Whether you're a small business that only uses a cash register for transactions or a larger retailer that uses multiple systems to run your operations, managing different systems can be inefficient and lead to loss of sales.
This is where point of sale (POS) systems can help. Our buyer's guide provides details on what a point of sale systems is, its common features, its benefits and necessary steps on how to purchase a solution.
Total mobile payment transactions will grow by 23.8% to $161 billion by 2021.
Source: eMarketer
The global POS system market will increase by a CAGR of 14.27% to $35 billion in 2025.
Source: MarketWatch
The POS cloud adoption rate for the restaurant industry is expected to reach 15% by the end of 2021.
Source: ReformingRetail
Point of Sale Systems Buyer's Guide
What are Point of Sale (POS) Systems?
"Point of sale" refers to a payment made from a customer to the seller in exchange for a product or service. A POS system is a central solution that combines software and hardware components in order to help a retailer or other service-based business manage its operations. In a POS, business owners can process payments, track inventory, market to customers and manage their employees. Popular POS system vendors include Square, Lightspeed, Vend, ShopKeep and Clover.
Types of POS Systems
Here are a few main types of POS systems:
Software
POS software components can be deployed on-premise (on a business' servers) or in the cloud (also known as Software-as-a-Service).
Hardware
Some vendors do offer bundles that include specific hardware, but others don't, in which case you'll likely have to purchase hardware at an additional cost. We've detailed the types of hardware in our POS Hardware Components below.
Mobile POS
Mobile POS systems allow retailers to capture credit card payments, manage inventory and access real-time reports.
Self-serve kiosks
Self-service kiosks is becoming common in big-box retailers and smaller coffee shops and cafes. Customers can look up prices and availability and scan and pay for the products themselves.
Target Market
POS systems are typically used in industries such as retail, hospitality, restaurants and consumer services (e.g., nail salons, auto mechanics). Organizations typically purchase a POS system with a dedicated focus but there are solutions that are intended for businesses that provide multiple services.
Single service
Most POS systems are tailored to the retail industry. However, vendors offer a system that's dedicated to restaurants that include different features (e.g., online ordering, ability to split checks).
Multiservice
Multiservice businesses can use POS systems to access all relevant information in one database. An example of a multiservice business is a sports stadium that offers food, souvenirs, etc., in addition to selling tickets to games.
POS Hardware Components
We've listed the common hardware components below.
Tablet/touchscreen monitors
In today's age, touchscreen monitors and tablets are replacing cash registers and older POS terminals. Not only do employees use them to ring up customers, they can check product inventory or clock in and out. Some tablets also allow employees to swipe a customer's credit card from the sales floor rather than behind the counter.
Credit/debit card reader
Most credit/debit card readers processes magnetic swipe cards (i.e., customers can simply swipe their cards). However, a 2015 regulation requires businesses to provide an EMV-compliant chip reader to consumers to reduce fraud and improve security. The customer inserts the card into the slot at the bottom. Then they are asked to authorize a specific amount or add in a PIN (if it's a debit card). Afterwards, the reader indicates whether the transaction is approved or rejected, and the customer is asked to remove their card.
Cash drawer
The cash drawer is still vital even though consumers use credit or debit cards for purchases. It stores not only cash and change, but checks (although rare), coupons and vouchers.
Barcode scanner
Barcode scanner is typically used in retailers and scans the price of the product. That data is then automatically added to the total price and stock information is adjusted in the inventory. The scanner can also be used for accepting mobile payments.
Receipt printer
As the name indicates, this equipment prints the receipt. However, there are businesses that opt to text or email receipts to customers in order to save paper.
Common POS Software Features
POS software offers many features to help businesses increase efficiency. Depending on the vendor, some of the features may be standard while others may be optional. Here are some common POS software features.
Inventory management
The inventory management feature lets companies easily keep track of the items that are in stock. Once an order is processed or a product is scanned, the inventory is automatically updated so employees won't need to handle this manually. The feature also automatically sends alerts if stock is running low and, in some cases, orders new items. Businesses can get high-level visibility of what's in stock and can sort inventory by SKU or transaction history.
Customer relationship management (CRM)
Customer relationship management refers to the process of storing data and interactions between a business and its customers. It can help retailers and other businesses provide better marketing services (e.g., promotions, customer loyalty programs). And because a customer's transaction history is stored in the data, they can create targeted marketing campaigns. The feature also helps employees provide better customer service. For instance, if a customer needs to return an item but forgot a receipt, a cashier can quickly look up the transaction to verify the item was purchased.
Employee management
POS systems can help businesses better manage their staff by allowing managers to create schedules and track employees' attendance. A restaurant-specific POS system can also track tips for better transparency and allocation. If this feature is included, businesses usually don't need to purchase a separate dedicated time clock software, as employees can record and track their time.
Multistore management
With the multistore management feature, businesses can track inventory, orders, employees and other information across multiple stores or locations. For example, if a business wants to move a product from one store to another, the solution automatically updates the inventory rather than requiring manual adjustment for each store. Businesses can also analyze data and trends for each location. Finally, the feature supports online orders that can be picked up in a store rather than shipped.
Reporting and analytics
Reporting and analytical tools let businesses manage performance, generate revenue and spot new trends and opportunities. Users can create dashboards and reports on various metrics, such as sales quotas, inventory levels and length of time in resolving customer issues. Most solutions include prebuilt reporting templates or customizable templates.
Integration to third-party software
POS systems can integrate to third-party software, such as accounting systems, e-commerce systems, payment processors or email marketing systems.
Top Benefits of POS Systems
Using a POS system comes with numerous benefits, including:
Improved customer service and marketing opportunities
POS software components can be deployed on-premise (on a business' servers) or in the cloud (also known as Software-as-a-Service).
Better staff management
Because POS systems include time-tracking and other employee management features, businesses can easily oversee their employees. The system has a code that's unique to each employee regardless of what register they use, so managers can track their time and sales performance to gauge productivity and eliminate the threat of theft.
Enhanced mobility
Some vendors do offer bundles that include specific hardware, but others don't, in which case you'll likely have to purchase hardware at an additional cost. We've detailed the types of hardware in our POS Hardware Components below.
Quick access to reports
Self-service kiosks is becoming common in big-box retailers and smaller coffee shops and cafes. Customers can look up prices and availability and scan and pay for the products themselves.
Reduced reliance on multiple systems
Businesses that only use cash registers would need to purchase additional systems for their needs. A POS system includes multiple features and hardware, so businesses save time and money in using one dedicated solution.
More accuracy
Since POS systems automatically update information, employees won’t need to manually enter data, which deters errors and improves accuracy. For example, if a product goes on sale, the POS system automatically calculates the discounted price and uses built-in checks to ensure there are no discrepancies.
Flexible payment options supported
Businesses need to be flexible in giving customers multiple options to pay rather than relying on one specific method. Most POS systems support credit and debit transactions, and more vendors are now offering the ability to accept payments via mobile apps. Even though credit or debit is a popular payment method, many customers prefer to pay cash or, in rare cases, by check, so most solutions offer this option.
How to Choose a POS System
There are many POS systems out there that vary in features and pricing. It's key to research all of your options before purchasing a software. We've listed four important steps below.
Knowing your company's needs
Before researching vendors, you must consider your needs and requirements. What is your business type? Do you manage multiple locations? What hardware do you need? What hardware do you have that must be compatible with the new POS?
Creating a Shortlist
After you've outlined your objectives for a POS system, create a shortlist of vendors that best fit your needs. We recommend listing out the must-have features as well as the nice-to-have ones to help determine the type of solution you're looking for.
In addition to features, you'll need to consider the vendor's deployment options (e.g., on-premise, cloud), implementation processes and customer support.
Contacting vendors
After you've outlined your objectives for a POS system, create a shortlist of vendors that best fit your needs. We recommend listing out the must-have features as well as the nice-to-have ones to help determine the type of solution you're looking for.
And be sure to compare different price quotes you receive. We explain more on pricing in a separate section below.
Conducting due diligence
When you've selected your top two or three vendors, ask for references from their current or previous clients. While vendors tend to give you the clients with the most glowing recommendations or experiences, ask to speak to clients that are in the same industry or are the same size as your company.
It's important to see not just the positives of the solution or vendor but any issues clients have experienced as well.
POS Pricing
One of the most important factors in selecting a POS system is pricing. Prices can vary depending on the type of system, payment processing fees, number of users and customization needed. Also, note that pricing can be based on the type of business (e.g., retailers, restaurants) as there are different features that are relevant to restaurants versus retail (e.g., a menu and floorplan).
Here are a few questions you should consider regarding pricing.
- What additional hardware components do we need to purchase?
- How many features do we really need?
- How many users will require access the system?
- How much does the vendor charge for processing each credit card transaction?
Software
In the past, POS system vendors used two popular pricing models: perpetual licensing and subscription hosting plans. However, more vendors are now opting to host the software in the cloud, where companies only need to pay a monthly (or annual) subscription cost. An example of a vendor with subscription hosting plans is Lightspeed's retail POS, which starts at $99 per month. That price covers one register, access for up to five employees, omnichannel capabilities, personalized onboarding, 24/7 support and basic reporting features.
Hardware
Although some vendors offer a software/hardware bundle at a single price, others may not. So, you'll want to consider how much the additional hardware will cost. For instance, Hippos offers a pricing plan for retailers that cost $29 per month and includes unlimited users, inventory management, appointment bookings and email receipts. It sells its hardware separately (e.g., cash drawer or thermal receipt printer).
Fees
Another cost to consider is credit card processing fees, which are fees the business pays in order to accept credit cards from consumers. The three types of fees are transaction fees (for processing each credit card transaction), flat fees (usually a monthly service fee with a payment processor) and incidental fees (for any issues such as chargebacks or nonsufficient funds). There are POS systems vendors that include payment processing fees as part of their plans (e.g., Lightspeed's processing fee is 2.6% of the payment received plus 10 cents per transaction). However, others don't, so companies need to think about that as well.
Challenges of POS Systems
While a POS system has many benefits, it comes with challenges, including:
Data security
Data security is a real concern, especially with credit card transactions. There have been cases where major retailers have identified hacking attempts in their systems and have advised customers to monitor their credit reports. Therefore, it's important to ensure that the POS system has strong security and authentication features.
Not using an EMV-compliant terminal
As mentioned, businesses that don't use EMV-compliant terminals (chip readers) face financial penalties for any credit card fraud that results from using only magnetic stripe terminals. Businesses may feel EMV-compliant terminals are expensive to purchase, but employing a chip reader is essential to stay compliant and guarantee higher security for both businesses and consumers than swiped cards.
Adoption issues
Businesses may encounter staff members that are resistant to using a POS system, especially if they think the solution is hard to understand. Fortunately, most POS systems have easy-to-use features and a short learning curve so employees can adapt to it quickly. The key is to make sure the employees can get training on the new system.
Implementation issues
Cloud-based POS systems tend to have shorter implementation times than on-premise solutions. However, expensive issues can still come up that delay the go-live date, such as unclear business goals or incompatibility with hardware systems. It's important to tell the vendor your budget, goals and requirements for using the software, as well as get a detailed timeline of the implementation process and what happens at each stage.
Connection Problems
POS systems include wireless connectivity, so if the power's out and the store doesn't have a generator, profit loss can result. Therefore, it's crucial to ensure the POS system has offline functionality as well as consider deploying a backup plan in case of equipment failure.
Market Trends
Like other solutions, POS systems change and develop over time. We've listed a few new market trends below.
Artificial intelligence and predictive analytics will become prominent features.
In the last few years, artificial intelligence (AI) has become important in some business software, such as business intelligence. POS systems are no exception, as AI features help businesses gain valuable insights on their customers, create personalized marketing campaigns, provide better fraud detection and process payment faster. It's a growing trend, and 31% of businesses plan to invest in AI features within the next year, according to the Adobe Digital Trends report.
More businesses are migrating to cloud-based POS solutions.
Legacy POS systems were only deployed on premise. Now that many vendors offer cloud-based installation, more businesses are opting for it. With the cloud, businesses often see lower costs and don't have to worry about adding or maintaining software and server upgrades.
Mobile POS systems use will increase.
Most retailers still use a traditional POS system and add tablets or mobile functionality as supplements. However, dedicated mobile POS systems are expected to increase in popularity as businesses look for ways to provide a better customer experience. Also, more POS system vendors are offering mobile payment functionality, where the customer can pay directly from their smartphones (e.g., Google Pay, Apple Pay).
Use of self-service kiosks will rise.
Consumers are technologically savvy and want to be able to have product information at their fingertips. More retailers are providing in-store kiosks, so customers can look up the price of the product, its availability or even order the product to be shipped to their home. Coffeeshops and cafes (e.g., Panera Bread) are offering mobile kiosks that allow consumers to order their food without speaking to an employee, and big-box retailers (e.g., Lowes, Target) provide limited kiosks for self-service checkouts.
