How to Use SKUs in Retail?

  |  19 Views

Using SKUs (Stock Keeping Units) in retail is crucial for efficient inventory management, sales tracking, and operational efficiency. Here’s how you can use SKUs effectively in a retail environment:

1. Create a Consistent SKU System

  • Standardized Format: Establish a clear and standardized format for your SKUs. This can include a combination of letters and numbers that represent specific product characteristics, such as category, color, size, and style. For example, a shoe might have an SKU like SHO-BLK-10, where:
    • SHO represents the category (Shoes)
    • BLK represents the color (Black)
    • 10 represents the size (10)
  • Length and Structure: While the exact structure depends on your business, it’s typically useful to have a SKU length that’s easy to understand and consistent. This will allow for quicker identification and minimize errors.

2. Track Inventory Efficiently

  • Real-Time Inventory Updates: Use SKUs to track the movement of products in your store. When a customer purchases an item, the SKU allows you to update the inventory count in real time, preventing overstocking or stockouts.
  • Stock Replenishment: SKUs make it easier to determine when a product is running low and needs restocking. You can easily set reorder points for each SKU, and your system will alert you when inventory levels drop below the threshold.

3. Streamline Point-of-Sale (POS) Transactions

  • Barcode Scanning: In a retail setting, SKUs are often linked to barcodes. When products are scanned at checkout, the SKU is read, which allows for automatic inventory updates and faster transactions. This reduces human error and speeds up the sales process.
  • Product Lookup: SKUs allow cashiers to quickly identify products in the POS system, especially in cases where multiple items look similar but have subtle differences (like color or size).

4. Simplify Reordering and Supplier Communication

  • Efficient Reordering: When you know which products are selling well, you can reorder products based on the SKU. This helps you communicate with suppliers using specific SKU codes rather than product names, which might vary across different vendors.
  • Bulk Orders: SKUs help when placing bulk orders for the same product or variant. By referencing the SKU, you avoid confusion about sizes, colors, or other variations.

5. Monitor Sales and Perform Data Analysis

  • Track Performance by SKU: By tracking sales by SKU, you can easily see which products are selling well and which are underperforming. This helps in making more informed decisions about pricing, promotions, and product discontinuation.
  • Customer Trends: By analyzing SKUs over time, you can identify customer preferences and trends. This data can inform your purchasing strategy, helping you focus on high-demand products.

6. Improve Stockroom Organization

  • Efficient Storage: Use SKUs to organize your backstock in the stockroom. For example, group products with similar SKUs in the same area of the warehouse or on the same shelf. This speeds up picking and packing for both customer orders and restocking.
  • Reduce Stock Discrepancies: Regular stock audits, using SKUs, ensure that physical stock matches the inventory in your system, reducing shrinkage and stock discrepancies.

7. Handle Multiple Variations

  • If you sell products in multiple sizes, colors, or other variations, using SKUs for each variant is essential.
    • Example: If you sell a T-shirt in different sizes and colors, each size and color combination will have its own unique SKU.
      • TSH-RED-S (Red, Small)
      • TSH-RED-M (Red, Medium)
      • TSH-BLU-S (Blue, Small)
    • This allows you to track inventory levels for each variation separately.

8. Integrate with eCommerce Platforms

  • Omni-channel Retailing: If you sell both in-store and online, use SKUs to ensure consistency across both platforms. SKUs allow you to easily synchronize inventory levels between your physical store and your eCommerce site. For example, if an item sells out online, you can immediately update the physical store inventory or vice versa.
  • Product Listings: When creating product listings on your website or marketplace (like Amazon), including SKUs in the product details ensures that customers get accurate information about stock availability and delivery times.

9. Simplify Returns and Exchanges

  • Easier Return Process: SKUs make returns and exchanges more efficient. When a customer brings an item back, you can quickly locate the SKU to verify the product and process the return or exchange in your system.
  • Track Returned Products: By scanning the SKU of returned items, you can track them more easily and make informed decisions about reintroducing returned products into inventory or adjusting the product’s availability.

10. Improve Supplier and Vendor Management

  • Supplier-Specific SKUs: Some retailers may have unique SKUs for the same product based on the supplier. This is particularly helpful if you work with multiple suppliers who provide the same or similar products but with minor variations.
  • Performance Review: By analyzing sales data at the SKU level, you can identify which suppliers provide products that perform the best, helping you make decisions about future orders and partnerships.

Best Practices for Using SKUs in Retail

  • Use Unique SKUs: Every product variant (color, size, model) should have a unique SKU. This helps to avoid confusion and ensure accuracy.
  • Keep it Simple: While SKUs should be specific enough to identify the product, they should also be easy to read and understand. Avoid overly complex or long SKUs.
  • Integrate Technology: Use inventory management software or POS systems that integrate with SKUs to automate many tasks, from sales tracking to restocking and reordering.
  • Monitor SKU Movement: Regularly analyze which SKUs are selling, which ones are slow-moving, and which might need promotional efforts to increase sales.

By efficiently using SKUs, you can streamline your retail operations, improve inventory management, and gain valuable insights into your business’s performance.

Let us know if you want more detailed examples or insights into any of these steps!