As I previously threatened, here’s part four of the SKU/UPC series. Catch up with parts one, two, and three as needed. This entry is to let you know there may be a crucial problem that affects small companies who buy a few or single UPC codes.
Few people proactively arrange to buy UPC codes. Entrepreneurs usually get them in response to a buyer’s request that they have them for a particular item. The designer then searches for “UPC code” and a bewildering array of options such as “buy a bar code” and “low price bar code” are at the top of the page in the sponsored search results. If you only need one and that’s all you’ll ever need, then conduct your transaction and go on about your merry way. Everybody else though may need to think twice about choosing the low cost option.
The low cost solution is provided by bar code resellers. They will sell you a UPC code from their inventory of numbers for $35 or so. When compared to having to buy a membership for $500 for 100 bar codes, plus an annual $150 maintenance fee, $35 can seem like a bargain. However, there can be a number of problems with buying bar codes from a reseller. These can include:
- Retail requirements
- Reseller integrity
- How many bar codes do you really need?
- Cost: maybe higher than you think
Reseller requirements
Most major retailers will require you to have your own GS1 (UPC) account. As I explained before, your block of UPC codes will be embedded with your business ID code (GTIN). If you buy from a reseller, the bar code is embedded with either the seller’s code or the code of another party they bought the codes from. Who can say which company is assigned to that bar code block -unless you look it up beforehand?
Reseller integrity
There’s been so many problems with resold bar codes that Wal-mart is far from being the only stickler. Other than issues of fraud, how do you know the number hasn’t been used before? If it has been used before but not recently, how long has it been fallow? It’s not that you can’t reuse bar codes however it is you acquire them but GS1 guidelines suggest a bar code is fallow for a period of four years before you reuse it. Another matter to consider is whether the maintenance fee for the codes has been paid annually as is required. If not, they may no longer be valid.
How many bar codes do you really need?
It is common for a business owner to underestimate the number of bar codes they need to buy and for two reasons. First they don’t understand how to issue SKUs, what amounts to the foundation of a UPC code. It is entirely possible to need 10, 15 or more UPC codes for one style. You need a separate UPC for each size, of each colorway of a given style. For example, if you have ten styles in three colors and five sizes, you’ll need 150 bar codes.
Second, owing to suggested limitations on recycling bar codes of styles you’re no longer selling -this being a seasonal business and your SKUs change according to season- you may need what amounts to a four year supply. That doesn’t mean you need to buy a four year supply at the outset but be aware that you may need to buy more as you go along. The cost for additional codes is comparatively minimal but as your sales increase, you may get bumped up into another category and owe the $750 fee as opposed to the under 1 million dollar sales fee of $500.
Cost
Unless you’re certain you will only need a few numbers and your buyers are amenable, buying bar codes from a reseller may not represent the value you’d hoped for. Buying the aforementioned 150 bar codes at $35 each, could end up costing about $5,000 (there are discounts). This is much costlier than the $500-$750 it would cost for you to create your own account.
I know it’s frustrating, every time you turn around, something costs money. It’s amazing that so many people think owning a business is a license to print money when all you really get is what amounts to crumbs. Take heart, the crumbs get a little larger as you grow.
I hope your last comment is true! LOL..
Thanks for this post. It’s very confusing to me, but I don’t need these. I just need to remember your posts are here if I ever do need them.
Marguerite
Kathleen, if I were a newbie DE I would feel like running and hiding under the bed. There’s just so much to absorb. Thank you for the education, even if I will never need to use it. I agree with Marguerite, it’s here should it be needed. Thanks
Thanks Kathleen for this information. It is very useful for me to know as I might just have to get my own account for my own bar codes.
One question though, what is the preferred time to apply for the GS1 account? Around production time before you ship to retailers (after they’ve ordered from you)? Or wait till you have orders from retailer? Or while you are still new and undergoing product development?
Thanks for the informative articles.
Jimmy
Thank you for this info! I am a wishful thinking entrepreneur at this point but I can already understand that this info is invaluable and an aspect that hadn’t crossed my mind! This is great, thanks again.
This is what I would do, your mileage may vary. Right out of the box, you’ll mostly be selling to independents so if you follow Miracle’s guidelines on the Importance of Product Identification, you’ll be okay. As I went along, I’d read up on barcode implementation. The entries here are good for the basics but you’ll also need to look into software, printers, bar code readers and preferred retailer requirements. EDI is another specter (see Selling to department stores) rearing its ugly head. I (theoretically) wouldn’t buy barcodes or the means to implement them unless a buyer expressed interest in carrying my line. I say theoretically because I’m a systems person. I love stuff like this. I would be likely to implement some kind of system if I had a lot of stuff (inputs/finished product) going in and out the door regardless of whether my buyers requested it or not. The proper context is to know I already have a bar code driven software system just to organize my books.
Thanks Kathleen. Looks like I will be buying bar codes soon.
I just bought bar codes this spring for the first time. (we manufacture several lines but the one we needed the codes for was our ultra fast-dry sport & travel towels…we have 4 sizes and about 15 colors. However, we determined that we would probably only need about 100 to start because although we will be retailing them in various stores, it made sense to limit the colors we offered. This is because should (oh no!) they be very successful overnight, it would be easier to plan production in only a few colors. We continue to offer the wider range of color on our own website, but we don’t have to barcode what we sell over the internet.
However, I dream up new things daily, and the 100 barcodes will not be enough. It boggles my mind that I thought I could never use that many, and now I need more. Success comes with a lot of details, and when Kathleen says fast growth can kill you easier than low sales, she wasn’t kidding… even if you think you don’t need this stuff yet…get your education now, so you can easily kick into gear when you need to.