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What is SKU?

Every eCommerce business model succeeds heavily on correct inventory management and a supply chain. To succeed, businesses need to focus closely on their SKU (stock-keeping unit) to understand inventory management levels, create bundle offers, and maintain a set of reorder points. And proper SKU management requires proper SKU analysis.

What is SKU?

A SKU stands for (Stock Keeping Unit) which means an alphanumeric code or we can say a scannable barcode that is assigned to business inventory, most of which we see in product labels in a retail store. These codes are designed by the retailer’s owner based on criteria that allow them to track their price, stock, and product details and measure sales product-wise and category-wise, design store layouts, and improving shopping experiences, and also allow retailers track the movement of inventory.

The SKU is made with an alphanumeric combination of 8-or-more characters. Retailers can also create their codes based on the characteristics of their merchandise. Stock keeping units have many useful identifying products and also be applied to intangible assets but billable products, such as units of repair time in an auto body shop, etc. You should also be used so that you can design your inventory management system and customer selling and buying experiences. That is why the most important strategy is about what SKUs you introduce into your supply chain model instead of proliferating for the sake of it.

Analyzing SKUs?

An analysis of your SKUs is important for efficient and accurate management. It also has several other benefits to increasing ecommerce business model profitability.


SKUs allow retailers’ business models to collect data that allows them to analyze product popularity or view their seasonal and cyclic sales trends in their different customer behavior. This analysis permitted them to assess stock inventory with trends in consumer behavior and product popularity.

Inventory Management

Inventory management is the main function of an SKU system. With this, retailers can track inventory levels, maintain inventory turnover, and flow of products. They can also set inventory levels and timeframes using the information we get from sales, which can act as a trigger for initiating or stopping inventory orders.

Identify and manage SKU proliferation

SKU analysis is an important part of every eCommerce business model. As businesses scale, they have to introduce new products or new variations of products to increase their sales and get more customers. When left unchecked, however, SKU analysis could be eating away at your profits ratio.

As a result of unchecked SKU analysis, that business may end up with a large volume of inventory stock that you’re unable to sell and you may face a big loss. This means you are spending a lot of money to make an inventory that doesn’t get sold. Plus, you are also spending more money to hold the inventory.

SKU analysis helps to identify your best-selling item to see what you can introduce variations of it, for example. It could also give you an opportunity to know what your audience likes and dislikes, which will be helpful for businesses to manage SKU proliferation effectively.

Customer Assistance

A retailer store assistant can scan an SKU to quickly find out details of a product that is in stock for a consumer that wants an alternative version of a product, making sales efficiency and customer satisfaction level. 

Cut unprofitable SKUs out

Not all products are getting the same attention from your existing customers. While you have many best-selling items in your inventory that generate revenue, others may sell fairly but have low-profit margins. Even worse, some products cannot even sell because your customers may not need them or not like them.

SKU analysis is a great method to keep an eye on these necessary details so you don’t waste your money on procuring and keeping unprofitable SKUs. This will help you to cut the cost of procuring and holding fewer moving items. It will also free up resources and inventory space to procure higher-value products and best-selling SKUs to increase your overall profitability.

Advertising and Marketing

Using SKUs in advertising in this digital modern technique. Many retailers advertise their product SKU instead of the manufacturer’s model number.

With the competitive online landscape of retail and everyone matching prices, then an SKU allows inventory to show uniqueness and enables you to identify marketing strategists that are generating sales based on the product. 

It can also help to decrease the practice of customers visiting physical stores to compare prices for items they get to buy online instead.

SKUs across different channels

If you’re selling your product through multiple channels, then there’s a chance that you have to maintain different inventory systems in place across those selling channels. This not only creates problems and is inaccurate in your inventory management, but it can also affect the result in costly mistakes. This means you can track and maintain your SKUs from different channels in one place, by monitoring inventory levels, reordering products, and inventory movement more accurately.

For example, suppose if your inventory data in one system doesn’t automatically connect with another, you could accidentally sell out-of-stock products or place reorders twice. That is why the SKU analysis process simplifies your multichannel inventory management organizing and consolidating your SKUs analysis across all your selling channels. 


Product Recommendations

Companies also use these SKU codes to enhance consumer encounters on their online sales platforms. 

For example, picks items to display as “suggestions” when you are shopping online by using SKUs. The company simply attached a unique SKU code, with all of its identifying information, to each product. When you look at a blender, amazon or an online shopping platform can display other blenders also that is similar to the one you are viewing.