What Is a Stock Keeping Unit (SKU)?


Ross Boguslavski

10 May 2021

1 min read


    What is a SKU? A SKU (pronounced “skeew”) is an acronym for stock keeping unit. It is a unique code that is mentioned on each item. This SKU is used to identify what item it is. A SKU can be either a string of just numbers or an alphanumeric code. It’s very similar to a part number, but it goes one step further as the SKU corresponds to the inventory control number too.

    Why Do Businesses Use SKUs?

    The SKU number is generally the number that is used to identify goods in the inventory management system. SKU codes can help you locate an item faster, identify an item’s location, or track your inventory and its variants.

    You can also implement SKU codes to boost sales; at the end of the day, every company is looking to increase its revenue. Let’s look at an example: today, you buy a new coat, it might be a wool coat, but the merchant knows that you have purchased a particular kind of coat. After two weeks, if that online store wants you to purchase from them again, they would consider that you have purchased an item with a particular SKU, so they might offer you similar purchases in another design or colourway. They could also use the same SKU code to identify that you are interested in outerwear and send you items such as hats, gloves or boots, all corresponding to wardrobe items.

    So the use of a SKU number can be used to determine a customer’s buying habits and what they are looking for. The seller might even know that you have purchased a grey wool coat and send you marketing for the matching umbrella to go with the coat you bought. Knowing that it corresponds to your taste, there is a greater chance of you purchasing the umbrella that matches your coat. Basically, SKUs’ use is not only for managing inventory but they’re also used as a powerful targeting tool by companies to increase sales.

    Can I use custom SKUs on Amazon?

    What Should a SKU Code Contain?

    A good example of what SKU codes should contain is:

    • Category
    • Brand
    • Size
    • Colour
    • Random 5 digit static number

    However, what works for you will depend on your business and what it is that you are selling.

    Can I Use Custom SKUs on Amazon?

    Many Amazon sellers are unaware of the benefits that custom SKUs can bring to their business. As you already know, SKU is an acronym for stock keeping unit, and it is assigned to each product in your inventory.

    Amazon automatically generates a stock keeping unit for each item you list with them; however, you can actually create your own SKU numbers. Custom SKUs can help you with inventory management; they can also identify information that may be hard to access when your products are in the Amazon Fulfillment Centre.

    The information you should include within a custom Amazon SKU

    Here’s the Information You Should Include Within a Custom Amazon SKU:

    Unfortunately, the SKU that Amazon automatically generates for you gives you (the seller) no insight whatsoever about the product. So before you click the save and finish button when you’re next listing an item. We’re going to go through how you can format your own in the seller SKU box Amazon provides.

    The first part of your custom SKU should be the category within your warehouse; you should use an abbreviation. For example, for electronics, you’d use E; for vehicle parts, you’d use VP and so forth.

    Example: VP-

    Next, input the brand; this is very useful for post-sales analysis. In this example, the brand we’ll be using is Alfa Romeo.

    Example: VP-AR

    Then add the size, if there is one. For this example, we have different sized clutches for an Alfa Romeo. One is 180mm and the other 200mm; our example below reflects the 180 option.

    Example: VP-AR-180

    Next, we have the colour, which is black, so we abbreviate it with B.

    Example: VP-AR-180-B

    Finally, we’ll add a random static number to the end of the SKU code. This is useful to differentiate between items if they match on all of the other variables.

    Example: VP-AR-180-B-00001

    Is a SKU the Same as a Barcode?

    Well, SKU codes are separate to specific sellers, and a barcode is not. A barcode remains constant and is used for an item regardless of who is selling it. For this reason, a particular product will have only one barcode, even if it might have different SKU numbers corresponding to different retailers.

    For example, you might purchase a product from a supermarket near where you live, or you might purchase the same product from a different supermarket 100 miles away, and the SKU number would remain unique to each of these supermarkets. In contrast, a barcode would remain the same and is specific to that item wherever you purchase it from.

    What Is a GS1 Barcode?

    Barcodes have become a worldwide tool used by businesses around the world each day. GS1 is a non-profit organisation that operates worldwide and has implemented several standards for barcodes and their use.

    GS1 was formerly known as the Uniform Code Council (UCC) in the 1970s. This is where they began the application and usage of the universal product code (UPC). Its function was designed to be implemented within stores that sold food items; however, the benefits of its application quickly became apparent to all kinds of stores. In the late 1970s, demand for barcodes spread internationally. The European Article Number or EAN barcode was created for this purpose and was used in Europe and several other countries.

    In 2005 the Uniform Code Council switched their name to GS1. Sometimes GS1 is confused with being a government organisation; however, GS1 is actually a non-profit with its board members being made up of different private companies.

    Do I Need a GS1 Barcode To Sell on Amazon?

    Currently, Amazon recommends that you use GS1 for barcodes; that’s their recommendation.

    If you’re intent on building your business and selling on Amazon, then GS1 is the way to go. Depending on your business’s annual turnover, you will need to pay a GS1 membership fee, which will allocate you a certain amount of numbers. The bottom line is that a GS1 barcode is not cheap, especially when you consider cheaper alternatives out there.

    So Why Would You Choose the More Expensive Option?

    Here’s why: if your product gets hijacked (this is when someone begins to sell the same or a copy of your item on your private label product listing for less money), a GS1 barcode on the GS1 database is important to prove that you are the owner of that product. Amazon will check, and if your product is not on the GS1 database, it is much more difficult to get hijackers off of your listing, so there’s that.

    If your product is on the GS1 database, it’s easier to start selling your product internationally. In fact, Amazon uses that database to find new people and new products to sell on other marketplaces, and they also get invited to test new things earlier as well.

    Should You Apply for GTIN Exemption?

    So there is another option, of course, which is a GTIN exemption. GTIN stands for global trade indicator number, and it’s just a creative way of saying barcode. So why not just get a GTIN exemption? Well, because now more than ever, Amazon wants to see that you’re serious about your business. Amazon wants to see that you’re in it for the long term.

    I assure you big brands on Amazon are not getting GTIN exemptions. So the main reason Amazon introduced GTIN exemptions was for handmade items or limited-run products. They introduced them specifically for that because it made no sense for somebody who’s just selling a product a handful of times to have to pay an annual fee for a barcode.

    It all depends on you, your own particular budget and what you can afford to invest in your business. Remember, if you want to get a trademark, and you want to get brand registered, you will need a GS1 barcode. If you want to sell internationally, you’ll also want to have a GS1 barcode.

    How SKU Codes Can Help Staff Members

    As you can see, SKUs are beneficial because not only do they allow you to identify unique products for record-keeping and stock-taking, but they also allow you to include a little bit of internal information. People working for your company can learn things about a product quickly by looking at that number.

    Let’s take the five-digit SKU, for example, as it’s a popular format among ecommerce businesses. A five-digit SKU would have a two-digit product category that corresponds to a different category of products. Followed by a number that says what placement it has within that category.

    So, for example, if I’m selling USB cables, maybe that’s category 88. Then I know everything in my catalogue that has to do with USB cables will start with an 88 in the SKU. This way, when you have a staff member receive some inventory, and they see the code starts with an 88, they instantly know it’s a USB cable.

    Five-digit SKU 

    You can use both numbers and letters in the SKU; therefore, you could choose the SKU to start with the item’s colour. For example, if you have a red hat, you could start with an R and then some series of numbers, or a series of numbers and letters, whatever helps you to track and understand your merchandise better.

    You may have seen for yourself that many times on top of an EAN-13 barcode, you also have a SKU barcode. This is a shorter barcode that you can scan, and it pulls up the SKU. This can be very helpful if you’re keeping track of inventory, having stock delivered, or moving premises. Having this SKU barcode in addition to an EAN-13 barcode is something that is recommended because it allows you to have more internal control over that product. The more control you have over your products, the easier it is to keep track of stock, which is one of the keys to succeeding if you’re running a product-based business.

    Can SKU Numbers Help With Work-Life Balance?

    Yes! The short answer is that they help make your life a lot easier because you can get an accurate count of every item within your inventory system.

    This is super important (especially for tax return season) because knowing your inventory’s exact count helps you make better buying decisions, especially if you’re a small seller doing almost everything by yourself.

    So if you know that you’re low on brown leather wallets, you can go out and source some more. If you know that you’ve been selling many winter boots, you might want to source more of those too, or if you know you have an excess of denim jackets, you know now that you shouldn’t be buying any more denim jackets.

    It helps you make those better buying decisions when you source suppliers, and it also helps you track every single item within your inventory. That way, if you need to know where a particular pair of jeans are, you can type the SKU number into your inventory management software, and it will tell you exactly where your item is located in your inventory. Even if you store your stock in a spare room or garage at home, you might still have several different locations where you house your inventory.

    SKU numbers contain a specific set of details that the seller wants them to contain. So really, you decide what you want them to contain. You make them up, and you make up the format too.

    An example of how a small seller might write their SKU numbers

    Let’s say you have an Adidas top; this Adidas top is green and in a size medium. A SKU example for this top would be:


    • T – For t-shirts
    • AD – For Adidas
    • M – For medium
    • G – For green
    • 00004 – This number is used to differentiate between items if the other options are identical.

    Your SKU number can contain dashes, or you can take them out; this is your SKU number, so you decide how you want it to look!

    So as you can see, you can include any important details that will help you understand what that item is and where it’s located. You decide those details and write your own format. Just make sure that they are easy to understand and ensure there are no repeats to avoid data errors.

    Should All Sellers Use SKUs?

    Yes, however, it really depends on the reasons you’re considering implementing them. SKU numbers help sellers as they enable you to locate an item when sold quickly. This can help save a lot of time during the shipping process, especially because sometimes searching for an item can be the most time-consuming part. If you work alone, it’s certainly not a good use of your time or energy, and it’s very inefficient.

    Can SKU Numbers Help With Coordinating Your Business?

    Can SKU Numbers Help With Coordinating Your Business?

    Yes. You really do need all of the systems that you use in your business to be coordinated. When you’re selling on multiple marketplaces, it can be difficult to keep your items’ titles the same on each of them because of the character limits in each platform. So that means that you cannot really use your title to search for your items. I mean, you could try, but you might not find the item that you’re looking for because of the different variations. So, in this case, it would definitely be beneficial to have a SKU number because that number would identify that specific item.

    Helpful Tools To Generate SKUs

    When you look around the SKU topic on the internet, you’ll find that there are several helpful tools and a lot of them are free. The easiest (and cheapest) way to get started is to go to an inventory management system website, and this could be any of them out there. Most of them have a SKU number generator for you to use for free.

    All you have to do is take your product name and whatever details you want, and it will generate your SKU number, so you don’t have to do a lot of thinking about it. One way to make this even easier is to take your inventory report from any online marketplaces you sell on and download it. You can then copy and paste the things you want in your SKU number from there.

    Before You Create Your SKU Numbers

    I’d advise that you should already have an inventory management system established and in place. This is because you need a source for all of that information. So that’s your titles, your description, your categories and your prices already in-house somewhere. That way, you can plug your SKU numbers into that system straight away.

    Keep in mind if you’re selling on multiple platforms, it’d be best to have one central inventory management system where you can house all those details with your SKU number. Another thing to consider is that it will take some time to generate these SKU numbers and update them into any systems you’re using now. The amount of time varies depending on your inventory’s size, but be patient with the process; it will definitely be worth it in the long run.

    It’s essential to remember to keep your SKUs consistent. You don’t want to use a different SKU on every website you’re selling on because this can lead to confusion. So if you have a different SKU on Amazon, eBay, and your website all for the same product, you’re more than likely going to run into problems. Keep your SKUs consistent, and they will do their job of tracking your inventory. Likewise, when you’re using different stock management systems, plugins and software, it’s crucial to ensure that the SKU stays the same; this way, your data is kept in order, and everything is tracked. Remember, the SKU is here to help you, so make sure you know that it’s doing the job it’s intended for.

    Ross Boguslavski

    Written by

    Ross Boguslavski

    Extremely executive managing director running the best multichannel eCommerce agency in the world!

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