The role of SKUs in eCommerce

Last week we discussed marketing automation and its benefits for your brand. But as we like to emphasize, you can't focus on just one aspect of your business. There are logistics, marketing, customer support, production, and the sales department. 

 

Nowadays, this last sector is focused on eCommerce and its several optimizations; one we would like to focus on is the ability to manage inventory effectively. Here is where Stock Keeping Units (SKUs) enter.  

 

These unique alphanumeric codes serve far more than just a labeling function. In this article, we will talk about the role of SKUs in eCommerce, exploring how they contribute to operational efficiency, customer satisfaction, and business growth in the digital age.

What are SKUs?

SKUs are the abbreviation for Stock Keeping Units, which are unique identifiers businesses use to manage and track individual products within their inventory. They are typically represented by a combination of letters, numbers, and symbols. 

 

These are designed to provide detailed information about a specific product, this information can go from category, brand, color, size, and other distinguishing features. However, make sure to distinguish them from barcodes, which are standardized across industries. SKUs are created and customized by individual businesses to meet their specific inventory management needs.

 

In other words, SKUs serve as a shorthand language for a company’s internal operations, allowing for quick identification and differentiation of products. For example, a retailer selling various types of shoes might use SKUs to distinguish between men’s and women’s footwear, different sizes, colors, and brands. 

 

The requirements of each business will determine the specificity level crucial for managing inventory effectively, as it ensures that each product variation is accounted for, reducing the risk of errors in order processing and inventory tracking.

Why does eCommerce need SKUs? 

Now that we have a better understanding of what are SKUs, we can get into their role within eCommerce businesses, here under we are going to explain each one of their functions:

1. Efficient inventory management

We already mentioned this function, but more specifically, SKUs allow eCommerce businesses to maintain a clear and organized inventory system. By assigning a unique SKU to each product variation, companies can easily track stock levels, identify when a particular item is running low, and promptly reorder supplies. 

 

This prevents stockouts, which can lead to lost sales and disappointed customers, as well as overstock situations, which tie up capital and storage space. An efficient SKU system ensures that businesses can manage their inventory accurately, minimizing errors and maximizing productivity.

2. Streamlined order fulfillment

In eCommerce, where speed and accuracy are crucial, SKUs play a vital role in the order process, as a fulfillment center in mexico it’s one of our tools. 

 

For example, when a customer places an order, the SKU provides a clear and specific reference to the exact item requested. This reduces the chances of picking errors in the warehouse, ensuring that customers receive the correct products on time. 

 

Also, a well-organized SKU system also helps in automating the picking, packing, and shipping processes, leading to faster and more reliable order fulfillment, which is key to maintaining customer satisfaction.

3. Enhanced data analysis

SKUs are another tool for data analysis in eCommerce. How come? Well, by tracking sales performance at the SKU level, businesses can gain insights into which products are popular, which are underperforming and which may need promotional efforts. 

 

This granular level of data allows for more informed decision-making regarding inventory purchasing, pricing strategies, and marketing campaigns. For instance, if a particular SKU is consistently selling out, it might be worth increasing stock levels, featuring that product more prominently on the website, or generating a new marketing strategy surrounding this merch.

4. Improved customer experience

In fourth place, a well-managed SKU system contributes directly to a better customer experience. Perhaps this is obvious, but nevertheless, it is a part that has an essential role in business success.  

 

With accurate inventory tracking, businesses can ensure that the products listed as "in stock" on their websites are genuinely available, preventing situations where customers order items only to find out later that they are unavailable. 

 

Additionally, SKUs help in organizing and presenting products more effectively online, allowing customers to easily find the exact item they are looking for, whether it’s based on size, color, or other specifications.

5. Simplified returns and exchanges

Last but not least, inverse logistics is another aspect that benefits from the use of SKUs. Sadly, returns and exchanges are an inevitable part of eCommerce or any other business, SKUs make this process more manageable. 

 

When a customer wants to return an item, the SKU allows businesses to quickly identify the product and process the return efficiently. This is particularly important for managing refunds, restocking, and updating inventory levels. For exchanges, the SKU system ensures that the replacement product matches the customer’s request precisely, reducing the likelihood of further issues.

 

Now that you’ve learned more about SKUs and their role in eCommerce businesses, verify the correct use of your inventory management system. And if you want to outsource your logistics and fulfillment process, don’t hesitate to contact us, one of our team members will be happy to assist you.