The retail industry is undergoing a massive revolution, thanks to new technologies and a spike in data analytics platforms. At the center of the retail technology environment is point of sales (POS) systems.
POS systems have evolved far beyond just the point of transaction. Today, they're the foundation for running a successful small business.
Dick Calio, founder of R.J. Calio Consulting – a full-service consultancy specializing in retail technology strategy – regularly performs POS implementations for retail chains. He typically focuses on retailers with 30-35 stores or more.
"The retail industry is undergoing a dramatic disruption," Calio said. "They're focused on how to keep the customers engaged. Customers want to buy whenever, however, and wherever they want. Retailers now need to engage on customers' terms."
What is a POS system?
POS refers to the point where a purchase is made and the payment is accepted. In the old days, this was just a cash register, but modern POS systems are a combination of internet-connected hardware and software that performs these tasks:
- Stores information about each product or service, including price
- Allows the cashier to select items being purchased by searching on a screen or using a barcode scanner
- Adds up the purchase amount, calculates sales tax and any shipping charges
- Gives cashiers the ability to apply discounts via coupons, coupon codes or manager overrides
- Keeps customer data and purchase history
- Updates the inventory to account for purchased or returned items
- Accepts payment directly or through an attached credit card reader
- Creates cash flow statements and reports on sales, inventory and employee productivity
- Allows business owners to schedule employees
- Sends orders to appropriate stations in a kitchen and optimizes a restaurant's seating capability
Must-have features in retail POS system
Integration is critical for POS systems, Calio said. Retailers need a reliable POS system that easily integrates with third-party applications. POS is only as good as the other applications it interacts with; it's just one piece within your shopper engagement toolkit.
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"Thirty-five years ago, POS systems used to be just that: point of sale," Calio said. "But now it's the hub of a store's entire IT infrastructure. And its main goal now is to drive shopper engagement."
These are some of the top features to consider when evaluating retail POS systems:
- E-commerce capability: Look for a system that can support and integrate with other technologies, giving you complete control over how to display, manage and customize your online presence.
- Warehouse management: This feature is critical to streamlining your operations (and reducing headaches), including tracking inventory and stock locations. This is your key to moving faster and working smarter.
- Omnichannel experience: Retailers no longer have the luxury of operating in silos. Customers want an omnichannel experience. The right POS system can help you achieve that by providing insights into the entire customer buying journey – no matter where or how they like to shop. This includes customer experiences, such as: "buy online, pick up in-store," "buy online, ship from store," and "buy in-store, return to another store."
- Open API: An open API gives you increased flexibility, with benefits like easy integration with third-party systems and easy access to data.
- SaaS-based programs: Software as a service (SaaS) gives you the software, support and upgrades in one monthly fee. It also eliminates hurdles retailers previously faced with credit card compliance and security.
Benefits of a retail POS system
When you integrate a retail POS system, your business gains these advantages:
- Efficiency: According to Expert Market's website, the most obvious benefit of a retail POS system is efficiency. POS systems are easy for employees to use and offer a much smaller margin for human error. Increasing efficiency can make employees happier, which will, in turn, make customers happy.
- Stock management: POS inventory management features are essential for a retail business. Traditionally, a company would have to conduct a physical inventory. POS systems allow retailers to view their inventory at any time. Many POS systems also provide low stock alerts. This can be invaluable for businesses that rely heavily on inventory.
- Digital product database: For companies with more than one retail location, a digital product database allows prices to be set consistently from store to store. Sales and special discounts are much easier to manage because they go into effect at all stores simultaneously.
- Consistency: Consistency is an essential aspect of customer satisfaction and customer loyalty. Today's customers generally expect to find consistency between online and in-store pricing, and pricing from one store to another.
- Employee tracking: POS systems allow for easy employee tracking. You can view sales figures for individual employees and any mistakes that need correcting. This makes it easy to provide incentives for top-performing employees, which fosters healthy competition.
Retail POS system costs
There are three components to a POS system: hardware, software and payment processing. Many components are compatible, allowing you to choose the hardware, software and payment processor that gives you the best deal.
- Hardware: The cost of a card reader ranges from $20 to $100. If you need a mobile device to run the software, factor in those costs. Most small businesses choose basic peripherals, including a tablet stand, cash drawer, card reader and receipt printer. This kind of setup costs $600 to $1,000.
- POS software: Payment processors – like PayPal – offer basic POS systems when you select them as your payment processor. For example, Lightspeed costs $69 a month for the basic plan and $229 a month for the pro plan, which is billed annually. It also offers a 14-day free trial.
- Payment processing: Credit card processing rates vary. Some systems offer you the choice of using a third-party processor or their in-house processor. This gives you more flexibility.
Top retail POS systems to consider
Every business has different needs. Check out the top retail POS systems below to see which is best for your business.
Lightspeed
Lightspeed POS software is web-based, and runs on any laptop, desktop computer or iPads. It offers robust inventory management tools – such as bulk upload and the ability to replenish inventory online. It includes customer and employee management capabilities, supports multi-channel sales and loyalty programs, and gives your business insight through analytics.
Lightspeed offers payment processing, but it also integrates with third-party payment processors. There are four pricing plans starting at $69 per month. Note that you'd supply your own iPad for the hardware. For more information, read our full Lightspeed POS review.
Clover
Clover's POS software runs on its proprietary hardware, or you can use its virtual terminal on any web-enabled device. Some of Clover's hardware has integrated credit card readers, while other options connect to an external reader. POS hardware starts at $749.
When you buy the Clover hardware, the software comes already loaded. Clover POS software lets you take orders for pickup or delivery, manage your employees' schedules and permissions, use customer data to customize promotions and strengthen relationships, monitor and manage inventory, and create reports.
Clover's two plans start at $9.95 per month. The company offers payment processing, and other payment processors support the Clover POS system. However, Clover's payment processing service doesn't work with other companies' POS systems. For more information, read our full Clover POS review.
Epos Now
Epos Now's POS software runs on the company's proprietary terminals, iPads, Android tablets, computers or POS systems your business may already have, which would reduce your costs.
Currently, the company is selling its complete POS system with hardware for $449. Its inventory management can handle thousands of items, has an automatic ordering feature, and allows product tracking by sales channel and location. It can also help you manage employees with permissions, unique sign-ins, a built-in time clock and scheduling features.
Epos Now is easy to use, so your staff can be up and running quickly. For more information, read our full review of Epos Now POS systems.
Other trends in retail POS
Retail POS systems are in constant flux, gaining new features and capabilities as trends change and businesses grow. Here are some retail POS trends in which to be knowledgeable.
Handheld mobile POS systems
Retailers are continuing to favor handheld POS systems because of their convenience, cost-effectiveness and efficient transactions. In-store tablets improve the customer experience, thereby increasing sales and customer loyalty.
"Tablet-based systems are on the rise," Calio said. "It creates a convenient customer experience." He recalled Nordstrom leading the way with handheld devices, bringing POS functionality to wherever the customer was, regardless of what they were buying. "Mobile POS is how retailers are attempting to bridge the gap between buying online and buying in store."
Cloud computing
Similar to nearly all industries, retail hasn't shied away from the advantages of the cloud. A POS system storing cloud-based data could provide many benefits for your business.
"The real-time aspect alone is huge," Calio said. "Retailers can manage inventory in real time. A woman can buy a dress online, pick it up in store the same day, and wear it that night."
Near-field communication capabilities
Consumers are using their phones more frequently than ever to make purchases, and near-field communication (NFC) makes it possible. NFC-enabled phones act as a mobile wallet, allowing retailers to replace in-store POS hardware, so customers make fast and convenient purchases with a mere phone swipe.
While the retail landscape is changing fast, one thing remains certain: "The smaller retailers are going to have to adapt to these new technologies," Calio said. "If they cannot adapt, they will go away."
Business.com editorial staff contributed to the writing and research in this article. Source interviews were conducted for a previous version of this article.