Running an online store and exploring selling products in person? You’ll need a point-of-sale (POS) system to check out customers and accept payments.
But finding the right POS system for your business can be challenging. With a vast array of options, features, and reviews to compare, knowing which POS to choose can feel daunting.
That’s why we’ve prepared this comprehensive guide to POS systems. Read on to learn everything you need to know to choose the best point-of-sale solution for retail selling.
What is a point of sale?
A point of sale, or point of purchase, is the place in your retail shop where transactions are completed. Think of your store’s checkout counter—that’s your point of sale because it’s where you check out shoppers, take payments, and issue receipts.
What is a POS system?
A point-of-sale (POS) system is the software and hardware that helps your business make sales and accept payments from customers in person. It works just like a cash register, except that it lets you track sales, manage inventory, collect customer contact information, and much more. Modern POS systems also route funds to your bank account after each sale (no bank visit required).
How does a POS system work?
A POS system calculates the total price of a customer’s order, processes the payment, and updates inventory levels to reflect the sale. The typical POS workflow involves four steps, explained as follows:
- A customer chooses to buy your products
- Your POS system calculates the sum of all items
- The customer pays
- The point-of-sale transaction is settled
A customer chooses to buy your products
As consumers browse your store’s inventory, you can check stock levels and prices in the POS system. Once the consumer is ready to purchase, use the barcode scanner to add items to their cart. If you’re using Shopify POS, you can use the camera on your tablet or smartphone to scan product labels.
Your POS system calculates the sum of all items
Next, your POS system calculates the total cost of all items—including any sales tax—and then updates your inventory to reflect sales made. This is also where you can apply discounts or promo codes to build customer loyalty.
The customer pays
To pay for their purchase, customers will use their credit card, debit card, gift card, cash, or a digital wallet like Google Pay or Apple Pay. You can also choose to accommodate split payments—where you accept two or more payment types in a single transaction.
The point-of-sale transaction is settled
Once the payment goes through, the transaction is officially settled. At this point, you’ll issue a receipt by printing or emailing one to the customer. The receipt will serve as proof of the POS transaction or purchase.
Software components of a POS system
POS systems come in two forms:
- On-premise POS software
- Cloud-based POS software
On-premise POS software needs to be used at the physical location. An example of this would be terminals in stores. These systems are fixed and are typically found in traditional retail settings.
Cloud-based POS systems, on the other hand, offer more flexibility. You can use them with most POS hardware (printers, cash drawers, etc.) and install them on any smartphone or tablet. These systems usually are more affordable and convenient. These features make them an excellent choice for merchants looking to accept payments in-store, online, or even at pop-up shops.
Note: Shopify POS syncs with your Shopify admin and updates inventory and sales data automatically whenever you receive, sell, return, or exchange products in-store or online.
Hardware components of a POS system
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Smartphone or tablet. Smartphones and tablets are popular choices for mobile POS solutions. They allow store staff to process transactions, accept payments, and manage inventory on the go, reducing wait times for customers.
Barcode scanner. Barcode scanners read product details and assist in ringing up sales, checking prices, and managing inventory. Some POS systems let you use a tablet or smartphone camera instead of a dedicated scanner. - POS terminal. The device that runs your POS software is called the POS terminal. You can install mobile POS software on any tablet, smartphone, desktop, or laptop with an internet connection.
- Receipt printer. While not always necessary, receipt printers are useful for providing customers with printed receipts. It’s an option that some customers may prefer paper over emailed receipts.
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Cash drawer. Cash drawers are necessary if you accept cash payments. They provide a secure and organized place to store bills. Plus, you can easily track cash transactions and manage change efficiently.
Credit and debit card reader. This piece of hardware can read credit and debit cards through swipe, tap, or EMV chip methods. It’s important for payment processing to transfer funds from the customer’s bank to your account. - Label printer. Sometimes you need to print labels, such as when sending a product to a customer’s address. Having a label printer in your POS setup lets you create and print labels immediately.
- Shipping scale. For businesses that ship items, a shipping scale is necessary to determine shipping costs accurately based on the item’s weight.
Benefits of using a POS system
Today’s POS systems offer functions that go beyond administering transactions or purchases. With point-of-sale solutions like Shopify POS, you can:
Accept payments anywhere
A distinctive feature that separates modern POS systems from their traditional counterparts is mobile payment processing. Using this function, merchants can serve customers and take payments anywhere you have internet connectivity—whether it’s at a fair, inside your store, or somewhere in between.
Centralize your inventory management
Inventory management can be a complex beast when you use different methods to manage online and in-person sales. But point-of-sale systems like Shopify POS unify your sales channels and make it possible to run your entire business from one platform. Inventory levels are updated automatically for your ecommerce store and retail outlet as products are sold, received, exchanged, or returned in-store or online.
Create in-depth customer profiles
Modern POS systems also help you collect, manage, and analyze customer data. You can build profiles that store customers’ purchase history, lifetime value, notes, and contact information. See everything a customer has bought from you both online and in-store, and then suggest more relevant products to increase your average order value.
Improve in-store sales
The right POS features can increase store foot traffic and help you make more sales. For instance, Shopify POS lets merchants send follow-up emails to indecisive shoppers about the products they were interested in but didn’t buy. Sometimes, a reminder is all you need to convert shoppers into buyers.
Adapt to changing business needs
As your business grows, you need a POS system that scales with you. Ensure it supports apps to extend its features, like contactless payments, marketing, and bookkeeping. For example, Shopify merchants can access thousands of apps for various needs. These apps integrate with both Shopify POS and your website, allowing seamless management from one platform.
Launch new stores faster
Another great benefit of a mobile POS system is its ability to help you open new stores—be it a permanent shop, a temporary pop-up, or a kiosk at an event—with ease. With Shopify POS, setup is simple. Just add a new location, download the Shopify POS app on any smartphone or tablet, connect your card reader, and start selling.
What features are essential to a POS system?
When comparing POS systems, there are certain features you should look for, including:
Integrated payment processing
There are some drawbacks to using third-party payment processors. With hidden fees, locked contracts, and lengthy payout schedules, they make managing cash flow far more difficult than it needs to be.
But modern POS systems come integrated with PCI-compliant payment processing (no need for a PCI compliance checklist). Shopify POS, for instance, lets merchants accept all popular payment methods—from debit cards and credit cards to Samsung Pay and Google Pay—as well as track both online and in-store transactions from Shopify’s user-friendly back end.
Multichannel inventory management
Choose a POS system that helps you manage inventory across multiple channels, including your online store, multiple store locations, and warehouses. This will help you order enough stock to satisfy customer demand while avoiding overstocking (or tying too much capital with too much inventory).
Plus, smart inventory management will save you from manually tracking and reconciling stock each day to ensure the inventory availability on your online store matches the actual stock available in your stores and warehouses.
Mobile checkout
Let’s be honest: no one likes waiting in line to pay. And thankfully, modern POS systems combat this by bringing the checkout to customers. Mobile POS allows you to look up inventory, take payments, and process returns without leaving the customer’s side.
If you often find yourself dealing with more than one customer at a time, mobile POS solutions let you save the customer’s cart and retrieve it later. This enables you to switch from one interaction to the next without losing order details, which results in a smoother overall checkout process.
Staff management
As your retail business expands, hiring more staff becomes necessary. You’ll cater to more customers and offer additional services, making your operations more complex. Ensure your POS system supports team management as it grows. At the very least, it should include scheduling and bookkeeping features and provide insights into staff performance, such as daily sales and average transaction value.
Flexible order fulfillment options
Flexibility is one of the top things modern consumers look for when buying from retailers. Whether it’s in-store, online, or through social media platforms like TikTok—you need to build a buyer’s journey that puts customers in control of the purchase process.
Choosing a POS system that integrates well with your ecommerce platform makes the task easier. With Shopify POS, you can unify your offline and online sales channels and let people discover, shop, and receive purchases however is most convenient for them.
Customer relationship management
As a customer makes a purchase from your brand, a POS system records what they bought, when and where the transaction occurred, and the total value. However, it may not store the customer’s profile.
Ensure the POS system you’re considering can create customer profiles that store contact information and purchase history for both online and in-store transactions. Using this info, you can design targeted email and loyalty program campaigns that improve customer lifetime value and encourage repeat purchases.
Types of POS systems
1. Retail POS
Designed for brick-and-mortar stores, a retail POS system helps merchants manage inventory, orders, sales, customer relationships, and staff. Some POS systems, such as Shopify POS, also provide integrated reports and analytics for both in-store and online sales, allowing businesses to manage everything in one place.
2. Mobile POS (mPOS)
Mobile point-of-sale systems are typically cloud-based and can be used anywhere. Store owners can process transactions from a central checkout area or any location within the store. Often, retailers use tablets or smartphones with card readers to take payments on the go.
3. Cloud-based POS
These web-hosted POS solutions are accessible from any device with an internet connection, such as computers, smartphones, or tablets. Unlike on-premise POS systems, cloud POS doesn’t require a local server (data is stored on remote servers).
4. On-premise POS
Also known as legacy POS, these systems store data on a local server, typically a computer’s hard disk. On-premise POS functions like software installed on a computer. While once popular, many businesses now prefer mobile and cloud-based systems, due to their flexibility and ease of maintenance.
5. Multichannel POS
A multichannel POS system integrates various sales channels, including websites, third-party marketplaces, physical stores, pop-up shops, events, wholesale, and social media. This capability is increasingly important for businesses seeking to streamline operations across multiple platforms.
6. Tablet POS
Tablet-based POS systems run on Android tablets or iPads and can be used as mobile or stationary solutions. These systems can serve as the main POS or complement a central POS station, making them versatile for different retail environments.
7. Desktop POS
Typically used as on-premise solutions, desktop POS systems are docked at checkout stations. Though bulkier, they often are more powerful and reliable, depending on the hardware chosen.
8. POS apps
POS applications work with various hardware and compatible devices, enabling businesses to access data and manage operations. There are multiple POS apps available, each offering different features to suit business needs.
9. Open-source POS
Open-source POS software allows companies to customize their point-of-sale systems using the available source code. Businesses can develop these solutions internally or collaborate with external developers to tailor the system to their specific requirements.
How to choose the best POS system?
Whether you’re considering trying your hand at offline selling or replacing the current POS in your retail store, it’s critical to choose a POS system that supports your business needs.
Finding the right POS system requires a fair bit of research and assessment, but the return on your investment will be worth it. Start by considering your existing needs, but also think ahead to the future. Do you want to sell both in-store and online? Do you want to expand your retail footprint?
Ideally, a POS system should help you:
- Offer flexible purchase, payment, and delivery options
- Serve multiple customers effectively
- Make flexible returns and exchanges (e.g., buy online, return in-store)
- Sell everywhere your customers are
- Minimize payment processing fees
- Gain visibility into your inventory across all locations
- Access order histories, customer profiles, and loyalty programs
- Share information with your other business systems (e.g., CRM, email marketing software, etc.)
Get the best POS system for retail
Shopify POS comes with all these capabilities and more. With Shopify’s point-of-sale, you can manage your physical store and online store inventory in one place, and access hundreds of reports that unify your sales data. Plus, you get omnichannel features that let you sell everywhere your customers are. For businesses that want to delight, convert, and retain customers, Shopify POS is the best POS system.
Point-of-sale (POS) system FAQ
What does a POS system include?
A point-of-sale system typically comprises both hardware and software. The POS hardware includes devices like a credit card reader, barcode scanner, cash register, and receipt printer. Most POS systems also include software that works on a mobile device, like a tablet or a smartphone.
How much does a POS system cost?
The cost of a POS system depends on what features you want and how many stores you operate. If you own a small brick-and-mortar shop and want something to accept cash payments, you can use Shopify POS lite for free. For multiple store locations and advanced features like inventory adjustments, Shopify offers a Pro version of its POS system that costs $89 per month, per location.
What is a POS system example?
Shopify POS is a popular example of a POS system. Retailers can use Shopify POS to process financial transactions and maintain optimal stock levels in their brick-and-mortar outlets. You can even use Shopify’s point of sale to identify trends based on recent product performance or seasonality.