Understanding POS Systems: What Does POS Stand For?

This article will give you a comprehensive understanding of POS systems. You’ll learn what POS stands for, its hardware and software components, and how it benefits retail, eCommerce, hospitality, and wholesale industries.

Key Takeaways

• Cloud-based POS systems offer flexibility, scalability, and remote accessibility, making them an ideal choice for businesses with multiple locations.
• Effective inventory management through a POS system helps businesses avoid stockouts, optimize stock levels, and reduce costs associated with overstocking.
• Omnichannel retailing, enabled by POS systems, allows eCommerce business owners to seamlessly integrate their offline and online sales channels, providing customers with a cohesive and convenient shopping experience.
• Mobile POS (mPOS) solutions enable businesses to process transactions anywhere within their establishment, enhancing customer service and reducing checkout wait times.
• Shopify POS is an ideal solution for businesses of all types, offering a versatile and user-friendly platform with features like omnichannel selling and advanced inventory management.

What does POS stand for?

POS stands for Point of Sale, which refers to the physical location of a transaction between a merchant and a customer. This includes hardware such as a cash register, receipt printer, credit card reader, and barcode scanner, as well as software for payment processing, employee management, inventory management, and reporting.

How does a POS system work?

A POS system connects hardware (such as a register, credit card reader, cash drawer, receipt printer, and barcode scanner) with software to process payments, manage inventory, track sales, and analyze customer behavior in real-time. When a customer makes a purchase, the POS system processes the transaction data. The system calculates the total amount due, applies for relevant discounts or promotions, and handles various payment methods, such as cash, credit cards, or digital wallets. 

Additionally, a POS system updates the inventory in real-time, deducting sold items from the available stock. This feature ensures accurate stock management and helps merchants avoid stock-outs or overstocking. Furthermore, a POS system can generate detailed reports on sales, inventory levels, and customer behaviors, providing valuable insights for business analysis and decision-making.

What are the benefits of POS systems?

A robust POS system can revolutionize businesses’ operations and contribute to their success. Let’s explore the key benefits of POS systems in detail:

Payment processing

A POS system enables businesses to accept various payment methods, including credit cards, debit cards, mobile payments, and cash. Depending on the integrations, merchants can process transactions quickly and securely, reducing checkout times and enhancing the overall customer experience.

Staff management

A POS system provides features for employee management, such as:

• Monitoring working hours
• Tracking sale figures per employee & time slot

With these features, merchants can streamline their staffing processes, track employee performance, and make data-driven decisions to improve operational efficiency. This benefit of POS system is beneficial for retail or hospitality industries.

Inventory management

A POS system offers robust inventory management capabilities, avoiding stock-outs, minimizing overstocking, and optimizing inventory turnover. It allows retail business owners to track stock levels and gain real-time visibility into their inventory. Every transaction updates the inventory by deducting the items sold immediately, allowing for exact store stock quantities monitoring.

Furthermore, the POS system can keep a record of the best-selling items and automatically restock them when the inventory runs low. 

Customer satisfaction & loyalty

A POS system allows business owners to store customer data, including purchase history and preferences, enabling personalized interactions and targeted marketing campaigns. This ensures customer satisfaction and loyalty boosts their propensity to revisit the store.

Online Order Management

The POS system with integrated online order management capabilities ensures seamless order processing across multiple channels. It enables business operators to synchronize inventory levels between online and offline stores, track online orders, and manage fulfillment efficiently.

Reporting & analysis 

Data-driven decision-making is essential for business growth and success. Instead of creating manual reports, a POS system provides comprehensive reporting and analysis tools, allowing business retailers to gain valuable insights into their operations. Automated reports show various aspects of the business, such as sales, pricing, purchases, contact, and inventories.

These insights enable merchants to identify strengths, weaknesses, and opportunities, optimize strategies, and make data-backed decisions to drive profitability and growth.  

Which hardware and software does a POS system typically include?

A POS system integrates hardware and software components, functioning harmoniously to streamline multiple business operations.

POS Hardware 

POS hardware refers to the physical devices and equipment that enable merchants to accept payments and perform other essential tasks. Here are some commonly used POS hardware components: 

• Register: A register assists in accurately calculating and efficiently handling customer transactions. Without it, the store may seem outdated and unprepared to handle transactions efficiently.
• Credit card reader: A device that reads and processes credit and debit card information, allowing business operators to accept card payments securely. 
• Cash drawer: A secure compartment stores cash received from customer transactions. Connecting Point of Sale (POS) software to a cash drawer helps reduce the risk of fraud by systematically recording every instance of drawer access. This enhances transparency, lowers the potential for unauthorized transactions, and promotes a more secure transaction. 
• Receipt printer: A printer generates receipts for customers after a transaction is completed, providing them with a record of the purchase.
• Barcode scanner: A device scans product barcodes for quick and accurate product details, enabling efficient inventory management and faster checkout.

POS Software

POS software is the digital component of a POS system that controls and manages the operations and functionalities. Here are some key features typically found in POS software:

• Payment processing: POS software integrates with payment gateways and enables wholesalers to process various payment methods, including Cash, Secure Online Payments, Magstripe Credit Cards, Chip Cards, and Contactless Payments.
• Employee management: POS software allows business owners to manage employee profiles, track hours worked, assign roles and permissions, and generate reports for better workforce management. 
• Inventory management: POS software provides tools to track and manage product levels and ensure efficient inventory control. Automatic inventory software links up with your sales data and alerts merchants when a product runs low in stock.
• POS reports: The software generates detailed reports on sales performance, inventory status, employee productivity, and other vital metrics, helping business owners gain insights and make data-driven decisions.

How much does a POS system cost? 

A POS system cost varies and hinges on several factors, including business types and desired features and functionalities ranging from $3.000 to $10.000

POS software cost

The price of POS software can vary depending on various factors, such as the system’s complexity, the number of features included, and the provider’s pricing structure. It typically ranges from $10 to $250 per month, depending on the specific type of POS. There are three primary types of POS software available:

• Cloud-based POS software: This type of software operates on the Software-as-a-Service (SaaS) model and is hosted in the cloud
• Legacy or on-premise POS systems: These systems are hosted on a local server or operated on-premise.
• Hybrid POS systems: A solution that combines cloud-based and on-premise functionalities.

It’s essential to consider both the short-term and long-term expenses associated with POS software, including hardware costs, installation fees, ongoing support charges, and additional modules or add-ons. By carefully assessing your business needs and evaluating different providers, you can make an informed decision that aligns with your budget and requirements.

POS hardware cost

The POS hardware price can range from as low as $20 to as high as $2,000. In essence, POS hardware encompasses the devices used to handle customer orders and facilitate payment processing. To effectively accept payments, most businesses typically require the following system devices:   

• Card reader: $20–50
• Tablet stand: $50–200
• Barcode scanner: $30–100
• Receipt printer: $35–150
• Till and cash drawer: $5–200
• Touchscreen: $250–800
• Digital menu board: $200–2,000
• Kiosk: $200–700

Shopify POS: An Ideal Solution for All

Shopify POS is the best solution to balance the features and pricing of all the POS systems on the market. Let’s explore why Shopify POS stands out and how it can cater to various business needs.

Shopify POS is a versatile and user-friendly point-of-sale system that can meet the needs of businesses across various industries, including retail stores, eCommerce businesses, hospitality industry professionals, wholesalers, and distributors. 

Key features of Shopify POS that make it stand out

• Omnichannel selling: A notable characteristic of Shopify POS is its capability to enable omnichannel selling seamlessly. It seamlessly integrates your physical and online stores, allowing business owners to manage inventory, sales, and customer data across multiple channels. It can also offer a consistent shopping experience to your customers, whether they visit your brick-and-mortar store or shop online.
• Inventory management: Shopify POS provides robust tools to track and manage inventory. You can easily add and categorize products, set stock levels, receive inventory alerts, and even create purchase orders. 
• Staff management: You can create individual staff accounts, assign roles and permissions, and track their performance. The system allows you to monitor sales by staff members, enabling you to identify top-performing employees and incentivize their efforts. Additionally, Shopify POS provides a time clock feature for easy staff attendance tracking.

Shopify understands the importance of empowering businesses, so they offer a free trial for users to experience the benefits firsthand. Try Shopify POS today and discover how it can revolutionize your business operations, increase sales, and enhance the overall customer experience. 

Start your free trial with Shopify POS now and unlock the potential for growth and success in your business.

Real-world examples or case studies of businesses benefitting from Shopify POS

Shopify POS has empowered numerous enterprises to streamline their operations and achieve success. Here are a few real-world examples: 

Switching to Shopify POS results in a 20% growth in Tigerlily’s store average order value.

Tigerlily is a premium swimwear brand in Australia that operates both online and in 11 brick-and-mortar stores. Despite recognizing the importance of serving customers, Tigerlily faced a challenge in creating a consistent customer experience across its online and physical store sales channels. 

“We were using Shopify for ecommerce and another provider as our POS system. The disconnect between both systems was resulting in fragmented data, and the inability to launch buying experiences that reflect how shoppers want to shop” stated Travis Wright, CEO of Tigerlily.

To address this issue, the company switched to Shopify POS to unify its sales channels and support hybrid shopping options. Since implementing Shopify POS, Tigerlily has experienced a 20% growth in store average order value and 20% rise in group revenue in FY23 compared to FY22. 

Additionally, multichannel shoppers have shown higher average order value than single-channel shoppers by 4%. With detailed reports and centralized reporting, Tigerlily can offer more personalized recommendations to shoppers and increase revenue.

“Since switching to Shopify POS and bringing our sales channels together, we’ve seen a 20% growth in store average order values and year-over. Customers appreciate that our experience online and offline feels consistent, which helps drive more sales” – Travis Wright, CEO, Tigerlily

Optimizing inventory management with Shopify POS: The Rugged Society’s success story

The Rugged Society is a unique menswear brand that offers a curated selection of heritage-style brands, antiques, and collectibles. The brand faced difficulties managing stock across its online and retail stores while selling at events, leading them to switch to Shopify POS to solve this challenge. The brand has experienced more efficient inventory management, 20% increase in order volume, and a 10% increase in average order values. 

“Having one system of record for managing our inventory has been really helpful. Our inventory syncs across our Shopify site and POS system in real-time, which saves us a lot of time” – Emanuelle Nardoni, Co-Founder of The Rugged Society.

With Shopify POS, The Rugged Society has a centralized view of inventory, orders, and customers, which has resulted in saved time, faster workflows, and international growth.

Frequently Asked Questions (FAQs)

Bottom line

A POS system offers many benefits, such as efficient payment processing, staff management, inventory control, and valuable insights for better decision-making. Harnessing its adaptability and intuitive interface, Shopify POS presents a holistic resolution that optimizes operations, enhances customer satisfaction, and cultivates business expansion.