I ever could with Square too, which I think is because the Shopify interface is just a lot easier to use.”

Track SKUs for each product variant in Shopify.

Keep it consistent

Keep your codes simple and understandable, and ensure that your SKUs are created consistently across all your products. 

Implement a logical hierarchy in your SKUs for easy organization. This means using a similar SKU structure and format, which will make them easier to understand for inventory management purposes.

Train staff on how to use SKUs

Retail employees will be interacting with SKUs on a daily basis. When they’re creating new SKU numbers or discontinuing certain products, train them on your SKU management processes. For example, do they know that “EV” is code for supplier Eastern Vines? 

Never use zeros or special characters

Zeros can be skipped by some retail software or mistaken by employees for the letter O, causing confusion when inputting SKUs.

Similarly, special characters such as !, @, or & can cause issues with certain software systems and should be avoided in SKU codes.

Define popular product features

Help your sales team by using SKU numbers to highlight popular product features. For example, if you’re a clothing retailer, you might notice that certain colors, sizes, or styles sell better than others. By using SKU numbers to track these attributes, you can better understand your customers’ preferences and adjust your inventory accordingly.

Tracking these attributes with SKUs ensures you’re stocking the right mix of products to meet customer demand.

Make regular SKU updates

As your product offerings change, so should your SKUs. This could mean updating SKUs when you introduce new product features or discontinue certain products.

Use SKU data to improve sales

Use SKU data to make business decisions. For example, you could use SKU sales data to determine which products to promote or discount, or use SKU inventory data to calculate reorder points and avoid stockouts.

You can also track SKUs to monitor sales trends and inventory levels. This can provide valuable insights into which products are selling well and which ones aren’t, helping you make informed inventory management decisions.

SKUs vs. other retail codes

SKU numbers aren’t the only type of product codes used by retail stores. Here’s how they stack up against each other.

SKU vs. UPC code

UPCs, or Universal Product Codes, are another widespread form of product identification. SKUs and UPCs look similar and are used simultaneously by retailers. But their functions are slightly different. 

A stock keeping unit identifies a unique product and its traits, while a Universal Product Code represents a product’s manufacturer (the first six numbers) and its item number (the next five characters). UPC codes also contain a check digit (the last number). This is a security/validity mechanism.

Here’s a helpful breakdown of the differences between SKUs and UPCs:

SKU (stock keeping unit)	UPC (Universal Product Code)
Used by individual retail stores	Used by multiple stores and the supply chain
Between eight and 12 characters	Always 12 characters
Identifies product traits	Identifies manufacturer and item number
Alphanumeric	Numeric
Retailers create SKU architecture	Issued by the GS1

 

SKU vs. GTIN codes

A Global Trade Item Number (GTIN) works similarly to UPC codes. They’re global—the 13- or 14-digit GTIN codes are assigned by GS1 and stored on an international database. Think of it like a global SKU system that all retailers use to code their products.

If you’re reselling popular existing products, a GTIN code might already be assigned to your inventory. GTIN codes are often printed on an item’s packaging.

SKU vs. barcode

A barcode is the batch of black lines found on product labels or packaging, which retailers scan when completing a customer’s purchase. The term barcode is often used interchangeably with UPC, because most barcodes encode a UPC number.

Unlike SKU numbers, when retail stores generate a barcode, they don’t create a new UPC. Barcodes are assigned to all like products, regardless of where they are sold. However, retailers may print product labels containing both a barcode and their SKU number.

SKU numbers, UPC numbers, and barcodes can all be added to a product label.

SKU vs. serial number

A serial number tracks products for warranty claims, repairs, and recalls. They are used by manufacturers to track product batches and identify defective units. Serial numbers are unique to each individual product unit, whereas SKUs can be shared by many units for the same product. 

Create SKU numbers for your store

The more you tailor your SKU architecture, the more you can harness it to meet your customers’ needs.

By understanding what product features are important to you, your vendors, and your customers, you can craft a SKU architecture that allows you to efficiently manage inventory and scale your business.

SKU number FAQ

How do I get a SKU number?

Your inventory management system should have a SKU field, where you can retrieve a product’s unique SKU number. If you don’t already have a SKU number for a product, use a free SKU generator. There are several apps to do this in the Shopify App Store.

Can I make my own SKU number?

You can develop your own SKU number for a product. You can do this manually (i.e., using an alphanumeric code system) or automatically using a SKU generator app.

Do my products need a SKU?

You don’t need to have a SKU number for each product, but they do simplify inventory management, order fulfillment, and sales analysis, making them a useful tool for retailers.

Is a SKU a product code?

A SKU is a product code—they’re used to track inventory and fulfill orders. However, they’re not to be confused with Universal Product Codes (UPCs), which are issued by GS1 and act as a global database of product identifiers used by all retailers.

Does every item have a SKU?

Every item you’re selling should have a SKU number. These codes help you track inventory, fulfill customer orders, and report on sales.

Can two products have the same SKU number?

SKU numbers are unique to each product. However, two products can have the same barcode and UPC number.