Point of Sale (POS) has become integral to modern retail operations. But if you think it’s about making payments, you probably live under the rock. Advanced POS systems now offer rich customer insights and data on inventory, helping retail businesses manage several tasks.
This has led to a market with revenue of $3.67 trillion by the end of 2024. It is growing at a CAGR of 12.77% and is expected to reach a revenue of $6.08 trillion by 2028. More and more retail shops, spaces, and offline stores are now integrating POS software into their daily operations.
But how significant is the impact of POS on business worldwide?
Will innovation like AI and the push for mobile-based POS change the future of POS systems? This article provides all your answers about POS systems, their benefits, and their impact on POS. But first, you must understand the basics.
What is A POS System?
A POS system is a suite of hardware and software elements that enable merchants to process payments. It is more like a cash register but uses digital components like software. The best part is that you can log each transaction, take payments, monitor inventory, and track buying trends.
For example, if you are in the fashion retail business, a POS system will help you with data on which types of styles you are selling more. It will also allow you to manage inventory for specific styles and control production for styles that don’t sell.
So, how does it work, and what are its vital components?
A POS system has multiple components, such as a cash drawer, receipt printer, card reader, software, and a barcode scanner. Understanding how these components work and create a seamless payment processing flow is crucial for any retail business.
How Does The POS System Work?
POS systems work in the following sequence,
- The transaction starts when the customer selects an item to purchase.
- Items are scanned, or a cashier may manually enter details into the POS system.
- Each item is identified by the POS system based on the barcode
- The price for each item is retrieved from the system’s database
- POS system calculates the total price customers need to pay.
- The customer will choose a payment method and make the payment
- POS system processes the payments leveraging payment gateway integrations and card readers.
- The system will generate a receipt based on the transaction with details of the purchased item, price, taxes, and more.
Components of POS System
Every POS system has several components and some interface that allows cashiers to convert a physical transaction into a digital one.
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- POS software is the heart of a POS system, allowing merchants to run scanners, interfaces, and other digital elements. It will enable retailers to scan items, check reports, generate invoices, manage customers, and make payment processing seamless.
- A cash drawer is simply a holder of cash and receipts. However, when integrated into the system, it helps retail businesses track how often cash drawers are accessed. This reduces the chances of fraud and improves cash security.
- A receipt printer will help you print out the slips that customers get when ordering specific items. Many POSs allow businesses to customize their receipts to improve the customer experience. The rising trend of paperless receipts changes how customers are notified of their purchases.
- Card readers allow retailers to offer more payment options to customers. With card readers, retailers can accept credit card or debit card payments. Advanced NFC technologies integrated into the POS systems of retail merchants now allow customers to tap to pay.
- Barcode scanners are essential for most retailers, especially those that sell merchandise. Cashiers can use them to scan items and add them to the bill.
Now that you know how a POS system works and its key components, it becomes paramount to understand the types available.
Types of POS Systems You Can Choose For Your Business
POS systems need to be versatile and adaptable to business needs. You can’t expect the POS system to be restrictive because customers need more payment options.
Here are the types of POS that you can use, bringing more versatility and offering better payment options for customers,
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POS Applications
POS apps are cloud-based and provide an installable application that customers can download from application stores. They allow you to access POS data from any device compatible with security standards like PCI DSS.
These apps may have limited functions compared to a full-fledged POS system. However, when it comes to accessibility, nothing trumps the POS apps. These apps need less capital investment than a full-fledged POS system.
Pros of POS Apps:
- Offers more flexibility for payments
- Better accessibility
- Lower cost than a full-fledged POS system
- Regular software upgrades and tech innovations
Cons of POS Apps:
- Security is a concern with these apps
- Less functionality compared to full-fledged POS systems.
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Terminal POS Systems
Terminal POS is a physical system that helps organizations track sales and revenue quickly. A cashier or any other employee at the terminal enters data into POS systems using an interface. This system includes a barcode scanner, a customer-facing display, and a card reader.
Such a POS system allows restaurant owners to integrate online ordering and QR-based menus for customers. It can also leverage label printing and inventory management.
Pros of Terminal POS:
- Easy to use and accessible for employees at the terminal
- It is more straightforward to integrate with other POS hardware and software
- Enables advanced technologies like QR-based payments.
Pros of Terminal POS:
- Easy to use and accessible for employees at the terminal
- It is more straightforward to integrate with other POS hardware and software
- Enables advanced technologies like QR-based payments.
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Cloud-Based POS Systems
Cloud POS is an innovation that has enabled superior scalability for many businesses. According to a Salesforce report, 54% of retail executives plan to use cloud-based POS systems by the end of 2024. This means there will be more adopters, making cloud POS systems a popular choice for many retailers.
The best part about cloud-based POS systems is that they can be accessed anywhere and anytime. They are hosted online and do not require software downloads. Here, you must understand the difference between an online and a cloud-based POS. Often used interchangeably, both terms have different use cases.
For example, you can install an online POS system and leverage offline mode, which is unavailable with cloud-based software. So, cloud-based POS systems are best if you are a business with retail outlets across continents.
Pros of Cloud-Based POS:
- Accessibility is better than most POS systems
- Software updates are over the internet, and simple
- There is no need for the installation of software on the local device
Cons of Cloud-Based POS:
- There can be subscription fees
- Need continuous internet connection
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Multichannel POS Systems
If you are in the retail business and sell products in multiple online and physical locations simultaneously, you need a multichannel POS. It integrates all your transactions across online, social media, and physical stores.
Using a multichannel POS system, you can also synchronize inventory levels across retail shops offline and online. This helps you keep the data accurate for parallel operations across locations.
Pros of Multichannel POS:
- Offers access to data across shops online or offline
- Provides more shopping options for the customers
- Integrates real-time data of inventory and purchases for seamless operations.
Cons of Multichannel POS:
- Offers access to data across shops online or offline
- Provides more shopping options for the customers
- Integrates real-time data of inventory and purchases for seamless operations.
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Open-Source POS Systems
Open-source POS systems are the best option for tight budgets. They are mainly free for retailers and businesses compared to enterprises that prefer a custom solution. However, they are not restrictive and allow customization, but you need to hire expert developers.
An open-source POS system has dual sides, like a flip coin. On one hand, it is one of the most cost-effective solutions. On the other hand, customization requires experts. Experts in customizing the code according to your needs may demand higher fees. So, you must choose an open-source POS system after factoring in the cost impact.
Pros of Open-Source POS:
- Lower on cost compared to other POS systems if no customizations are needed.
- You can customize such a system easily for your business
Cons of Open-Source POS:
- Needs technical skills and resources
- Many open-source systems don’t offer payment processing
- No customer service integration into the POS system
You must have a fair idea of POS systems, but why should you invest in one? What is its impact on your business operations? First, you need to understand its benefits and decide whether to invest.
Benefits of POS Systems For Your Retail Business
POS systems offer many benefits, from efficiently managing payments to synchronizing user data in real time. However, every business has unique needs, and you must choose the one that suits your requirements.
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Personalized Customer Shopping
Modern POS systems have been changing the way customers interact with retail businesses. Digitization with mobile devices, sensors, and data integrations is transforming shopping. Integrating AR/VR, AI, and Blockchain technologies into the POS system will forever change personalized shopping.
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For example, Mac Cosmetics stores provide AR mirrors for customers to try virtual makeup. The mirrors are chrome with an interface that allows customers to try to make virtual makeup through 3D rendering technology. You can take this technology further by directly integrating it into the POS system.
So, if a customer likes the product virtually, it can be directly added to the invoice. This provides a more personalized experience for your customers.
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Multiple Payment Options
POS systems offer more payment options for your customers. Different POS systems enable payments via debit cards, credit cards, cryptocurrency, and contactless pay. While online payments have gone mainstream, POS-based payments are still very effective, allowing retailers to transform the payment experience.
Introducing a cloud-based POS system has been revolutionary, making payments more mobile. Now, customers not only have multiple payment options but also have better accessibility.
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Competitive Edge
An advanced POS system can be your market differentiator. If you are a retailer, you know how competitive the market is. Every business tries to add innovative features to their stores and online portals. You must be ahead of the curve and integrate advanced POS systems.
For example, an advanced POS system with reporting and analytics features can help business owners improve customer personalization. Similarly, you can integrate custom AI models to transform how customers interact with the POS system.
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Customer Data Security
Businesses must ensure compliance with data regulation standards like GDPR, HIPAA, and others. An advanced POS system can help companies to improve efficiency and ensure customer data security. For example, cloud-based POS systems can help businesses operate offline. A user can pay even if the device is outside the network range.
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Inventory Management
POS systems can help retailers track their inventory across shops online and offline at multiple locations. They provide updates on stock availability across stores. For example, if your stores run out of a specific item, look it up for restocking.
Retail merchants can quickly determine if there are availability issues for any item or product before essential events like sales. Plus, retailers will have critical data on how people buy specific items more. They can use this data to manage stocks.
The POS system offers many benefits, but its full potential can only be realized by understanding its impact on retail operations.
Impact of POS System On Retail Operations
POS systems automate critical aspects of every business, such as payments, data collection, and more. Mobile POS options have transformed how users pay for their purchases. Instead of conventional checkout stations, these POS systems allow merchants to process transactions anywhere in the store.
Some of the tangible benefits that POS systems bring,
- Process simplification
- Reduction in the time needed for business operations
- Improves agility in the dynamic market environment
- Streamlined transaction processing
- Improves the efficiency of inventory management
Signing Off
POS systems are now mainstream, but there are still reservations about upgrading them to newer modules, such as mobile or cloud-based. To overcome such skepticism, businesses need to understand the different types of POS, their working, and how secure it is to transact with them. However, with this article, you must have known the types of POS, its benefits, and its impact on business operations. So, adopt advanced POS and transform your business’s operations through efficient transactions.
