Stock Keeping Unit (SKU)

Do you ever feel like the only person in a meeting who doesn’t know what any of the acronyms mean? It can be a nightmare when you first start supplying to Walmart!

“Are we EDLP for BTS?”

“Will those SOTC items be available in LAG?”

“Our items are IOPD, but due to OTIF, our OSA is down.”

You’ve been there! It’s really not fair to single out Walmart. As much as they love acronyms, common ones used all across retail have become so familiar in our vernacular, it can be intimidating to raise your hand in a meeting and ask, “Wait, what does that mean?”

Part of learning at 8th & Walton means getting a handle on common terms throughout the industry. One common universal retail term that requires a deep dive is the SKU (pronounced “skew”). We’ll explain how the SKU is used and how it works to support and define your business.

What Is a SKU?

SKU stands for Stock Keeping Unit. It is a specific number assigned to a product by the retailer (not the supplier) to identify the price, options (brand, style, color, and size, etc.), and manufacturer of the individual item.

In talking about items in a store, you may hear buyers say, “Yes. We have that item. We carry three SKUs.” What they’re saying is they carry three varieties of the same item.

For example, if Betty’s Ice Cream Company has three flavors of ice cream in Walmart, that’s three SKUs. The store may have 15 cartons of chocolate, 16 cartons of strawberry, and 19 cartons of vanilla, but it still translates to three SKUs of the item.

Is a SKU Different Than a UPC?

A SKU and UPC number are very different. UPC stands for Universal Product Code. By its own definition, the UPC is a universal number. The UPC number on a tube of Molly’s Toothpaste will be the same at Walmart as it is in Kroger and Target. It also only tracks basic information.

The SKU, on the other hand, is unique to the retailer. It’s a series of numbers that can be set up to identify specific information about each product.

What Is the Purpose of Having a SKU Number?

Because SKU numbers are unique to the retailer, they are used to easily track inventory in the store. SKU numbers can be broken down into various categories and classifications for each item. Most POS systems allow retailers to create their own hierarchy and SKU number assignment.

With the rise of online shopping, the SKU number has found a new function in recent years. While browsing, you may be looking at a lawnmower. In reviewing the features, the screen will also populate with “similar items” or “items you may also like.” These other options will be close to or even complement the lawnmower you’re seeing based on the lawnmower SKU number.

For the retailer, another advantage of having a SKU number is advertising. Stores make a practice of “price-matching” competitors to win the business. By each retailer having a unique SKU number for identical items, they can better protect margins.

There are many retailers who elect to list the SKU in a local ad instead of the manufacturer’s model number. To the average shopper, we have absolutely no idea if the item we are looking at is the same one as in the other store. This prevents the retailer from having to match the price.

The SKU Keeping Profit and Loss in Check

Where are you getting the most profit in your store? Which items deserve a feature or more shelf space? These questions are easier to answer when backed up by data from the SKUs.

When you track the variations of a product with SKUs, you don’t just report on the main product line; you zoom in to the performance on the individual variation of the product. This method of reporting off the SKUs can tell you which product variants are your best sellers and which need adjusting.

The SKU performance report will show you Jamie’s Fuzzy Bears sell well, but the purple ones move three times faster than yellow ones; time to adjust the shelf space!

Then there’s the loss aspect of any business. Every business struggles with ways to track and identify inventory loss. In the supply chain, items have many opportunities to be damaged, go missing, or be stolen.

If your company SKU numbers are diligently categorized, it will greatly help narrow down where and how the item went missing. This will help your loss prevention team greatly minimize future opportunities for theft and fix errors in the supply chain.

Knowing More About SKUs and Item Setup

Still have questions about SKUs, setting up your items, or other acronyms at Walmart? Our experts are standing by to help!

Talk one-on-one with an adviser from 8th & Walton and let us do the heavy lifting for you!