What’s the Difference Between an SKU and UPC? And Why it Matters

If you have an eCommerce business with an inventory that carries any products, you should have a SKU infrastructure in place. SKUs help to track a specific product, but do you know how they work behind the scenes?

And what about a UPC? UPC, SKU, what’s even the difference? 

In this post, we break down the differences between an SKU and UPC, and why it even matters. 

What’s a SKU?

SKU stands for Stock Keeping Unit, and it’s a unique number used to track a businesses’ inventory. SKUs include numbers and letters, and they should explain the key information about a product like it’s price, style, brand, color, type, and size. The most needed information should be first in the SKU. 

Here’s the thing, there’s no universal SKUs. You tailor your SKU to represent the most common questions that your customers or vendors ask about your inventory. 

How to use SKUs for your eCommerce Business

eCommerce businesses use SKUs to track inventory and sales. The analytical data you can get from SKUs allow you to track key information and create a powerful relationship with vendors and customers. You must use SKUs to track the relevant information for your unique business needs, so consider this before you develop your SKU architecture. 

Make sure to first consider the size of your stock. Smaller stock requires and architecture that tracks customer type (kid, baby, adult, etc). If you have larger stock, then consider breaking down the product’s traits after the customer type for additional details, like gender and size. You also need a unique number sequence, not one that mirrors the manufacturer’s SKU. 

Think about your customers as you create the SKU. What’s important to your customers? Do they ask about color? Style? Keep that in mind and put the important information first. Then, you must choose an inventory architecture through your point-of-sale system or by hand on an as-needed basis. 

Important qualities for your naming pattern include:

• No zeros
• Use 8-12 characters
• Choose an easy-to-understand format
• Place a letter before the number 

The Difference Between SKUs and UPC Codes

Now that you know the basics about an SKU, you may wonder what the difference between an SKU and UPC is. The two lines seem very similar, so what do they mean? Here’s a summary of each:

SKU-Stock Keeping Unit

• Internal system 
• 8-12 characters
• Alphanumeric
• As the retailer, you determine the SKU architecture. 
• Goes along with the barcode. 
• Identifies product traits. 

UPC- Universal Product Code

• Universal
• 12 characters
• Numeric
• Issued by the Global Standards Organization

As the retailer, you choose your SKU, but the UPC is already set. You must make sure that your SKU is unique from the UPC. The SKU should identify the product traits while the UPC code should identify the manufacturer with the first 6 digits, the item with the next 5 digits, and the check digits with the last number. The check digit is created by adding or multiplying all digits in the code to show the UPC code is valid.  

How to Leverage SKUs to Grow Your Online Business

SKUs are incredibly important for your retail business. Here’s how you can use them to boost business. 

Inventory Tracking

Accurately track your inventory overall with SKUs. By doing this, you can track availability and pinpoint when to order new products. Avoid understocking and find the perfect reorder point. Doing this ensures maximum productivity and the ability to understand the everchanging needs of your business. 

Sales Forecasting

By helping you keep accurate numbers on your inventory, SKUs help you forecast your sales more effectively. You can accurately keep your products in stock, increasing customer satisfaction, and preventing sellout issues. You must be strategic about using SKUs to forecast sales.

For example don’t rush to eliminate slow sellers from your stock, consider which customers may still want those. If you cut those products, the customers will go elsewhere. The best solution is to consider how customers purchase your products so that you can make the smartest decisions possible about your store’s inventory. 

Capitalize on Big Profit Generators 

Your SKU architecture can give you valuable information about which items customers seek out most from your eCommerce store, as well as information about the least popular items. Of course, this tells you what to reorder and what to possibly eliminate, but you can use the information in other ways as well. 

When you know your big profit generators, you can make them accessible via website design and display, so that they reach customers faster. Make sure they are always in stock because making them easily accessible will only boost sales. 

Increase Customer Satisfaction

By anticipating reorder points with SKUs, you can help your customers find what they are looking for. You can also create a seamless shopping experience free of out-of-stock items, which only makes customers happier.

Leverage the SKU information about product characteristics to offer targeted new suggestions to customers. Include “similar” or “frequently bought with” items on each product page by applying your SKU architecture to find suggestions with similar or complementary features.  

Set Your Business Up for Success with your Own SKU Architecture

SKUs are more than just some measly numbers on a barcode, they can help you grow in many ways. Be specific when setting up your SKU system, considering what matters most to your customers and you. Then, it’s time to start creating your own SKU. 

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