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

A SKU number helps retailers 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.

For small businesses, SKUs streamline operations. Whether you run an ecommerce website or a brick-and-mortar store—with a massive inventory or limited stock—assigning SKUs to products makes it easier to fulfill orders efficiently and provide a positive customer experience.

In this guide, learn what product SKUs are, how to create them, and how to manage SKUs to organize your inventory.

What is a SKU number?

A stock-keeping unit (SKU) number is an alphanumeric code assigned by retailers to identify and track each specific product within their inventory system. Typically 8–10 characters long, SKUs encode key product attributes—such as color, size, manufacturer, and price—enabling precise inventory management and sales analysis.

SKUs are created by individual businesses and arranged so that the most important information appears first. This makes it easy for store teams to retrieve items quickly and for managers to analyze sales performance at a glance.

Unlike other types of product coding, SKUs are not universal—they’re created individually by each retailer. Retailers assign a unique code to each item in their inventory management software. These codes can be tailored specifically to vendor or customer requirements, ensuring accurate inventory tracking.

Since each retailer creates their own set of SKUs, an identical item from the same manufacturer that is sold by multiple retailers will have a different SKU at each retailer.

Why are SKUs important for your business?

A well-structured SKU system pays off by helping teams locate products faster, pick orders with fewer errors, and spend less time searching for misplaced stock. SKUs also help reduce inventory costs by exposing slow-moving or duplicate items and streamlining receiving and reconciliation. 

Consider a neighborhood bike shop where each type of tire tube has a unique SKU. A single scan at the point-of-sale (POS) system rings up the correct price and instantly removes that tube from inventory. That same code appears on management's dashboard, flagging any popular sizes that are about to sell out, so they can restock before tomorrow’s rush.

Inventory mistakes drain profit fast. A recent global IHL Group study found that inventory distortion costs retailers about 6% of sales each year, or roughly $1.77 trillion. SKUs provide visibility into all parts of your inventory, so you can reorder fast-selling items (or stop ordering slow ones) before profit leaks. 

Where to find SKU numbers

Here are common places where you can find SKU numbers:

• Product packaging: Flip any box or bottle over and you’ll spot a little barcode label with the SKU printed nearby. 
• Receipts: When you sell a product, the receipt often lists the SKU number alongside the product description. 
• Price tags: Retailers often print SKU numbers on price tags, especially for products sold in-store.
• Inventory management systems: Your inventory management system (IMS) and point-of-sale system stores SKU numbers for every product. 
• Product listings: Online retailers selling on Amazon or eBay typically include SKU numbers in the product details section of their listings.

Note that while SKU numbers and barcodes often appear adjacent to each other on price tags, they are not the same. A barcode is a format for encoding information—on a price tag, it usually represents the product’s Universal Product Code (UPC), which will be discussed later in this article. 

How to create SKU numbers for products

Because stock-keeping units are designed for internal use, there are no hard rules when creating your own SKU system (also known as a SKU architecture). However, sticking to some basic conventions will help keep your 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 by using an IMS or POS system.

These SKU systems track customer orders and the status of stockroom goods. Most include an automated SKU code creation feature, meaning each product entered into your system automatically receives 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 low turnover of inventory, you may be able to create SKUs by hand 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 next SKU characters represent increasingly specific features, such as color, size, or brand. 
• The final SKU characters form a unique identifier, indicating the number of products in inventory and the order in which they were purchased or processed.

Whenever possible, create visually meaningful codes, such as the first few letters of a supplier or brand name. This makes your SKUs easier to recognize and process manually.

Also, limit SKUs to 10 or fewer characters to keep your SKU numbers compatible with third-party software should you transition to a digital tool in the future.

SKU examples by industry and product type

A SKU needs to communicate a lot of information at a glance. The four examples below show SKU formats across different industries. 

1. Apparel

TSH-M-BLK-COT-001

• TSH = T-shirt (broad category)
• M = medium (size)
• BLK = black (color)
• COT = cotton (fabric)
• 001 = running item number for uniqueness

Start with the attributes staff look for first (category and size), then add color and fabric, and finish with a short serial number. This makes it easy for your floor staff to spot and for the POS to register.

2. Electronics

LAP-HP-PRO-16-512-A1

• LAP = laptop
• HP = brand (HP)
• PRO = model line
• 16 = 16 GB RAM
• 512 = 512 GB SSD
• A1 = internal batch code

Gadget shoppers and sales reps care most about brand and specs, so the SKU highlights RAM and storage right after the model. The two-character batch code at the end lets you quickly track recall issues easily.

3. Books

BK-FIC-THR-JD-978055

• BK = book
• FIC = fiction (genre)
• THR = thriller (subgenre)
• JD = author initials (John Doe)
• 978055 = last six digits of ISBN

This SKU reflects how indie book shops shelve titles by genre first, followed by author. Borrowing a chunk of the ISBN prevents two thrillers by authors with the same initials from colliding in your system.

4. Coffee

COF-ARB-DK-250-003

• COF = coffee
• ARB = Arabica (bean)
• DK = dark roast
• 250 = 250-gram bag
• 003 = third roast batch of the day

Baristas can glance at the code to know bean type, roast, and pack size. The final three-digit batch counter ensures stock is rotated before flavor peaks.

How to use SKUs to your advantage

1. Monitor trends and inventory levels

Each product is assigned a unique SKU number, so it’s easy to track individual items. You can monitor products in detail, including variations like size, color, and style. Most stores assume digital inventory counts match shelf counts exactly, but field audits show only about 65% of SKUs actually match on any given day. 

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

Plus, SKU systems update inventory levels in real time as sales occur, providing consistently accurate stock data. 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 status and calculate reorder points—the moment when you need to order replacement stock. This usually happens when your inventory level drops to or below a predetermined number. 

By tracking how quickly each SKU sells over a given period, you can predict when you should reorder from suppliers. A large-scale study across 85 stores found that automatic replenishment systems slashed stockouts by up to 60%. 

💡 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.

3. Forecast demand and sales

Using a SKU system also improves the accuracy of sales and demand forecasting. Run your SKU data through an ecommerce analytics tool to 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 seasonally?

If your SKU data highlights low-selling items, you can monitor sales and reduce inventory accordingly. This ensures you meet customer demand without tying up cash in dead stock.

4. Plan product displays

A thoughtfully designed 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 identify high-margin items that are underperforming and place them at eye level on your store shelves, or feature them prominently on your website’s homepage. Classic shelf experiments show that moving an item from the bottom shelf to eye level boosts sales by about 39%.

5. Upsell and cross-sell products

Cross-selling tactics can increase sales by 20% and profits by 30%, as evidenced by McKinsey. SKU data can also be leveraged 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 automatically trigger your ecommerce site (or in-store associate) to 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 similar products.

6. Improve the customer experience

Because no two products share the same SKU number, SKUs are often the most reliable way for a retailer to identify a specific item or customer order. This also makes SKUs useful for customer service and support.

Plus, because SKUs help you track inventory, you can minimize inventory risks that contribute to a poor retail experience. You know exactly how much inventory you have on hand, so you’ll have plenty of time to restock a fast-selling item 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 them to products. 

Shopify, for example, has a SKU field for each product listing—even supporting variant SKUs, like unique codes for each t-shirt size. This data is unified across your POS and ecommerce platform, allowing accurate inventory tracking and order fulfillment across multiple sales 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.”

Keep it consistent

Keep your codes simple and understandable, and ensure your SKUs are created consistently across your entire product catalog. 

Implement a logical hierarchy in your SKUs for easy organization. This means using a consistent structure and format, making it easier to understand for inventory management purposes.

Train staff on how to use SKUs

Retail employees interact with SKUs daily. Include them when creating new SKU numbers or discontinuing products to 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 disrupt 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 certain colors, sizes, or styles sell better than others. By using SKU numbers to track these attributes, you can better understand customer 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. Update SKUs when you introduce new product features or discontinue 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 inventory data to calculate reorder points and avoid stockouts.

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

Advanced SKU strategies for growing businesses 

SKU analytics

Run SKU data through a business intelligence (BI) tool to understand profitability metrics and allocate inventory more effectively. A European chain used AI-powered SKU rationalization to eliminate 200 low-yield items, resulting in an additional €30 million in margin within one season.

For another example, if Store A sells 15 red hoodies a day but Store B moves only two, SKU analytics flags the imbalance so you can transfer surplus inventory instead of placing a new purchase order.

You can easily pull SKU-level data from your store with Shopify Sidekick’s AI by simply asking questions like:

• What are the gross margins per SKU for the last 90 days?
• Which SKUs have an annual turnover rate below two but tie up more than $5,000 in inventory?
• Show me a list of SKUs for which the days of supply exceed the lead time by 50% or more.

Discontinue SKUs that aren’t selling, and double down on the group that drives most of your margin. 

SKU automation

Automated inventory management is key for scaling brands. Some ways to automate your SKU processes include:

• Use templates to generate SKUs. Apply logical attributes (for example, CAT-SIZE-COLOR-SEQ) so software can assemble SKUs on the fly when a new variant drops.
• Trigger lifecycle updates. Automatically update SKU status (inactive, end-of-life) when sell-through falls below a threshold. 
• Maintain version control. Lock SKU edits behind role-based permissions. Keep a “do-not-reuse” list so retired codes don’t reappear in your system.

International selling

The moment you ship across a border, poor SKU management gets expensive fast. In Avalara’s 2023–24 cross-border survey, 94% of operators said they’d been delayed because of incorrect classification and documentation, and 39% hit that wall frequently.

With the US ending the $800 de minimis exemption for parcels from China and Hong Kong in May 2025, every shipment needs a full tariff classification and duties paid up front. Building globally consistent SKUs tied to GS1 GTINs, HS codes, and accurate descriptions ensures parcels move efficiently.

Shopify Managed Markets integrates this entire workflow directly into your admin. Managed Markets acts as a merchant-of-record service, automatically attaching HS codes, collecting and remitting duties and taxes at checkout, and printing compliant customs forms.

Common SKU mistakes to avoid

Even the most well-intentioned SKU systems can be derailed if daily practices go unchecked. Here are common mistakes to avoid:

• Inconsistent naming conventions: Using ad-hoc or department-specific formats makes SKUs hard to read, search, and scale as your catalog grows. Start with a clear structure—such as Category-Style-Size—so every team member interprets codes the same way.
• Using meaningless codes: Random strings of numbers and letters require staff to memorize lookups, which causes picking errors. Use cues like product type, color, or size so employees can decode SKUs at a glance.
• Making SKUs too long or too short: A 3-character code lacks the detail needed for accurate inventory reporting, while a 20-character code slows scans and clutters labels. Aim for 8–12 characters for optimal balance.
• Not regularly reviewing/updating SKUs: When assortments expand or naming rules change, old SKUs can duplicate or contradict new ones. Schedule periodic audits to retire outdated codes and align new products with your schema.
• Confusing SKUs with other codes: SKUs identify internal stock, while barcodes, UPCs, and EANs fulfill external or regulatory purposes. Mixing them up can lead to data mismatches and costly inventory reconciliation issues.

SKUs vs. other retail codes

SKU numbers aren’t the only product codes retailers use. Here’s how to distinguish them from 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 differ slightly. 

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 digits). UPC codes also contain a check digit (the last number), serving as a validation mechanism.

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

SKU vs. GTIN codes

A Global Trade Item Number (GTIN) works similarly to UPC codes. GTINs are global, 13- or 14-digit codes assigned by the nonprofit international organization Global Standards 1 (GS1) and stored on an international database. Think of a GTIN like a global SKU system used by retailers worldwide to code their products.

If you’re reselling popular existing products, a GTIN code might already be assigned to your physical inventory. GTIN codes are often printed on product 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 UPC numbers.

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

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 unit, whereas SKUs are shared among multiple identical units. 

Create SKU numbers for your store

The more you tailor your SKU architecture, the better you can leverage it to meet your customers’ needs. By understanding which product features are important to you, your vendors, and your customers, you can craft a SKU architecture to help you efficiently manage inventory and scale your business.

Ready to take control of your inventory and boost profitability? Start creating efficient SKU numbers for your store today with Shopify's powerful inventory management tools.