There are a few things a business can do without—and a retail POS system isn’t one of them. It’s almost impossible to operate a modern business without one.
Traditionally, POS was just a collection of hardware used to ring up sales, process simple transactions, and print receipts. Sometimes, the cashier entered the product and quantity manually.
Today, POS systems have evolved. They’re more than just business tools—they help you manage inventory, track sales, streamline customer interactions, and even get valuable business insights. In short, they’re the cornerstone of an integrated commerce strategy.
But searching for a POS system for your retail business can feel like unraveling a complex web of features, pricing structures, and other considerations.
That’s why we’ve compiled this guide to help you understand how POS systems work, the key features to look for, and how to choose and implement the right software for your retail store.
TL;DR
- A point-of-sale (POS) system is a combination of software and hardware used by businesses to facilitate in-store sales. Businesses use the system to accept payments from customers and monitor sales.
- Cloud-based POS systems store data on cloud servers and can be accessed remotely from any device with an internet connection. On the other hand, on-premise POS solutions store data locally on in-store servers and are limited to in-store use.
- Key features to look for in a POS system include sales processing, inventory management, customer relationship management (CRM), reporting, multi-location & omnichannel selling, and security & compliance.
What is a POS System?
A point-of-sale (POS) system combines the software and hardware merchants use to accept and process transactions. It’s the central hub for businesses to complete purchases, whether in-store or online.
The hardware includes devices such as card readers, cash registers, touchscreen displays, barcode scanners, and receipt printers. Some retailers may use a mobile device, such as an iPad or Android device, as their POS instead of a computer.
The software powers the POS system. The business can ring up orders, process sales, generate invoices, manage inventory, monitor buying trends, and collect marketing data.
Traditional POS systems were only designed to handle cash transactions and issue paper receipts. They lacked important capabilities like inventory management, customer data tracking, and multi-channel payments.
On the other hand, modern POS software offers:
- Automation when it comes to billing, invoice generation, inventory updates, and sales reports
- Omnichannel integration
- Cloud connectivity
- Enhanced security
In other words, modern POS software is more than just a payment processing tool. They’re comprehensive business management solutions that enhance efficiency, improve customer experience, and help businesses harness the power of technology for success.
How POS Systems Work in Retail Stores
Here’s a step-by-step breakdown of a typical POS transaction:
- Product scanning or selection – Once the customer has decided to buy a specific product, the cashier scans the product’s barcode using a barcode scanner or selects the product manually on the POS system’s catalog. Some systems allow the cashier to scan the item using their mobile devices. For online stores, this step is a bit different. It happens when a customer finishes adding items to their cart and clicks the checkout button.
- Calculates total cost– The POS system adds up the total cost of the items, including applicable tax, shipping, or extra charges. If the store is running any promotions, discounts, or loyalty rewards, they’re applied at this stage.
- Customer payment – At this point, the cashier asks the customer for their preferred payment method. If using cash, the cashier simply opens the cash drawer, puts the cash inside, and hands the customer their change (if required). If the customer prefers credit/debit card payments, the cashier selects that payment option in the POS and prompts the customer to tap, swipe, or dip their card using the card reader. The process is almost similar if the customer prefers mobile payments. But instead of a physical card, they hover their phone over the credit card terminal. The POS system connects with the payment processor to complete these transactions securely.
- Communication with acquiring and issuing banks – If the customer uses a payment method that draws from an external account, such as a credit/debit card or digital wallet, the POS system will send the transaction details to the business’s bank (acquiring bank) so it can communicate with the customer’s bank (issuing bank) to get approval for the transaction.
- Receipt generation – Once the payment is approved and processed, the POS system completes the sale and generates a receipt. This can go two ways depending on your setup; you can physically print the receipt or ask the customer for their email or phone number to send a digital copy.
- Inventory updating – The POS software updates inventory levels in real-time automatically reflecting the sale and alerting staff if the stock levels are low. This is essential for ordering new stock and preventing chargebacks.
In retail store environments, the POS system also helps with sales tracking and reporting. You can generate daily, weekly, and monthly sales reports and track sales trends, peak hours, and best-selling products.
It also supports your customer management processes by storing customer information and purchase history, supporting personalized marketing and loyalty programs, and helping manage refunds, exchanges, and customer preferences.
Key Features to Look for in a Retail POS System
Choosing the right POS software for your retail store starts with identifying the features you need to look for. Below are key features to consider:
Sales processing and checkout
Payment processing is the heart of a POS system. It should process payments with speed and efficiency, reducing waiting times at checkout. Look for POS software that supports quick product scanning, instant price calculations, and minimal steps for payment completion.
The software should accept multiple payment options, including:
- Credit/debit cards
- Mobile payments like Apple Pay and Google Pay
- Contactless payments
- Buy Now, Pay Later (BNPL) options like Afterpay and Klarna
If you need to process payments remotely, ensure the system has a mobile POS (mPOS) to allow your cashiers and sales reps to process sales transactions from anywhere using smartphones or tablets. This reduces checkout lines, ultimately improving customer experience.
Inventory management
Real-time inventory management helps you avoid stockouts and overstocking. The POS systems should update the inventory in real time to provide accurate stock counts. It should send automated updates to the store manager every time the stocks are low to allow for timely reorders.
While most POS software has inventory management features, some are more advanced than others. Also, some are more industry-specific. Evaluate your business and industry needs thoroughly to understand the level of inventory management you need.
Customer relationship management (CRM)
A POS system with CRM capabilities helps you provide a high level of personalized attention to your customers based on their purchase history and shopping preferences. It also allows you to see your customers’ profiles and the products they bought and when.
Ensure the system supports loyalty and reward programs, allowing your customers to earn loyalty points, redeem discounts, and receive exclusive offers.
POS software with advanced CRM features can leverage sales data to generate just-in-time marketing at the counter customized based on the customer profile. For example, a system could create instant coupons based on the products the customer has just purchased.
Reporting and analytics
Ensure the POS system generates sales reports to give you real-time insights into sales performance, top-selling products, and peak sales hours. You should get access to inventory trends reports to identify fast-moving and slow-selling products so you can adjust stock levels accordingly.
In addition, the system should provide you with employee management features to help you reward top-performing staff and identify training opportunities.
The sales reporting should be customizable, allowing you to filter data based on preference, such as data range. You should also be able to customize how the data is presented and schedule automated report creation.
Multi-location and omnichannel capabilities
If you run multiple store locations or sell online, your POS system should automatically sync data across all physical and online stores. Check for multi-store inventory syncing to ensure store levels are automatically updated across all stores in real-time.
For example, if you sell one of your products on your eCommerce store, the POS software should automatically deduct it from your physical store.
If you’re like 95% of business owners, you understand how important using multiple channels to sell is. That’s why you need a POS system that seamlessly integrates with eCommerce platforms like Shopify, WooCommerce, and Amazon.
Ease of use and user interface
If a POS system has impressive capabilities and great functionality but makes it difficult for your team to adopt, it’s not worth the investment. It should have a user-friendly interface and intuitive design that requires minimal training.
Ensure the dashboard is well-organized to allow the employees to navigate the system quickly without hiccups. New employees should adapt to the system easily without extensive training.
The layout should also be customizable to allow cashiers and sales reps to tweak it based on their workflows. For example, they should be able to add shortcut keys to the display for the most frequently bought products or categories. A cashier would simply touch a single button to ring up those products. This would significantly speed up the checkout lines.
How to Choose the Best POS System for Your Retail Business
The best choice of POS software for your retail business depends on multiple factors. Here are steps to help you evaluate these factors:
Evaluating your business needs
Choosing the right system for your business starts with evaluating your business needs. Start by considering your business size and industry.
For example, a small boutique will need a POS system with basic features like checkout, inventory tracking, and reporting. On the other hand, large retailers with multiple physical stores need advanced features like multi-location syncing and AI-powered analytics.
Your sales volume and customer flow also determine the kind of POS software you need. A high-volume store needs a robust system that can handle multiple transactions simultaneously. Seasonal businesses might benefit from systems with flexible subscription plans or per-transaction pricing.
Also, your needs might differ based on your online and offline presence. If you’re solely offline, you might prioritize in-store speed, functionality, and mobile checkout options. If you have both brick-and-mortar and online stores, you might have to go for a system that seamlessly integrates with your eCommerce platform and syncs data for both stores.
Comparing cloud-based vs. traditional POS systems
You have two choices when it comes to POS systems—cloud-based and on-premise POS systems. Here’s a comparison table to help understand the difference between the two:
| Cloud-Based POS | On-Premise POS | |
| Storage | Stores data remotely on cloud servers | Stores data locally on in-store servers |
| Accessibility | Can be accessed remotely from any device with an internet connection | Limited to in-store use |
| Maintenance | Automatic software updates from the provider | Requires manual updates and IT support |
| Security | Data is encrypted and backed up in the cloud | Security depends on local IT infrastructure |
| Cost | Monthly subscription fees (low upfront costs) | High upfront costs with on-time purchase and maintenance costs |
| Integration | Seamlessly integrates with eCommerce and third-party business tools | Limited integration options |
Cloud-based POS software is ideal for businesses with multiple locations and online sales due to more flexibility, remote access, and automatic updates. On the other hand, on-premise POS systems provide more control over data but need internal IT management and have higher upfront costs.
Budget considerations
POS systems vary when it comes to cost. It’s vital to evaluate the upfront and ongoing costs to choose one that matches your budget. Here’s a breakdown of cost structures to expect:
- Upfront pricing – Mostly adopted by traditional POS system providers. It involves a high initial investment but no recurring charges. It’s the best pricing for businesses with stable, long-term operations.
- Subscription-based pricing – Mostly used by cloud-based systems. Doesn’t require an upfront investment. Instead, you pay ongoing monthly subscription fees and get access to software updates, support, and cloud storage. This model is suitable for growing and small businesses that need scalability.
- Transaction-based pricing – Some providers charge a transaction fee instead of a flat fee. This may work well for businesses with seasonal business and fluctuating sales
Compatibility with existing business tools and integrations
Your POS system should seamlessly integrate with other business tools you use to streamline your operations. An integrated POS system is compatible with the following tools:
- Ecommerce platforms to sync online and offline sales
- Accounting software to automate financial reporting and tax calculations
- Inventory management software to prevent stock discrepancies and overselling
- CRM software to track customer data for personalized targeting
- Payment processors (like Stax) to ensure secure and diverse payment options
Customer support and vendor reliability
Reliable customer support ensures smooth operations, especially during peak sales periods. Evaluate whether the system provider offers 24/7 support on multiple channels like phone, live chat, and email.
Also, check for user online reviews to gauge customer satisfaction when it comes to the vendor’s reliability, uptime, and overall operational efficiency. Ensure the provider regularly releases security patches and software updates to enhance security and performance.
Implementation and Best Practices for Using a POS System
Successful POS system implementation goes beyond software installation. It requires proper planning and application of best practices to get the most out of the system.
Here are some tips for POS software implementation:
Steps to setting up a new POS system
Involve your employees and key stakeholders to understand their needs before implementing the POS system. This ensures your entire team is aligned with the implementation goals for a smooth transition.
Establish a clear timeline for implementation, detailing every step from testing to deployment. Also, assign responsibilities for each phase.
Set up the POS hardware including terminals, credit card readers, barcode scanners, cash drawers, and receipt printers. After that, configure the software settings to match your business workflow, such as tax rates and discounts.
Don’t forget to import product details, stock-keeping units (SKUs), and prices into the system. For better inventory management, also set up product categories, variants, and bundles.
Once it’s configured, you can run test transactions to ensure seamless checkout, receipt printing, payment processing, and inventory updates. Simulate all the different payment methods you’d like to process.
Training employees for smooth adoption
The POS system is as effective as the people using it. Organize hands-on training sessions with the provider to help your employees get familiar with the system. Train them well on how to handle various payment methods, returns, and discounts.
Urge the provider to offer video tutorials and training manuals for easy reference and troubleshooting in case of issues.
You can also designate “POS champions” or in-house experts with comprehensive experience to help bring other employees up to speed. Also, schedule refresher training sessions whenever the system gets new updates.
Regular maintenance and software updates
Schedule routine system checks to test your POS hardware and software to spot any issues early. Stay alert for glitches, downtimes, or slow processing speeds that could affect checkout efficiency.
If implementing a cloud-based POS system, enable automatic security and software updates and data backups.
Leveraging analytics for data-driven decision-making
A POS system is more than just a checkout tool—it provides vital insights to help you make wise business decisions. Monitor top-selling products and peak sales hours to stock accordingly and adjust staffing schedules.
Leverage purchase history data to offer personalized discounts and loyalty rewards. Also, identify repeat customers and send them targeted emails and SMS campaigns based on their favorite products.
In addition, track individual employee performance and offer incentives for top performers. You can also use this to identify training opportunities based on checkout speed and error rates.
Conclusion
A well-selected POS system is the backbone of a retail store’s business operations. It streamlines sales processing, customer engagement, inventory management, reporting, and overall operational efficiency.
When looking for a good retail POS, prioritize your business needs. Ensure the system supports inventory management, sales processing, customer relationship management (CRM), reporting, multi-location & omnichannel selling, and security & compliance.
To ensure efficient, cost-effective payment processing you should partner with a trusted payment processor like Stax. The good thing is that Stax not only offers payment processing services, but also POS equipment for retail businesses like yours.
Talk to us today to learn more about the right payment solutions to take your business to another level.
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