An SKU (stock-keeping unit) is a scannable code that keeps track of products in a retail store. It is part of the store’s inventory tracking system. In addition to a scannable barcode, an SKU is also composed of an alpha-numeric set of around 8 characters. The bar code is usually above the set of characters. The SKU contains information about a product’s price and its manufacturer.
Instead of shutting the store down to do an inventory count periodically, employees can use a handheld scanner to scan each item in the store. This information is fed back into the inventory system to reconcile what has been purchased against the remaining (unpurchased) units. The part of the inventory system that deals with SKUs is called a POS (point of sale). In some stores, customers are also able to scan SKUs on their mobile phones for additional information about a product.
When a store item is purchased, it is scanned by the cashier (or by the customer for self-checkout). Once scanned, the item is subtracted from the store’s available inventory. When the inventory for an item gets low, the manager is notified. In more sophisticated inventory systems, a notification will be sent to the vendor, who will then submit a re-order for those specific products.
SKUs can be used with non-tangible items as well, which includes repairs and warranties. For example, an auto repair shop will use an SKU for different types of billable time.
SKUs are also used in marketing. When a customer purchases a certain product or group of products, the store’s inventory system can analyze those purchases. An advertisement for a similar product may be displayed to the customer. This type of informed ad has a higher chance of making a sale than some random ad. Additionally, store managers can see which items are hot sellers vs. those that are not. Depending on the type of POS being used, managers can see this information in real-time.