SKU code guide for online stores & retail

Retail-related acronyms can be difficult to get your head around so it doesn’t hurt to familiarise yourself with a glossary of common retail terms. One acronym you may commonly hear but not necessarily know the definition of is “SKU”. 

In this guide, we’ll  explore what the SKU stands for and its meaning. We’ll also give you some useful tips on managing SKUs and how online stores can use them effectively.

Remember, this SKU guide is designed for online store use. Keep in mind that the business examples we cover are online store-related.

Contents: Sku Guide for Online Stores 

  • Overview: What is SKU?
  • The purpose of SKU codes
  • What is a SKU number sequence, and what does it stand for?
  • Do other online businesses use SKU?
  • Where are SKUs used?
  • What is the best SKU format
  • Why use SKU for online stores
  • Businesses that use SKU

Overview: What is a SKU code?

It’s essential to keep your stockroom organised when you’re working in a fast-paced business environment. One of the best and most effective ways to keep track of your inventory is by assigning every product a unique identifier. Retailers and online businesses use what is called a stock keeping unit, or SKU for short, to do this. SKU is pronounced ‘skew’.

The meaning of SKU is simple - it’s a unique code that helps businesses differentiate various products from others. 

The purpose of SKU codes

SKU is the ultimate product organiser. It is used to label goods in a way that is unique to your business. These are typically physical products that you need to keep track of - like jeans and dresses. 

However, it isn’t enough to have one SKU for one product. Instead, you need a SKU for each product colourway and each size. This is because an SKU’s main purpose is to keep track of inventory. And you’re not going to be able to do that if only one of your products is labelled correctly.

As well as labelling products, the purpose of an SKU is to organise the services you offer. This could be everything from drawing up invoices to personal styling appointments. 

A good rule of thumb is that if you offer something - it should be logged and tagged with SKU.

What is SKU number sequence, and what does it stand for?

An SKU is made up of a series of numbers and letters. This alphanumeric SKU is almost always a unique combination that is often eight characters long. A SKU can be longer than eight characters long but it’s advised against as categorising starts getting complicated.

As mentioned earlier in the guide, each product will have different SKUs labelling them. This is because, in each product range, there are different colourways, sizes, and prices. Lots of factors can have a direct impact on the SKU sequence. Therefore, it’s important to set your SKU meaning up correctly. You can either use the ones provided by your manufacturer. Or, if you are a small business, you can customise your own.

Do other online businesses use SKU?

Yes, other online businesses and E-tailers use SKUs. However, it’s doubtful they'll be using the exact same SKU code as you. The SKU is a unique letter and number combination which is customisable meaning, that although you and another business may be selling the same product, you’ll have set up your SKU codes differently 

Where are SKUs used?

We’ve touched on it briefly, but SKUs are mainly used in online retail businesses. This is because they are an excellent and efficient method of product tracking. 

On the website

They are used in product descriptions on the customer-facing website and in the titles of physical inventory on the business-facing side of the site. In online businesses it can also be used to label any services a business may offer.

Internally, you’ll often see SKUs being referred to instead of the product name or the product colour. This is because SKUs are unambiguous whereas labelling items by, for example, colour can become confusing. Remember, when products are live on your website they shouldn’t be labelled by the SKU code. Instead put the SKU in the product description or caption. 

In warehouses

Elsewhere, SKUs are also used in warehouses as a method to organise the inventory. If you have ever bought anything from ASOS, you will notice that every item you order comes in a bag. On this bag will be a barcode and an SKU. This barcode is scanned by warehouse staff when being prepared for shipping and will automatically update the inventory system.

To help customers search and find products easily

SKU codes are also a useful way for buyers to search for the exact product they’re looking for either onsite or through Google. Instead of searching ‘black dress [brand]’ they can search for the unique SKU code. 

On social media

Influencers also use SKU codes when highlighting products they’ve used in their content. They’ll often include SKU codes in the social post caption so their followers can easily find the product. Similarly, brands can also opt to include SKU codes in their social posts to make it easy for customers to find products.  

What is the best SKU format?

Of course, the best SKU format is the one that works well for your online business. However, there are some tips on managing SKUs

  • Keep SKUs short and sweet. You don’t want it to be any longer than 32 characters.
  • Use a mixture of letters and numbers.
  • If you work with SKUs in Excel, don’t start labelling them with a zero. This is because Excel drops the first character of data if it is a zero. This can severely impact your organised inventory.
  • Avoid characters that could be confused as numbers. ‘I’, lowercase ‘L’ and ‘O’ all have the chance of being mistaken for a number.
  • Keep SKUs separate from any other number sequences you may have.

Why use SKU for online stores

In this guide, we’ve already covered ‘what does SKU mean’ and the best practices for formatting. Now we’re going to cover why you should use SKU codes. There’s a multitude of benefits that come from categorising your products using SKU. Here is a few of them:

1 - Improved inventory tracking

An organised business is so important for productivity levels. If all your products are labelled and accounted for it means less time managing your inventory and more time marketing your business. By utilising SKU your online business will be able to keep all systems on the same page regarding inventory.

2 - Ordering made simple

Online Ecommerce businesses aren’t the only ones that favour SKU use. Suppliers such as wholesale businesses are also big fans of SKU so it’s useful to be familiar with them. Most suppliers have a product list that they will send out to you. These almost always feature SKUs.

To make the ordering process smoother, you can reference a SKU instead of a title or a colour. For example, there might be lots of ‘brown T-shirts’ but there will be only one SKU: Y5FV221.

3 - Keep tabs on your in-demand products

The unique codes help determine which of your products are in high demand. It could be a pink size 12 jumper or a green hand-painted cereal bowl. No matter what the product is, an SKU system can help keep tabs on what items are flying out of the door. It’s efficient because you can easily choose to repurchase a particular size or item colour, instead of the whole bulk order.

Businesses that use SKU

When delivering the SKU meaning, we touched on the fact that fashion retailers are big fans of the SKU. However, many other businesses benefit from the use of SKUs:


Do you have experience in dropshipping? If so, then you will already know how important it is for warehouses to stay on top of their inventory. Often, warehouses will house multiple Ecommerce business items. So they must keep track of what is being sent where and who is receiving what. Operating using a SKU system makes things a lot easier.


Amazon stipulates that an SKU is a critical piece of data. The company also states that any products sent to Amazon have to have an SKU identifier. This is because Amazon uses the SKUs in your inventory to correctly fill out their catalogue product pages. It’s no wonder Amazon is a fan of the SKU when they are shipping approximately 1.6 million packages per day. It could get messy without the system.


Supermarkets utilise the same SKU system as fashion retailers. They list every product with a unique SKU and then label every flavour of that product, too. They do this online and in their warehouses.

For more business terms explained, see our blog.