Is it Important to Code Products in an Online Shop? | Sales Layer

Is it Important to Code Products in an Online Shop?

Alma Muñoz·April 20, 2021

Table of Contents

What is product coding?

Product coding consists of associating a code made up of digits, letters or both to each product, in a differentiated and customised way.

These codes are used both to identify products at an international level and to easily locate catalogue and warehouse products, and to mark characteristics of the product itself (such as variant, category, product group, etc.).

Associating a code to each product is usually done in an automated way by means of systems prepared for this purpose. Doing it by hand would involve both errors of repetition and coding logic and a lot of time spent on creating each code one by one.

Why it is important to have a product coding system

When the use of a product code is understood, its usefulness is obvious for any participant in a supply chain, whether it is a manufacturer, distributor, retailer or brand with a direct sales model.

Product codes enable the daily tracking and maintenance of a company's or shop's inventory and catalogue, for both offline and online channels.

They are key pieces of information both to know what products are available in the catalogue offer and to track their stock levels in warehouses and sales channels. Without these codes, it would be much more common to lose track of products.

In addition, a product coding system also serves as a basis for analysing inventory performance, as codes make it easier to see which products are selling the most and the least, how much stock is on the shelves and for how long it’s been there.

The benefits of coding products for online shops and warehouses

They offer a simple organisational system: Identifying each product with a code increases traceability through systems and apps, and exchanges information between people and departments.
They save management time: It is much faster to generate automatic codes for each product. Thanks to them, customer service and logistics departments can also locate them more quickly, and add new products and shipments in less time, with no need for tedious manual records.
Inventory optimisation support: By enabling a more accurate analysis of how many products you have and what their movements have been in real time, it is easier to determine what sells best and allows you to make better business decisions.
They facilitate business intelligence: Product coding offers greater control over how many products you have in your catalogue, warehouses and different channels, and what their performance is in each one of them and in terms of profitability for your company.
They reduce the risk of logistical errors: The codes make product identifications more precise and, therefore, prevent misplacements in the warehouse, misunderstandings when sending orders to customers of an online shop, or when generating stock renewal requests to your wholesalers, distributors or manufacturers.

How to implement your product coding system

There are some universal value codes used by all manufacturers, but in reality the product coding system depends on the type of product, and you can also generate your own custom codes.

In all cases, a product code must meet some basic needs:

Be unique for each product.
Be easy to write and share (through a logic that must be respected by all codes, whether in an international system or internal to your company).
Associate identifying features (such as category or variant) to the product.
Include a control code.

To generate them, there are systems that automatically create codes for each product and new addition to your catalogue, such as an ERP or a WMS.

Types of product coding for catalogues and shops

As mentioned above, there are several types of product codes that can include different elements:

Numeric coding: codes that only include numbers.
Alphabetic coding: codes that only include letters of the Latin alphabet.
Alphanumeric coding: codes that combine numbers, letters and signs.

One of them is the barcode or EAN / EAN13. It is made up of thirteen numeric digits that identify the country of origin, manufacturer, product code and control number of each product. It is also known as GTIN or GTIN13 (Global Trade Identifier).

It is a mandatory identifier and is also useful for identifying goods in warehouses and physical shops using a laser scanner. Furthermore, it may also be necessary in an online shop that has its own warehouse and has to keep track of incoming and outgoing goods.

Another similar coding system that is currently in vogue is QR codes, which can be useful in virtual resources, such as social media posts, emails or digital catalogues, to take your customers to a specific product page in your online shop.

RFID tags are also increasingly used to identify products, but are useful in warehouses and physical shops, as they are stickers that are attached to each product.

Two other common types of product coding for online shops are:

The UPC code: another universal identifier, consisting of 12 numeric characters, which represents a product anywhere in the world.
The SKU code: this is an alphanumeric identifier that a shop generates in a customised way for its products and for internal tracking. In Spain it is also known as Warehouse Reference.