Introduction
Retailers, whether they have physical stores or sell online, are always looking for new ways to stand out, grab a bigger market share, and win the hearts of their customers. To do this, they’re using data, especially detailed pricing data called SKU-level pricing data.
SKU stands for Stock Keeping Unit, which is the smallest and most granular inventory unit in the retail world. Each product, version, and color has its own unique SKU. SKU-level pricing data seems like a bunch of numbers, but it has the power to change the retail sector. It goes beyond the usual pricing strategies and opens up new possibilities for any retailer to become a strong competitor in the market.
In this blog on SKU-level data, we will take a closer look at how it helps retailers understand what is happening in the market and become experts at setting their prices just right.
What Is SKU-Level Pricing Data?
SKU, “Stock Keeping Unit,’’ is a unique code that is assigned to each product retailers sell.
This code helps stores see exactly how much each product costs, making it simpler to keep track of prices. Having this detailed pricing data for each SKU is really important for stores. It helps them decide on prices, determine discounts, and understand how the market changes. By looking at this data, stores can improve their prices, stay competitive, and meet customers’ wants and needs.
It’s important to remember that SKU-level pricing data is unique to a business and can be changed to fit the needs of both vendors and customers. Simply put, they help retailers keep track of goods from where they come from to where they are sold. Some of the most important things to know about SKUs are
- Vendors can use a stock-keeping unit (SKU) to keep track of a product’s stock based on its essential characteristics.
- SKUs affect how products are sorted, which significantly impacts how customers choose what to buy at the category level, brand level, store level, store level frequency, and more.
- SKUs can also help organize, coordinate, and compromise many steps in the supply chain.
Now that we’ve discussed what SKU is and how it generally works, let’s learn more about it.
The Significance of Pricing In Retailers
Pricing is the most important aspect for retailers, influencing both the success and sustainability of their businesses. Here are the reasons why price matters for retailers:
- Profit Maximization: Pricing is a big deal because it helps stores generate revenue. Retailers must choose prices that cover their costs and leave some extra for profit. When they do this right, it can boost their earnings a lot.
- Competitive Advantages: In a crowded market, how much something costs can set a store apart from the rest. A store offering reasonable prices can attract more customers and help you overpower the competitors.
- Customer Attraction and Retention: Pricing directly influences consumers buying decisions. Attractive prices can draw customers into service stores and encourage them to purchase online.
- Inventory Management: Prices also help stores manage their inventory. Sometimes, they lower prices to get rid of extra stuff, promote things that are not selling well, or make the most of seasons when people shop more.
- Brand Image: Price can convey a brand’s image and positioning. Luxury retailers, for instance, charge premium prices to maintain an exclusive image, while discount stores focus on budget-friendly pricing to appeal to cost-conscious shoppers.
SKU & UPC – What Sets Them Apart?
SKU and UPC are essential identifiers used in retail and inventory management, but they serve distinct purposes and have different characteristics. Let’s delve into the details of each to understand how they differ:
1. SKU (Stock Keeping Units)
SKU is an internal code retailers and businesses use to track their inventory. A unique alphanumeric or numeric code is assigned to each product in their catalog. Here is what distinguishes SKU:
- Uniqueness: SKUs are unique to the specific retailer or business using them. Each organization can create its own SKU system, ensuring that no two products share the same SKU.
- Flexibility: SKUs can be highly customizable. Retailers often design their SKU systems to include product category, size, color, and any other relevant details. This makes it easy to identify and manage products within their inventory.
- Ease of Use: SKUs are typically designed to be user-friendly for internal purposes. They’re often shorter and easier to remember than UPCs, making them more convenient for inventory management and order processing.
- Not Standardized: SKUs need to be standardized across the industry. Each business can create its own system, so there is no universal SKU format.
2. UPC (Universal Product Code)
On the other hand, UPC is a standardized barcode system used for product identification and tracking in retail. It is regulated by the Global Standards Organization (GS1) and consists of a 12 or 13-digit numeric code. Here is what sets UPC apart: Here is what sets UPC apart:
- Universality: UPCs are universal and not specific to any particular retailer. They are used globally, and each UPC corresponds to a unique product, regardless of where it is sold.
- Standardization: The format and structure of UPCs are standardized, making them consistent and easily recognizable by barcode scanners and point-of-sale systems. This standardization ensures accuracy and efficiency in retail operations.
- Information Encoding: UPCs typically do not contain detailed product information like size, color, or style. They are designed to identify a product at a high level, and additional details are often managed separately in a retailer’s internal systems.
- Retail Checkout: UPCs are primarily used at the point of sale (cash register) to scan and ring up products quickly and accurately. They help automate the pricing and inventory tracking processes.
So, the main difference between SKU and UPC is their purpose and level of standardization. SKUs are internal, customizable codes retailers use for inventory management, while UPCs are universal, standardized barcodes employed for product identification and efficient retail checkout. While SKUs provide more flexibility and detailed information for in-house use, UPCs ensure consistency and accuracy in retail transactions across different stores and locations.
What Makes SKUs Crucial?
SKU-level pricing data is important because it helps a business keep track of its inventory correctly, avoid having “phantom inventory,” and figure out when to order more products so they never run out. As it is clear, keeping track of stock is an important part of stores, warehouse storage rates, and delivery centers. It’s important to remember that the ability to look at SKU-level pricing data can make a huge difference in how much money a business makes.
After comparing the features of similar things, customers often make faster decisions about what to buy. When a customer gets lipstick, for example, eCommerce businesses can show similar items that other customers have bought based on SKU-level pricing data. Cross-selling opportunities grow by leaps and bounds, which helps the company make more money.
What Are the Benefits of SKU-Level Pricing Data for Retailers
SKU level Data refers to the specific pricing information associated with individual Stock Keeping Units (SKUs) or retailers’ products. Analyzing and using SKU based pricing can provide several benefits for retailers. Let’s explore these benefits in detail, supported by statistics where applicable:
1. Pricing Strategy Optimization
SKU based pricing empowers retailers to fine-tune their pricing strategies, resulting in improved profitability. Retailers can use historical sales data and market trends to adjust prices dynamically. According to a McKinsey study, dynamic pricing can increase retailer margins by 10% or more. By optimizing products, retailers can attract price-sensitive customers while maximizing revenue from less price-sensitive segments.
For instance, if a retailer notices that a specific SKU has higher sales during weekends, they can raise prices during that period to capture more revenue. On the other hand, they can lower weekday prices to attract cost-conscious shoppers.
2. Competitive Pricing
Keeping prices competitive is important if you want to attract and retain customers. One way to do this is by SKU pricing analysis. It can help retailers know what their competitors are charging. In a survey by Econsultancy, 72% of businesses use this kind of competitive pricing information to adjust their pricing strategies.
Retailers can use SKU-level data and monitor and respond to competitor pricing in real time. By tracking the prices of specific SKUs offered by competitors, retailers can adjust their prices to remain competitive. This ensures that you do not lose customers to competitors due to pricing differences.
3. Inventory Management
Detailed price data for each product (SKU) can help stores better manage their goods. When they look at how much things cost and how much they sell, they can figure out which products are not selling well. Then, they can change the price or how they advertise those products. According to the National Retail Federation, better-managing products can make stores earn 50% more money.
Retailers can implement strategies such as markdowns or bundle promotions for SKUs with excess inventory. Conversely, for high-demand SKUs, they can adjust prices to maximize revenue. This data-driven approach minimizes stockouts and overstock situations, reducing carrying costs and improving cash flow.
4. Customer Experience
Offering clear and steady prices for each product improves customers’ feelings about shopping with you. People like it when prices are fair and don’t change suddenly. This can make them more likely to stick with your store and be happy with their purchases. In a survey by PwC, 73% of shoppers said that knowing the price and deals is a big deal.
When stores use SKU-level pricing info to keep things fair and consistent, they earn trust from shoppers. This trust can result in repeat business and positive word-of-mouth referrals. It is also an effective way to minimize customer complaints about pricing discrepancies.
Conclusion
In conclusion, SKU-level pricing data is an incredible tool for retailers that can provide a competitive edge in today’s dynamic market. It helps them set the right prices, compete with others, manage their stuff better, and make customers happy.
Pricing isn’t just about putting numbers on things; it is about knowing what people want, making them happy, and making good money. SKU level data gives retailers the smarts and flexibility to make all this happen.
SKU-level pricing data becomes super important as things keep changing in how people shop and what they like. It’s not just a bunch of numbers; it’s the best tool that helps retailers succeed and stay ahead of the competition. With SKU-level pricing data, retailers can do great in the ever-changing world of stores.
