What is an SKU? A Guide to Understanding Stock Keeping Units

Key highlights

• SKUs (Stock Keeping Units) are essential for organizing, tracking and managing inventory across retail and eCommerce businesses.
• Unlike barcodes or UPCs, SKUs are internal codes tailored to your business needs, improving inventory accuracy and control.
• Effective use of SKUs streamlines inventory management, boosts order fulfillment accuracy and enhances customer satisfaction. 
• Creating a custom SKU system helps forecast demand, optimize sales strategies and manage multi-channel retail operations efficiently. 
• Bluehost WooCommerce hosting helps online retailers manage SKUs, product catalogs and inventory smoothly for scalable growth.

Introduction

Ever found yourself digging through shelves, spreadsheets or your online store backend wondering where that one product went? You’re not alone. Without a solid inventory system, running a retail store or online business can feel like organized chaos. That’s where knowing what SKU is and how to use it makes all the difference. 

 A Stock Keeping Unit or SKU number is more than just a random string of numbers and letters. It’s a unique identifier that helps retailers, wholesalers and eCommerce businesses organize, track and manage inventory efficiently. From improving inventory accuracy to streamlining order fulfillment and enhancing customer experience, an effective SKU system is the backbone of modern inventory management. 

In this guide, you’ll learn exactly what an SKU is, how it works and why it matters for inventory management. We’ll also show you how to implement your own SKU system to boost productivity and sales.  

What is an SKU and why does it matter in 2025?

Stock Keeping Unit or SKU stands for a unique code assigned to each product you sell, whether you’re running a small brick and mortar store or a booming online retailer. To explain SKU in layman’s terms An SKU acts as a smart labeling system, giving each product its own unique identity to simplify tracking, organization and inventory control. 

Think of an SKU as a product’s unique fingerprint. Every variation, whether in color, size or packaging, receives its own SKU. For example, a red medium sized T-shirt will have a different SKU than the same shirt in blue or large. So why does it matter in 2025? With multichannel selling, increasing competition and higher customer expectations, inventory management is more critical than ever. A well-structured SKU system helps reduce errors, prevent stockouts of bestsellers and avoid excess inventory.

By using an SKU number, you can improve inventory accuracy and speed up order fulfillment. It also helps optimize your supply chain and enhances the overall customer experience. Understanding what is SKU helps you to stay competitive in 2025. 

How SKUs differ from UPC, GTIN and barcodes?

It’s easy to confuse SKUs with other product codes like UPCs, GTINs or barcodes, but they serve different purposes: 

• SKU (Stock Keeping Unit): Internal code used by retailers for inventory tracking and management. Completely customizable based on your own system. 
• UPC (Universal Product Code): A 12-digit serial number code used mainly in North America for retail scanning. Assigned by GS1 and printed as a barcode. 
• GTIN (Global Trade Item Number): A broader term that includes UPCs, EANs (European Article Numbers) and other globally recognized product identifiers.
• Barcodes: Machine-readable representations of UPCs, GTINs or SKUs that can be scanned for quicker product identification. 

The main difference? SKUs are for your internal use. You decide their format, structure and what product details they carry. UPC barcodes and GTINs are globally standardized, primarily used for point of sale and supply chain communication.

Comparison table: SKU vs Barcode vs UPC vs GTIN

To fully understand what an SKU is, it’s helpful to compare it with other product identification codes like UPC, GTIN and barcodes. This gives better context on how SKUs work and why they matter in inventory management.  

Feature	SKU	UPC	GTIN	Barcode
Stands for	Stock Keeping Unit	Universal Product Code	Global Trade Item Number	Barcode (visual representation)
Purpose	Internal inventory management	Retail scanning (primarily North America)	Global product identification	Scannable version of UPC/GTIN/SKU
Who assigns it?	You (retailers, warehouses)	GS1 (Global Standards Organization)	GS1	Generated automatically
Format	Alphanumeric, customizable	12-digit numeric code	8 to 14-digit numeric code	Machine-readable lines or QR
Use case	Manage inventory, track products internally	Scan at POS, supply chain	Global trade and supply chain	Scan codes on packaging or labels
Flexibility	Fully customizable	Standardized	Standardized	Represents SKU, UPC or GTIN visually

UPCs, GTINs and barcodes are essential for external scanning and supply chain processes. However, SKUs are mainly for internal use, allowing you to organize and manage your inventory as needed. 

In short, SKUs help you manage inventory behind the scenes, while UPCs and barcodes help you sell products at checkout. 

Now that you know how SKUs stand apart from other codes, let’s dive into why they are essential for smooth and efficient business operations.

How do SKUs help in business operations? 

SKUs play a vital role beyond just identifying products. They are the foundation for making every day retail tasks smoother and more efficient, whether you run a physical store, an online shop or both. Here’s how they help in different aspects of your business: 

1. Inventory management and stock control

One of the biggest benefits of using a stock keeping unit (SKU) is to streamline and track inventory. With clearly assigned SKU codes, you can track inventory levels in real time, identify products quickly and avoid situations like stockouts or overstocking. This helps you maintain an optimized inventory management system, reduce inventory holding costs and improve overall stock levels. 

Also read: WooCommerce Inventory Management Guide

2. Order fulfillment and shipping accuracy

When you manage inventory using a proper SKU system, order fulfillment becomes much more accurate. Since each item has a unique code, product packaging, shipping and verifying products is faster and less prone to human error. It also ensures that customers get the right product every time, improving their trust in your business. 

3. Sales tracking and demand forecasting

SKUs also help track sales trends by providing accurate data on which products are performing well and which ones aren’t. This information is crucial when you need to forecast demand, prepare for seasonal shifts or identify opportunities for complementary items. By analyzing SKU data, you can adjust your marketing strategies and manage inventory more effectively. 

4. Enhancing customer experience and multichannel selling

An organized SKU system improves the customer experience, especially when selling across multiple channels like your website, marketplaces and physical stores. It makes it easier for customers to find the right product category, compare same product options and complete purchases smoothly. For businesses adopting multichannel or omnichannel strategies, having the same SKU used across platforms creates consistency and avoids confusion. 

By now, it’s clear that SKUs are more than just numbers — they’re essential for smooth business operations. But how do you actually create effective SKU codes tailored to your business? Let’s break it down.

How to create and structure effective SKUs? 

Creating SKU management best practices is crucial for streamlining inventory management, tracking products efficiently and improving business operations. A strong SKU system helps you quickly identify products, reduce errors and make data-driven decisions. 

Best practices for SKU creation 

Follow these key practices to ensure your SKU system is clear, consistent and scalable: 

• Keep it simple and readable: Avoid overly long or complicated codes. Use a combination of letters and numbers that are easy for your team to understand and manage. 
• Be consistent: Use a standardized SKU format across your inventory. This helps avoid confusion, especially when training new staff or expanding your inventory management system. 
• Include key product attributes: Each SKU should include key product details—category, size, color or model. For example, “TSH-BLK-M” could represent a black t-shirt in medium size. 
• Avoid using special characters or spaces: Stick to alphanumeric characters to avoid compatibility issues with across POS, inventory tools and eCommerce platforms.
• Plan for scalability: Design your SKUs with future growth in mind. As your product range expands, your SKU system should still work without needing a complete overhaul. 
• Make it unique: Ensure every product has a unique SKU to avoid duplicate entries and tracking errors.

SKU examples for different business types

Here are a few real-world examples showing how different types of businesses can structure their SKU codes effectively: 

Business type	Example SKU	Explanation
Apparel retailer	TSH-RED-L	T-Shirt, Red, Large
Electronics store	LAP-15-D123	Laptop, 15-inch, Model D123
Online bookstore	BK-FIC-045	Book, Fiction, Item #045
Furniture seller	CHR-WOOD-001	Chair, Wooden, Item #001
Beauty & skincare	CRM-HYD-50ML	Cream, Hydrating, 50ml
Grocery store	APP-GRN-1KG	Apples, Green, 1 Kilogram

These examples show how you can use a combination of product categories, attributes and sizing to build meaningful SKU numbers that help you track inventory effectively. 

With your SKU structure in place, the next crucial step is putting it into action effectively across your inventory and sales systems. 

How do we implement SKUs the right way?

After setting up your SKU system, it’s time to put it into action. Proper implementation ensures that SKUs don’t just sit in spreadsheets but actively improve your business operations.

1. Integrating SKUs into inventory systems 

Integrating SKUs into your inventory management system is critical to streamlining day-to-day operations. Whether you’re using basic spreadsheets, advanced inventory management software or a full-scale POS system, SKUs help centralize and automate tracking. 

For retail stores and online retailers, SKUs enable real-time inventory tracking across locations and sales channels. A connected inventory management system paired with a SKU system helps reduce inventory errors, improve stock levels and prevent overselling. 

If you’re using platforms like WooCommerce, Shopify or other eCommerce solutions, most of them have built-in features to manage SKU numbers. This helps automatically sync your product information across your online store, warehouse and even physical retail locations, supporting efficient inventory tracking. 

2. Training teams and avoiding common mistakes 

A well-designed SKU system only works if your team knows how to use it. Training employees to understand SKU structures and how to read and input them correctly is crucial. This helps prevent costly mistakes like shipping the wrong product or miscounting inventory.  

Common mistakes to avoid include: 

• Creating SKUs without a consistent format
• Failing to update SKU data when products change 
• Overcomplicating the SKU structure
• Using the same SKU for different products 

Investing time in staff training ensures everyone involved in inventory management, order fulfillment and customer service understands how to create SKUs effectively within your coding system. This step alone can greatly reduce operational errors and improve customer satisfaction. 

While setting up SKUs is critical, having the right tools and platform to support your inventory management can make all the difference. This is where your choice of hosting and eCommerce solution comes into play.

How does Bluehost help with efficient SKU management? 

When it comes to putting your SKU system into action, your choice of platform and hosting plays a crucial role. At Bluehost, we make managing your inventory, products and SKUs simple and scalable whether you’re running a small online shop or a growing eCommerce store.

1. WooCommerce hosting benefits for inventory and SKUs 

At Bluehost we offer optimized WooCommerce hosting. It makes it easy to set up and manage your online store using WordPress. Powered by WooCommerce—one of the most popular eCommerce platforms—you get flexibility and ease in running your store.  

With WooCommerce, you can get the benefits of SKU codes effortlessly. Whether you’re selling a handful of products or thousands, you can: 

• Assign unique SKU numbers to each product and variation.
• Manage inventory levels directly from your WooCommerce dashboard.
• Track stock levels, automate low-stock alerts and integrate with your preferred inventory management system. 
• Sync inventory with physical stores or third-party sales channels to maintain consistency. 

We’ve optimized our hosting environment for WooCommerce, so your store remains fast, secure and hassle-free. 

2. Optimizing product catalogs and sales with Bluehost tools 

Beyond hosting, Bluehost offers additional tools to help streamline your product and inventory workflows: 

• Product catalog management: Create organized and SEO-friendly product listings with properly structured SKU data. 
• Performance optimization: With built-in caching, CDN and security, your store loads fast, improving customer experience and reducing cart abandonment. 
• Easy integrations: Seamlessly connect inventory management software, POS systems and order fulfillment tools that rely on SKUs for accurate syncing.
• Scalability: As your inventory grows, you can scale your hosting resources smoothly with our VPS or dedicated hosting options. 

With Bluehost, you don’t just host your WooCommerce store. you build a reliable and scalable environment designed for SKU management. This setup supports efficient inventory tracking and helps boost your online sales.

Final thoughts 

SKUs may look like simple codes, but they are the foundation of efficient inventory management, sales tracking and customer satisfaction. Whether you run a small retail store, a growing eCommerce business or a large-scale operation, well-planned SKU codes are essential. They help you organize inventory, streamline order fulfillment and make smarter business decisions. 

With Bluehost WooCommerce hosting, you don’t just get a website—you get a fully scalable platform that supports powerful inventory management and accurate product labels. From creating product catalogs to tracking SKUs across multiple sales channels, we make sure you have the right tools to grow confidently. 

Gain full control over your inventory and eCommerce operations. Get started with Bluehost WooCommerce hosting today!

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