What is SKU number? Beginner’s guide for online stores

Key takeaways:

• A SKU number is an internal code you create to identify products and variations within your store.
• SKUs help reduce inventory errors, prevent overselling, and improve order fulfillment accuracy.
• You can create effective SKUs using a simple, consistent structure without technical skills.

A SKU number, short for Stock Keeping Unit, is a unique code you create to identify and manage products within your store. If you’re an online retailer or planning to set one up, you’ve probably come across it already. It helps you systematically track what you’re selling, eliminating guesswork in managing your inventory.

If you’re new to e-commerce, you may find it too technical and intimidating. The truth is that a SKU number is simply a way to organize your products so you can run your store smoothly. It’s not just for big warehouses or enterprise sellers; as a store owner, you can learn it too and apply it to your day-to-day workflow.

We’ve created this guide to help you understand that you don’t need a technical background to use SKUs effectively. By the time you’re done reading, you’ll understand what a SKU number is, why it matters for your store, and how to create a system that actually works for the products you sell.

What is SKU number?

A SKU is a combination of numbers and letters you assign to a specific product in your store. It’s a way to mark them to keep track of what you sell, from individual items to variations like size or color.

Unlike standardized product codes, SKUs are unique to your store. You create and manage your own SKUs based on how you want to track products and variations.

You decide how to structure them and the information they represent. Two stores can sell the same product and use completely different SKUs for it. What matters is that the SKU makes sense to you and fits your store’s inventory system.

What does SKU stand for, and what is it used for?

SKU stands for Stock Keeping Unit. It’s a label that helps you identify products quickly without relying on full product names. SKUs are used to track inventory, manage product variations, process orders, and review sales data.

You can also use it to forecast sales and anticipate which products to stock to meet customer demand. This makes it easier to plan and keep your inventory aligned with what customers actually buy.

Why SKUs are different from barcodes and serial numbers?

SKUs, barcodes, and serial numbers may all look alike, but they serve very different purposes. A SKU is an internal identifier that you create for your own store’s products. It helps you organize and track your inventory, orders, and product variations. It isn’t based on a universal standard.

A barcode is a machine-readable code of black and white lines. SKUs can use barcodes for quick identification during checkout or warehouse scanning.

A serial number is another type of identifier, but unlike a SKU, it usually marks each individual product. Serial numbers often support warranty, repair, or individual item tracking, not daily inventory tasks.

Simply, SKUs are internal labels you create, barcodes are the scannable representation of codes, and serial numbers identify specific individual items.

Can the same product have different SKUs?

Yes, the same product can have different SKUs. This usually happens when a product comes in multiple variations, such as different sizes, colors, or styles. For example, a black t-shirt and a white t-shirt would each have their own SKU, even if they’re the same design. You might use a SKU like TSHIRT-BLK-LG, while another could be TSHIRT-WHT-LG to tell them apart.

Why SKU numbers matter for your online store

SKU numbers play a bigger role in your store than just labeling products. They give you the structure needed for accurate inventory tracking, especially when managing multiple product variations. It also supports good inventory management practices by giving you clearer visibility into what’s actually in stock.

As your product list grows, SKUs become even more important, as they give you insight into your products and help you make informed decisions about restocking, pricing, and marketing.

Without a SKU system in place, it’s easy to run into avoidable problems. For example, if similar products aren’t clearly labeled and tracked, you might oversell one variation while another sits untouched. SKUs help prevent that by giving each product and variation a clear identity from the start.

Here’s more of why SKU numbers matter for your online store:

• Organize your products with clear, searchable labels
• Track inventory and prevent overselling
• Quickly fulfill orders with accurate picking and packing
• Analyze sales by size, color, or category

Organize your products with clear, searchable labels

SKUs make it easier to find and manage products quickly, especially when you’re dealing with similar items. Instead of relying on long product names, you can search, filter, and sort products using systematized SKU codes. This becomes helpful when managing multiple variations of size, color, or style.

Track inventory and prevent overselling

When each product variation has its own SKU, inventory tracking becomes far more accurate. You can see exactly how many units you have left for each item and avoid selling products that are already out of stock.

Quickly fulfill orders with accurate picking and packing

SKUs also help streamline your e-commerce fulfillment process. They can help you clearly identify which products need to be picked and packed. Instead of guessing based on generic product information, SKUs provide a precise reference that reduces mistakes during fulfillment.

Accurate picking and packing reduce mistakes, which helps protect delivery timelines and overall customer satisfaction.

Analyze sales by size, color, or category

SKUs allow you to break down sales data in meaningful ways. You can see which sizes sell fastest, which colors perform best, or which product categories drive the most revenue. This insight helps with restocking decisions, promotions, and long-term planning.

SKU vs UPC, GTIN, and serial numbers—what’s the difference?

It’s common to see SKUs grouped together with UPC codes (Universal Product Code), GTIN (Global Trade Item Number), and serial numbers. They are product codes, but they have different purposes in commerce.

SKUs don’t follow a universal standard. You create them to manage products inside your store, while other identifiers follow standardized rules and are used across marketplaces, retailers, and supply chains. Below is a comparison of these codes, highlighting the key differences.

	SKU	UPC	GTIN	Serial number
Who assigns it	Store owner	GS1 and brand owner	GS1 and brand owner	Manufacturer
Where it’s used	Internal store systems	Retail, e-commerce, global marketplace	Global inventory, e-commerce, supply chain, logistics	Warranty, repairs, quality control, recalls
Is it global	No	Yes	Yes	No
Can it be customized	Yes	No	No	No
Can it be reused	Yes (with rules)	No	No	No
Real-world use cases	Managing inventory inside your store	Scanning items at checkout	Listing products across sales channels	Tracking warranties or repairs

What is GS1?

GS1 is the global organization that sets the standards for product identifiers such as GTINs and UPCs. These standards ensure that each product code is unique, enabling products to be consistently recognized across retailers, marketplaces, and supply chains worldwide.

Businesses that need to sell products across multiple marketplaces obtain GTINs through GS1. This gives you officially registered product codes that platforms can verify. Smaller businesses that only sell through a single store may rely on SKUs alone, but GTINs become necessary as distribution expands.

Is SKU number a serial number?

No, a SKU number is not a serial number. A SKU identifies a product or product variation, while a serial number identifies a single, individual item. For example, every large black t-shirt might share the same SKU, but each physical item could have a different serial number.

How to create SKU numbers

The goal when creating a SKU is to build a system that helps you run your store seamlessly. A good SKU structure makes products easy to identify, keeps inventory accurate, and stays consistent as your catalog grows. You don’t need a complex setup. You just need a clear approach you can stick to.

Here are four steps that will help you create SKUs that are easy to understand and manage:

1. Decide what details to include in your SKU
2. Choose a consistent format for your SKU structure
3. Create a few sample SKUs manually
4. Use automation tools if your catalog is large

Step 1: Decide what details to include in your SKU

Start by identifying the product details that matter most for managing your inventory. These are the attributes that help you quickly tell similar products apart.

Common details include:

• Product type
• Category
• Color
• Style
• Size

For example:

• If you’re a clothing store, you may focus on product type, color, and size.
• If you’re a bookstore, you may focus on genre and format.
• If you’re a gadget store, you may focus on product type and model version.

The important thing is to include only what’s useful. Adding too many details can make SKUs harder to read and manage.

Step 2: Choose a consistent format for your SKU structure

Once you know which details to include, decide on a format and use it consistently across your store. Consistency is what makes SKUs useful in the long term.

This is how you might structure your SKU number based on the product and its characteristics:

• Shirts: TSHIRT-BLK-LG
• Books: BOOK-NONFIC-PB
• Gadgets: SPEAKER-BT-V2

Using the same order and separators every time makes SKUs easier to understand and identify a product down to its variation.

Step 3: Create a few sample SKUs manually

Before assigning SKUs to your entire catalog, test your structure with a small set of products. Creating a few SKUs manually helps you spot issues early.

Ask yourself:

• Can I understand this SKU at a glance?
• Would someone else be able to read it without explanation?
• Does this structure leave room for future products or variations?

This step is important if you’re new to e-commerce, as it minimizes errors before you apply SKUs across your entire catalog.

Step 4: Use automation tools if your catalog is large

If you have a growing catalog or add products often, automation can save time and reduce mistakes. Many e-commerce platforms and website builders allow you to generate SKUs automatically based on rules you set, such as product type or variation.

This is where having the right setup matters. A DIY website builder with product and inventory management tools, like our Website Builder, gives you a practical way to keep SKUs consistent as your store grows. You get a system designed to support progress, so managing products stays straightforward as you scale.

Whether you create them manually or use tools to generate SKU numbers automatically, the goal is to keep your system consistent and easy to maintain.

Common mistakes in SKU creation

Even the simplest SKU system can cause problems if it’s not set up carefully. Most issues don’t come from choosing the “wrong” format. They come from small inconsistencies that add up over time, especially as your store and team grow.

Here are some of the most common SKU mistakes to watch out for, along with how to avoid them:

• Using full product names
• Inconsistent formatting between categories or team members
• Reusing old SKUs for new products
• Failing to document or standardize naming conventions
• Mixing lowercase and uppercase inconsistently

Using full product names

It can be tempting to include full product names in your SKUs, but this usually makes them long, hard to read, and difficult to work with. Long SKUs slow down searching, increase the chance of errors, and are harder to scan.

What to do instead: Use short, meaningful abbreviations that represent key product details instead of full names. Keep SKUs concise while still recognizable.

Inconsistent formatting between categories or team members

When SKUs follow different formats across categories or are created differently by different people, they become harder to manage. Inconsistency makes sorting, filtering, and reporting less reliable.

What to do instead: Decide on one SKU structure and apply it across your entire catalog. If more than one person creates SKUs, ensure everyone uses the same format.

Reusing old SKUs for new products

Reusing SKUs can cause serious confusion in inventory records, sales performance reports, and accounting systems. Old SKU data can get mixed with new products, leading to inaccurate insights.

What to do instead: Once a SKU is retired, keep it retired. Treat SKUs as permanent identifiers, even if the product is no longer sold.

Failing to document or standardize naming conventions

If your SKU rules only exist in your head, they’re easy to forget or misapply later. This becomes a bigger issue when you bring in new staff or work with suppliers.

What to do instead: Document your SKU rules and create a standardized system that everyone uses. This allows you to be more consistent and makes onboarding or scaling easier.

Mixing lowercase and uppercase inconsistently

Using a mix of uppercase and lowercase letters can create duplicate or mismatched SKUs in your system. It can also create confusion and make products harder to differentiate from one another.

What to do instead: Choose one format, usually all uppercase, and stick to it. Consistency reduces errors and keeps your inventory clean.

Best practices for managing SKUs over time

As your store grows, your own SKU system needs to grow with it. What works for a small catalog can quickly become difficult to manage if it isn’t structured and documented early. These best practices help you keep SKUs clear, consistent, and reliable as products are added and your team grows.

• Create and document a simple naming convention
• Stay consistent across sales channels
• Don’t change SKUs once they’re live
• Don’t reuse old SKUs

Create and document a simple naming convention

A clear naming convention is the backbone of a scalable SKU system. It ensures SKUs stay readable and predictable, even as your catalog expands.

Document how SKUs are structured, what each part represents, and which abbreviations are used. This makes it easier to integrate new inventory management software or train new staff.

Stay consistent across sales channels

If you sell across multiple platforms, SKUs should stay consistent wherever possible. Using the same SKUs across your e-commerce site, physical stores, and point-of-sale (POS) systems helps prevent errors in your product data.

Having consistent SKUs also makes it easier to track products across channels, reconcile reports, and manage fulfillment without any confusion, especially as the order volume increases.

Don’t change SKUs once they’re live

Once a SKU is assigned and in use, changing it can cause problems across business records. Even small changes can make data harder to interpret.

If a product changes slightly, it’s usually better to create a new SKU rather than edit an existing one. This keeps your data clean and your tracking reliable.

Don’t reuse old SKUs

Reusing old SKUs is rarely a good idea. Even if a product is discontinued, its SKU is still tied to past orders, reports, and inventory data. Reusing it for a new product can blur those records, leading to inaccurate insights.

A safer approach is to retire old SKUs permanently and create new ones for new products.

How to manage SKUs efficiently at scale

As your store grows past a few dozen products, SKU management starts to look different. What once lived comfortably in a spreadsheet can quickly become hard to maintain. This is where smarter strategies, including automated SKU management, help you stay organized without slowing down growth.

What is SKU rationalization and why it matters

SKU rationalization is the process of reviewing your catalog to identify SKUs that no longer perform well. Over time, stores often accumulate outdated, duplicate, or low-performing products that clutter inventory.

By rationalizing SKUs, you can:

• Reduce inventory bloat
• Focus on products that actually sell
• Simplify restocking and fulfillment

For growing stores, this creates a cleaner catalog and makes inventory management easier.

Using automation and AI to manage SKUs

Manually creating and maintaining SKUs works early on, but automation becomes valuable as product counts increase. Automated tools can help assign SKUs according to predefined rules, flag inconsistencies, and maintain consistent SKU formats across your catalog.

Some tools also use AI-driven insights to spot duplicate patterns, clean up outdated SKUs, or suggest better organization as your store evolves. This reduces manual effort and helps maintain consistency as you add more products, variants, and channels.

Turning SKUs into insights with dashboards and reports

When SKUs are structured and consistent, they become powerful data points. You can use them to track performance by product type, variation, or category through dashboards and reports.

This visibility supports:

• Inventory forecasting
• Smarter restocking decisions
• Identifying top-performing and underperforming products

You’re using SKU-driven data to guide business decisions.

Scaling beyond spreadsheets

If you’re managing more than 100 products or selling across multiple channels, spreadsheets become a bottleneck. Dedicated e-commerce tools with built-in inventory and SKU management give you real-time visibility and reduce the risk of errors.

Frequently asked questions

Build a SKU system that grows with your store

You don’t need to overhaul your entire store to get started with SKUs. Begin with your top products, apply a simple structure, and build from there. Once it becomes easier to manage your products through SKUs, you’ll begin to see its true value.

This is something you can do on your own. No developer, no complex setup, no guesswork. The right tools make the process even easier by keeping products, inventory, and SKUs organized in one place. Our Website Builder’s E-commerce Plan is designed to support that kind of progress, giving you a practical way to manage your store confidently as it grows.

The choices you make now shape how smoothly your store runs later. Set up SKUs that work for you, use tools that simplify management, and give your business the structure it needs to move forward with confidence.