SKUs vs. UPCs: What’s the Difference?

If you’ve been researching inventory management options, you might have noticed that many resources use the terms SKU and UPC interchangeably to refer to product identifiers. But while you can use either option to track your products, UPC codes and SKU numbers are not actually the same.

To choose the best option for your inventory management system, it’s important to understand how SKUs and UPCs are different. Fortunately, we’ve broken it all down for you.

Short answer: no, SKUs and UPCs are not the same. But they are very similar.

SKU (pronounced skew) is short for stock keeping unit. It’s an alphanumeric serial number that’s unique to your business—and it can be as long or as short as you want.

UPC on the other hand, is short for universal product code. It’s a 12-digit numeric serial number that stays the same for every company handling the product.

In addition, you can create and use as many SKUs as you want for free. On the other hand, for a UPC to be considered valid, it must be licensed through the GS1 (Global Standards One)—an organization responsible for maintaining business communication standards across the globe.

Finally, SKUs can be assigned to just about any asset within your business, including billable hours. UPCs can only be assigned to physical products.

With all that in mind, let’s dive into the details of what SKUs and UPCs are, how they’re used, and how they’re created.

SKU numbers are created by your business to track both your products and intangible assets internally (within your own company). They may include letters, numbers, or both.

And though it may seem like common sense, no two items should have the same SKU—otherwise, you wouldn’t be able to distinguish your products from each other in your inventory management system.

Some companies are able to work with their manufacturers to print their own SKU numbers or SKU barcodes directly on their product packaging. But if that isn’t an option for your business, you can definitely create SKU barcodes for your items.

Creating barcodes is relatively simple, but it may be time-consuming. Since the barcodes printed on the product packaging are usually UPCs instead of SKUs, you’ll have to add extra barcode stickers or store tags to your merchandise and shelves if you want barcodes that are uniquely for your SKUs. That’s assuming, of course, that you’re unable to work with the manufacturer to print your SKU barcode alongside the UPC on the product packaging itself.

Alternatively, you can simply use the UPC barcode for scanning purposes but set up your barcode scanning system to translate the UPC into your SKU. That way, any entries in your inventory or POS systems are tracked by SKU rather than UPC—without the extra hassle of adding extra barcode stickers to each product.

Because there’s no required length for a SKU, many retailers use SKUs to simplify their inventory tracking. Just imagine trying to find item BT8721 in your warehouse versus item 966192087215. Shorter, alphanumeric codes are just easier to sort, organize, and manually enter into your system.

Since SKUs can also contain product details, many businesses use them for sales purposes. In our shoe store example, a sales clerk could easily check stock for a customer by scanning the product SKU on the display pair. That saves your employee time (since they don’t have to walk to the back room and search for the shoe), and it allows the employee to direct the customer to similar products if the shoe is out of stock.

Many online retailers also use SKU numbers to recommend related products to shoppers—that’s how Amazon is able to deliver targeted ads based on the items you’ve recently looked at.

And because SKUs are unique identifiers used solely within your company, shoppers can’t search for your SKU online to find the same product from other retailers. This prevents your customers from finding identical products at a competitor’s store, helping you retain more business.

A UPC is a 12-digit product code that follows your product wherever it goes. So if you’re a wholesaler or manufacturer who sells your product to direct-to-consumer retailers, your product’s UPC number will stay the same wherever it’s sold. This allows consumers to track which retailers are selling the same product.

UPCs are unique for every product in the world—no two products can have the same UPC. Consequently, UPCs are regulated and administered by an international group called the GS1.

The responsibility for assigning a UPC falls to whatever company owns the intellectual rights to the product—in other words, the company that designed the product. If that’s your business, you’ll need to fill out an online application for a GS1 company prefix. Your GS1 prefix is a six- to nine-digit number that makes up the first chunk of all your company’s UPCs.

From there, you have to sign up for a prefix capacity plan. These plans can get you anywhere from 10 to 100,000 licensed UPCs using your company prefix.

It’s important to sign up for the right plan for your business right from the get-go. The GS1 doesn’t allow you to “upgrade” to a higher capacity plan once you’ve reached your UPC limit. Instead, you have to apply for a new company prefix and pay for a separate plan for your new items. That’s a massive headache, since you’ll have to deal with inconsistent UPCs across your system.

The next two to five digits of the UPC, though, is at the discretion of the UPC owner. Many companies opt to include their internal item number as part of their UPC, though that’s certainly not required. Manufacturers that hold the intellectual rights to an item may opt to use the item’s part number.

Finally, the last digit of your UPC is a check digit. This digit is calculated using all the other digits in the UPC, and it acts as a redundancy check—ensuring that no UPC is the same.

Not only can UPCs be barcodes, it’s practically a requirement to print your UPC barcode on your product packaging.

UPCs are used to identify and track products across multiple retailers. So if you’re shipping your product to Amazon or another retailer, they will use the product’s UPC to verify that you’ve shipped the correct items in the correct quantity.

Why? Since UPCs are *ahem* universal, every company can use them—unlike SKUs, which vary from business to business. If you don’t provide the UPC barcode, your clients’ inventory systems won’t be able to recognize the products you’re shipping.

So while there’s no official law saying you have to print a UPC symbol on your product, not printing a UPC barcode kind of defeats the purpose of having a UPC in the first place.

UPC codes always start with the company prefix of the business that designed the product. This allows your business to essentially claim ownership of your products. It also allows consumers to trace the products they buy back to their root source (which can actually be a lot of fun if you’re into it).

UPC codes are also great for inventory tracking. While the longer, all-numeric code may be harder to manage than shorter SKUs, the GS1’s strict guidelines on UPC structure ensure that you don’t get duplicate UPCs within your inventory.

And since UPCs follow your product after you’ve sold it, they make it easy to track your products through every phase of the supply chain and across multiple retailers after they leave your warehouse.

The GS1 is an international organization, as well, so the UPC is an internationally recognized product code. This is essential for businesses looking to sell their products internationally, as many countries require a compliant product code for every item sold.

In general, we think SKUs are best for direct-to-consumer retailers. SKUs prevent customers from shopping with competitors—so they’re better for business if you’re purchasing your products from a wholesaler.

If you’re the sole retailer and owner of your products (or your inventory is only for internal use within your company), a UPC may simply be unnecessary since you aren’t selling your items to other businesses. In that case, you can avoid the expense of licensing UPCs for your inventory and simply use an internal SKU—though you do run the risk of an unscrupulous third-party seller licensing your products under their own company prefix.

SKUs can also be helpful if your company sells hundreds or thousands of items since shorter, alphanumeric SKUs make it easier to find and track specific products.

UPCs, on the other hand, are practically mandatory for wholesalers. UPCs are best for barcode scanning and product tracking across multiple businesses. Plus, Amazon and some other marketplaces require you to have a UPC to sell products on their platform.

Likewise, UPCs are your best bet if you’re selling your product internationally. UPCs are recognized worldwide, so you’ll need them to sell in some countries where regulated product codes are required.

We also recommend you purchase and license UPCs for any product you’re selling wholesale that originates from your company. This allows consumers and other businesses to identify your company as the origin of your products, and it ensures that no other entity can claim ownership of your product. Removing the UPC from product packaging can even be classified as trademark infringement.

Keep in mind, though, that our recommendations are very general, and the right solution for your company will depend heavily on your business’s needs and priorities. Many retailers, for instance, find that using UPCs is simpler since they don’t have to generate all-new SKUs for each item on their shelves. And many wholesalers use SKUs to simplify their internal inventory tracking.

Whether you’re just starting your inventory management system or you’re trying to implement barcode scanners within your business, it’s important to use a uniform system of serial numbers to track your items. UPCs and SKUs are both valid types of product codes, but each has its own benefits.

Generally speaking, we think retailers should use SKUs as their primary form of product tracking, while wholesalers should use UPCs to track their items across multiple businesses. However, the right approach will vary based on your business’s needs.

Hopefully, with the information we’ve provided about SKUs and UPCs, you have the information you need to craft a tailored approach that suits your company.

SKUs and UPCs get even easier to use when paired with a scanning system—but barcode scanning isn’t your only option. Check out our guide to barcodes, RFID tags, and QR codes to find the best scanning system for your business.

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.