This article is part of a larger series on Retail Management.
When you start a retail business, there are lots of things to figure out. And in planning retail inventory management, you likely come across barcode labels, inventory systems, and even SKU (stock keeping unit) and UPC (universal product codes). This guide will help you differentiate between an SKU vs UPC and explain when each is used.
SKUs are beneficial for internal inventory monitoring, whereas UPCs are for external supply chain tracking. At a glance, you can distinguish an SKU and UPC by the number and type of characters in the sequence. SKUs have both letters and numbers and have varying lengths, typically anywhere from 8–12 characters. UPCs, on the other hand, always have 12 numbers and no letters.
However, retailers will often use both SKUs and UPCs together in one product barcode label:
There’s more to it than that, so continue reading for our UPC vs SKU breakdown.
What Is an SKU Number?
An SKU features both numbers and letters to help retailers identify products and track inventory. SKU numbers are internal, so retailers can create their own systems and naming structures to make SKU numbers useful in managing inventory. You can use them to identify color, size, style, collection, product type, and more. They also accompany UPCs on your product tag or label.
So, for example, an apparel retail business owner might create an SKU naming system that includes a letter at the front to indicate what type of clothing it is. They could use the following:
- T = top
- B = bottoms
- D = dress
- S = shoes
- A = accessory
And then taking it further, they could include identifying codes for sizing, color, and gender. So, maybe an SKU number could read T1BM0322 for a men’s small shirt in blue, coded as follows:
- T = top
- 1 = size small (0 = extra small; 2 = medium; 3 = large; 4 = extra-large)
- B = color blue
- 0322 = March 2022; the date the SKU was entered
This is just an example. You can create your SKU naming structure in a way that makes sense for your business’s internal processes. You might also add identifiers for product collections, vendors, and other information you’re interested in tracking.
Retail business owners can manually create SKU sequences or use a POS software that creates them automatically. Lightspeed Retail is a popular cloud-based POS typically used by brick-and-mortar shops with high SKU counts.
Learn more about SKU numbers in our ultimate guide.
When to Use an SKU Number
Retailers should use SKU numbers when they receive goods from suppliers. This will allow you to stay organized, track stock, and minimize data discrepancies and human error. Plus, a well-organized SKU numbering system can keep your warehouse and inventory storage areas easier to navigate.
And while SKU numbers are great for retailers’ internal tracking processes, they are also customer-facing and friendly for shoppers because savvy online shoppers may search by SKU number to find the best purchase options. Plus, associates can more easily find products on the sales floor with a useful SKU numbering system, especially helpful when shoppers ask about availability.
Here are some examples of when you’d need to use an SKU number:
- Find out how many units you have on hand of a specific product or SKU
- Run price checks via SKU search when you’re unable to scan or use the barcode
- Monitor shrinkage by item
- Determine if an item is out of stock or if you have more in the store, the warehouse, or elsewhere
- Create organization in your stockroom or warehouse
- Check receiving and ensure you’ve been supplied with the correct quantity of goods
- Pull sales reports by SKU number
- Check up on reordering points and restocking needs
- Identify which store or location the item is at or from
What Is a UPC?
A UPC is also an identifying series of characters, except it’s different from an SKU in that it only features numbers and is always 12 digits long. Also, UPCs are standardized, so it’s an externally set naming system, while SKU numbers are internal and unique to each retailer. UPCs also include less detail or information about the item than SKU numbers, since UPCs are randomly generated.
The Global Standard Organization (GS1) sets the UPC naming standards and requires all manufacturers to include UPCs in their products. You might also hear of UPCs referred to as a Global Trade Identification Number (GTIN)—they are one and the same.
A manufacturer essentially purchases and licenses a UPC for each of its products from the GS1. So, every product you purchase from a supplier should have a UPC on its label, though it will likely not have an SKU number.
When to Use a UPC
You’ll need to use UPCs when manufacturing products or making your products available on the global retail supply chain. This includes listing your items on third-party marketplaces like Amazon.
To get a UPC, you’ll need to go to the GS1 website and determine how many UPCs (or barcodes) you need.
Once you know how many you need, you’ll need to consider which type of UPC you want to invest in. Smaller businesses can go for the GS1 US GTIN, whereas larger retailers with extensive or growing inventories may pay extra and apply for a GS1 Company Prefix, which enables them to get multiple barcodes at a time. GS1 recommends the latter if you have more than nine products. A GS1 US GTIN costs $30, while the GS1 Company Prefix uses the following pricing structure:
UPCs rarely change and should always be used when selling your products in the global supply chain.
How to Manage & Track SKUs & UPCs
A full-featured POS system will help you manage and track all your SKUs and UPCs in a centralized location, synced across all store locations and sales channels. POS systems can automate SKU and UPC tracking and use information to deliver notifications and analytics reports about your business.
While UPCs are more straightforward and give you less wiggle room, you’ll want to set up a naming convention for your SKUs that will work now and in the future. Consider business plans and, more importantly, your product expansion plans. Taking the time to set it up right in the beginning will pay off in the long run.
Lightspeed POS is a robust solution with features to help manage all your inventory. It has the capacity to handle up to 10,000 SKUs and product variants, bundles, and kits. You can add SKUs and UPCs manually or import from an existing database. It’s our top-recommended retail POS for inventory management.
After your SKUs are input into your POS or inventory platform, you need to create usable SKU numbers. In other words, you need to print them on labels so that customers and staff can refer to the SKUs and use them for the purposes mentioned above. Explore our list of the best barcode label printers to help you choose the right tools for your business, or learn how to create your own barcode labels with SKUs or UPCs.
In an SKU vs UPC comparison, the biggest difference is that SKUs are internal and UPCs are external. Each has its own uses, and you may even be obligated to use a UPC in some contexts, but both work together to help you easily track, find, and identify inventory.
Managing your SKUs and UPCs with a POS like Lightspeed gives you every tool you need to maintain your inventory and sales floor efficiently. It provides streamlined, user-friendly inventory management and reporting tools with the capacity to handle lots of items. Visit Lightspeed to learn more.