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Everything Retailers Need to Know About SKU Numbers
April 30, 2025 / 9 minute read / By Zoya Naeem
Blog
Learn what SKU Numbers are, how they work, and how you can use them to streamline your retail business all in this guide.
An SKU number (short for Stock Keeping Unit) is how retailers label products, bring order to the shelves, the stockroom, and the screen. Whether it’s helping you find a red size 8 sneaker in a sea of boxes or quickly restocking your bestsellers, SKU numbers are doing the quiet, behind-the-scenes work that keeps your store moving.
Retailers use SKU numbers to identify and track products based on details like size, color, style, or price. They help your team locate inventory faster, fulfill orders more accurately, and avoid selling something you don’t actually have in stock.
And whether you’re managing a growing eCommerce site, a physical storefront, or both, having a clear, consistent SKU system makes your day-to-day smoother and your reporting sharper.
Still, there’s a lot of confusion around what SKU numbers are (and what they’re not). So, in this guide, we’re breaking it all down for you.
We’ll be covering:
- What is SKU Meaning and Why Should You Even Care?
- Where Can You Find SKU Numbers?
- How to Create SKU Numbers That Actually Make Sense
- SKU Best Practices Every Retailer Needs to Know, and
- What Is The Difference Between SKUs, Barcodes, and UPCs?
Whether you’re building your first SKU system or tightening up the one you already have, this guide will give you the clarity you need to organize your inventory and improve your retail operations.
What Is SKU Meaning and Why Should You Even Care?
SKU number is a unique alphanumeric code retailers use to identify and track individual products in their inventory.
Unlike a barcode or UPC (which are standardized across businesses), SKU numbers are entirely custom. That means you can decide what the code includes and how it’s structured, usually based on product features like type, brand, color, size, or price point.
A typical SKU might look like this ‘SHRT-BLU-LG’, which could represent a large blue shirt in your inventory. It’s simple, descriptive, and helps your staff (and your system) instantly know what’s what without second-guessing.
Why do retailers use SKUs?
Because managing inventory without a solid SKU system is like trying to organize your closet with no hangers, no labels, and the lights off.
SKUs give you the clarity you need to know what’s in stock, what’s selling, what’s low, and what needs reordering, simple and fast.
SKUs are also incredibly helpful for:
And the best part—SKUs aren’t just for big retailers. Whether you’re running a single-location boutique, an eCommerce shop, or a multi-store operation, a smart SKU system scales with you.
Pro Tip:
If you’re using a modern POS system like Cumulus Retail, setting up new products becomes far more efficient. You can build item records from scratch or use templates, assign vendor-specific product numbers, and add rich descriptions, all in one go. It’s a faster way to maintain clean, consistent product data as your catalog grows.
Where Can You Find SKU Numbers?
Once you know what a SKU number is, you’ll start spotting them everywhere. They are there in almost every retail transaction, whether you are selling in-store, shopping in-store, processing online orders, or doing a stock check after hours.
Here are some of the most common places you’ll come across SKUs in your day to day tasks:
From stocking shelves to fulfilling an order or running a sales report, SKU numbers are there to make retail a little more manageable.
How to Create SKU Numbers That Actually Make Sense
Now that you’ve seen where SKU numbers show up (from your POS system to your product tags) you might be wondering ‘Who decides what those SKUs look like?’
Well, you do.
SKU numbers aren’t universal codes like barcodes or serial numbers. They’re custom identifiers you create to keep your inventory organized and easy to manage. That means you have the flexibility to build a system that actually works for your business, whether you’re managing 20 products or 2,000
Here’s how to create SKUs that are easy to understand, easy to scale, and tailored to your store:
1. Start with product type
Keep it broad but clear. For example, if you’re selling shoes, you might start with SHO or FTW (footwear). T-shirts? Maybe TSH.
2. Add in key details
These might include:
Example: A large, red cotton T-shirt from a summer collection could be TSH-RED-L-COT-SUM24
3. Keep it short, consistent, and scalable
SKUs should be easy to read and follow a pattern you can replicate across your entire catalog. That way, your system won’t fall apart as your inventory grows. Avoid long or overly complicated strings so you can include the most useful details in a consistent order.
4. Make it yours
There’s no one-size-fits-all SKU format. What matters is that your system reflects your inventory needs, your sales flow, and the way your team works.
SKU Best Practices Every Retailer Should Know
So, you’ve mapped out a smart SKU structure and maybe even automated a few. That’s a great start. But creating SKU numbers is just one part of the puzzle. To really get the most out of your inventory, you’ll want to treat your SKUs like the BTS team that keeps things moving efficiently.
Here are a few things that help retailers stay organized and scale with confidence:
What’s the Difference Between SKUs, Barcodes, and UPCs?
Now we all know that SKUs play an important role in keeping your inventory clean, searchable, and easy to manage. But if you’ve also come across barcodes and UPCs and wondered if they are just different names for the same thing, you’re not alone. These identifiers often work in tandem, but they serve different purposes.
A SKU (short for Stock Keeping Unit) is an internal tracking number created by you, the retailer. It’s a code you assign based on what matters to your business. Maybe it reflects the product type, brand, size, or color. You can think of it as your own personal labeling system, designed to help you sort, search, and manage your inventory in a way that actually makes sense for your store.
A barcode is a scannable image that represents a code (either a SKU or a UPC). It’s how your POS system quickly identifies a product at checkout or during inventory counts. A barcode isn’t the code itself, it’s simply a machine-readable format of either a SKU or a UPC.
Then there are UPCs (Universal Product Codes), which are assigned by manufacturers. Unlike SKUs, you don’t get to customize them. They’re standardized and used by multiple retailers to identify the same product. If you’re stocking third-party items, say, a brand-name water bottle or a pair of headphones, the UPC will already be printed on the packaging.
So, when do you use each?
Well, you use SKUs when you need to organize your inventory internally and tailor tracking to your business. Use barcodes to make scanning at checkout or during audits faster. And rely on UPCs when working with pre-labeled products from external suppliers.
Pro Tip:
Using an all-in-one POS System like Cumulus Retail frees you from manually generating or managing barcodes for every size or color variation. The system auto-generates unique barcodes and even lets you layer in vendor UPCs when needed. It saves you a ton of time and reduces errors, especially when you scale.
Ready to Organize, Track, and Grow Smarter with SKUs?
You don’t have to manage your SKU system manually or juggle disconnected spreadsheets and outdated tools. With an all-in-one POS system, like Stratus Enterprise or Cumulus Retail, you can stay in control of your inventory, reporting, and reordering, all in one place.
Interested in seeing a cleaner way to organize your products?
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