E-commerce is a complicated business with complex logistics and inventory management. SKUs, or stock-keeping units, are the keys to understanding inventory and knowing how much of your product you have on hand. Knowing what an SKU is and how it’s used can help manage your e-commerce operations and choose the best system for your unique needs. This article will explain what an SKU is and why it matters to you as an online retailer.
What Are SKU Numbers?
An SKU is a unique identifier for a product. It’s what’s on the outside of your package, which lets you know which products are in stock at any given moment. When you buy something via an online retailer, that retailer uses an SKU to identify that product in its inventory system. The SKU is then used to identify that product in the warehouse, in transit, or out on the sales floor.
Why Do SKUs Matter?
SKUs are incredibly important to e-commerce sellers, but they matter to small business owners for various reasons. Understanding what a SKU number is and how they’re used can help you make smart decisions about your inventory management system. Knowing the features of each SKU type will help you get the most out of your inventory management system and get your products on the shelves faster.
Importance of SKUs
1. Understanding Your Inventory
An inventory management system is the heart of your e-commerce operation. Without an accurate inventory system, you wouldn’t know how much product you have, where it’s located, or where to find it. An inventory management system keeps track of everything for you so you can keep your business running smoothly. You can get a free inventory management spreadsheet template from places like Lightspeed.
2. Finding Best Sellers
Knowing what products are selling well is important to you as the seller. A common practice for smaller e-commerce sellers is to highlight their best sellers. This lets you know which products your customers want, and then it gives you ideas on what other products you should be stocking.
3. Understanding Throughput
Understanding the flow of your e-commerce operation helps keep everything running smoothly. An inventory management system can help you know how many products you’re receiving, how many are in transit, and the rate at which they’re moving through your warehouse. Using this information, you can adjust your business processes to meet your needs.
4. Seeing the Order Count
The order count is what’s presented on your accounting system. It’s also an important number for business owners to know. Knowing the order count helps you track your performance and understand what items are selling well. It can also help you determine if your product is selling well and whether it’s worth stocking.
5. Seeing an On-Hand Inventory On the Accounting System
Most inventory management systems let you see a balance sheet of your products that are in the warehouse. This helps you know how much product is in stock and going into inventory. It shows you how many products are on hand versus what’s sold, which is useful for understanding how much volume to produce to meet demand. It also lets you compare your inventory balances to your accounts payable, which shows you how much you owe to your suppliers.
Role of SKUs in Boosting Customer Satisfaction
1. Quicker Delivery
When you sell a product, and your customer can see it’s shipping soon, that customer is more likely to make another order, return for another site visit, or give you a positive word-of-mouth review. It also makes the customer feel like they’re getting what they paid for, which boosts their satisfaction as well as your business.
2. Handling Returns
When a customer returns a product, it goes into inventory. This makes it easier to process the return and helps you avoid late fees for lost merchandise. It also lets you verify the condition of the returned product before re-stocking it.
3. Customer Hassle Reduction
The less your customer has to do with their order, the better. Specifically, shipping and returns need to be as simple as possible. An easy-to-use interface or an easy ordering process can lead to happier customers.
4. Faster Shipping
When you’re ordering from a smaller e-commerce seller, there’s a good chance you’re not going to get free shipping. Most options you’ll see will be between standard shipping and expedited shipping. If you’re an international customer, there’s also the option of round-trip shipping.
Understanding your inventory and using SKUs to manage your inventory is an important step in keeping your e-commerce business running smoothly and keeping it running at peak performance. This can make a dramatic difference for small e-commerce companies and help them stay competitive.