A SKU, or stock keeping unit, is a unique code that a business assigns to each distinct product it sells, including every variation such as size, colour or pack quantity. It lets stock, sales and pricing be tracked at the exact level a customer actually buys.
SKUs are created by the retailer, not by a global standard, so one business can structure them to suit its own needs. Many follow a pattern that combines product type, style and variant, for example a code that tells staff the item is a medium blue shirt. The SKU is stored in the point-of-sale or inventory system and is usually linked to one or more barcodes, which is what the scanner actually reads at the counter.
Retailers use SKUs to see which specific variants sell, to manage reorders and to report by range or supplier. A single style in five sizes and four colours becomes twenty SKUs, each with its own stock level. Hospitality venues use SKUs too, covering menu items, ingredients and packaged goods.
Common mistakes include inconsistent naming, reusing codes for different products, or creating duplicate SKUs for the same item after a supplier change. These problems distort reports and make stock counts harder. It helps to agree a clear naming convention early, keep supplier codes in separate fields and avoid overly long or ambiguous formats.
SKUs matter because inventory accuracy depends on precise product identity. Without a clean SKU structure, forecasting, replenishment and stocktakes all become guesswork, and moving to a new system or adding ecommerce becomes much harder.