What is a POS System? How to Choose the Right POS for 2024

A point-of-sale (POS) system is the hardware and software that enables you to make sales, accept payments, and check out customers.

Whether you want to open a retail store, pop up shop, sell at events, or out of the trunk of your car, you need a POS system to accept payments and sell in person.

But it can be tough to find the right POS system for your business–especially if your business started online and you’re exploring selling in person for the first time. 

That’s why we put together this no-nonsense guide to help. Keep reading to learn everything there is to know about POS systems so you can choose the right one for your business and make running your retail operations as straightforward as possible.

What is a POS system?

A point-of-sale (POS) system is the hardware and software that helps your business accept payments from customers and make sales in person. It also routes funds to your bank account after each sale.

Modern POS systems help merchants manage inventory, track sales performance, manage staff, collect customer contact information, and much more. 

The term “POS system” used to refer to your cash register. But today, most POS systems are software-based and can be used on any tablet or smartphone. This lets you serve customers and take payments wherever you are, without needing a cash register.  

How does a POS system work?

At its most basic level, a POS system calculates the sum of the items a customer wants to buy, processes the payment, and modifies your inventory levels to reflect the sale. Here’s what the typical POS system workflow looks like: 

1. A customer chooses to buy your product
2. Your POS system calculates the total price
3. Your customer pays
4. The point-of-sale transaction is finalized

1. A customer chooses to buy your product

As shoppers browse a store’s products, store staff can look up prices and inventory availability in the POS system. Once the shopper is ready to buy, the store staff uses a bar code scanner to add products to their cart. Some point-of-sale systems, like Shopify POS, let you scan items using your smartphone or tablet camera instead of a bar code scanner. 

2. Your POS system calculates the total price

Once all items are added to the shopper’s cart, your POS system calculates the total cost, including any sales tax, and then updates your inventory count to reflect items sold. At this point, store staff can also apply discounts or promo codes.

3. Your customer pays

To complete their purchase, customers need to use their credit card, debit card, tap card, loyalty points, gift card, cash, or a digital wallet like Apple Pay or Google Pay. They can also do what’s known as a split payment—where they use any mix of the above payment methods to pay for their purchase. 

4. The point-of-sale transaction is finalized

Once payment goes through, you’ve officially made a sale. Next, a receipt of the transaction is either printed or emailed to the customer and you give the customer the products they bought. 

Software components of a POS system

There are two main types of POS systems: on-premise and cloud-based. On-premise POS systems require you to be on location to use it. Terminals are the most common on-premise point-of-sale system. Cloud-based POS systems offer more flexibility, because you can run your business, serve customers, and take payments using any mobile device with an internet connection. 

A cloud-based POS system is compatible with most POS hardware (cash drawers, printers, etc.) and can be installed on any tablet or smartphone. Cloud-based and mobile POS systems are also typically less expensive and more convenient than a tethered on-premise solution. This makes them a great option for merchants who want the flexibility to sell in a physical store and online, along with the occasional pop-up shop or in-person event. 

? PRO TIP: Shopify POS syncs with your Shopify admin and automatically adjusts inventory and sales data as you receive, sell, return, or exchange products in your stores or online.

Hardware components of a POS system

• POS terminal. A POS terminal is the device that your POS software runs on. Mobile POS software can be installed onto any tablet, smartphone, desktop, or laptop computer with an internet connection. 
• Cash drawer. Unless you only process cashless payments, you’ll need somewhere to put the cash customers use to pay for your products. Cash drawers are a safe, secure place to organize bills.
• Tablet or smartphone. Both of these mobile devices are popular hardware for retail POS software. With them, store staff can process transactions and accept payments, without having customers wait in line to pay. They’re also handy for inventory management, since retail staff can count and adjust inventory on the go. 
• Barcode scanner. A barcode scanner reads an item’s product details and is used to ring up sales. They’re also useful for double-checking a product’s price, the amount of inventory you have in stock, and other details. There are two types of barcodes: 1D barcode scanners that can scan traditional barcodes, and 2D barcode scanners that can read QR codes. Some POS systems, like Shopify POS, let you scan a product’s barcode using your tablet’s or smartphone’s camera instead of using a barcode scanner.
• Credit and debit card reader. This piece of hardware can read debit and credit cards. There are several ways to read a card, including swipe, tap, and EMV chip. You need this for payment processing so you can receive the funds from the customer’s bank.
• Receipt printer. While receipt printers aren’t always essential, they’re useful if you want to offer customers the option of taking a printed receipt rather than an email receipt.
• Label printer. There are some instances where you’ll need a label printer—like when you ship a product to a customer’s shipping address from your store, for example. With a label printer as part of your POS setup, you can do that on the spot.
• Shipping scale. If you ship items to customers, you’ll need a shipping scale to be able to determine the cost of shipping that item and how much you charge for shipping.

? PRO TIP: If you want to open a temporary retail location, like a pop-up shop or kiosk at a concert, you don’t need to buy your hardware. Sign up for Shopify’s Hardware Rental Program to start selling quickly, risk free.

The benefits of using a POS system

Modern POS systems offer far more functionality than administering transactions. They can complete other business functions and inform important business decisions, including:

1. Centralizing your inventory management 
2. Collecting and visualizing sales data in real time
3. Building in-depth customer profiles 
4. Accepting payments anywhere
5. Improving in-store sales
6. Opening new stores faster 
7. Adapting to changing business needs 

1. Centralizing your inventory management

Whether you store inventory at your stores or in a warehouse, ensuring your stock quantities are accurate as items are received, sold, returned, and exchanged can be time consuming. But managing inventory is critical. 

Inventory is your largest expense when it comes to running your business. Considering US retailers sit on about $1.50 in inventory for every dollar they make, mismanaging inventory can also cause a lot of tied-up expenses. Buy too much stock and you run the risk of dead stock, while ordering too little can cause untimely stockouts. 

Merchants with both an online and physical store shouldn’t need to manually count and adjust inventory quantities each day to ensure the stock they see online and in their POS system is accurate. Your POS system should connect with your ecommerce platform and ensure that stock quantities shoppers see on product pages—and the stock you see in your back office—reflect what you actually have in stock. 

This is difficult when you use two different systems to manage online and in-person sales. But Shopify POS connects seamlessly with your Shopify online store’s database. Inventory levels are automatically updated as products are received, sold, returned, or exchanged in-store or online. 

By unifying your sales channels and managing your entire business from one platform, you ensure stock levels are accurate in your POS system and on your online store, without needing to spend time manually counting and adjusting inventory quantities. This means you spend less time managing your inventory and more time selling it and growing your business. 

“Since using Shopify POS, we’ve freed up a lot of time that would have otherwise been spent on operations,” says Sophie Rankine, co-founder of elph ceramics. “That’s time we can now use to implement some of the strategies we have while assuring the day-to-day operations run smoothly. 

The amount of times I count inventory is close to never. I still do them, but before, I had to count stock at the end of each day to know how much we sold and update stock quantities customers saw on our website. With Shopify POS, our stock levels sync automatically.

Centralizing your store and warehouse inventory also makes it easier to move stock from one place to another (e.g., from your warehouse to a store) when you run low on a product. It also makes ordering inventory less of a guessing-game, which helps you order enough stock to meet demand without tying up capital in inventory that won’t sell. 

2. Collecting and visualizing sales data in real time

Each transaction that goes through your POS system should also feed into your reporting and analytics tools. 

Your POS system should make viewing analytics straightforward. Rather than viewing ecommerce and store sales data in different platforms, you should be able to get a complete view of your brand’s sales and have the ability to filter by sales channel. Having a unified view of your sales makes it easier for you to know which products are moving and which aren’t. 

When choosing a point-of-sale system, ensure it helps you visualize the following data:

• Online and retail store sales and inventory data 
• Sales data over a time (day, week, month, year, or custom)
• Sales by employee (average order value, items per order, gross and net sales)
• Sales by channel (online store and multiple store locations)
• Sales by location (store locations and geographic areas where online sales come from) 
• Sales by product (sales volume, profitability, stock quantity, and percent of inventory sold)
• Number of orders (broken down by fulfillment stage: unpaid, paid, unfulfilled, fulfilled)

3. Building in-depth customer profiles  

A POS system should also help you collect, track, and manage customer information. Access to these details can help store staff understand the customers they serve better while fueling your retention marketing and loyalty programs to spark repeat purchases. 

When evaluating your options, make sure the point-of-sale system you choose lets you do the following: 

• Create customer profiles. Build profiles that store customers’ contact information, purchase history, lifetime value, and notes. 
• View order history. See everything a customer has bought from you both in-store and online, which can help store staff suggest more relevant products. 
• Launch a loyalty program. Build a loyalty program that rewards shoppers every time they buy from you online or in-store. 

4. Accepting payments anywhere 

Another core function of POS systems is payment processing. When customers buy products, your POS system is what processes that transaction. When paired with the right hardware, POS systems can take the following payment types: 

• Cash, which is then deposited into your cash register. 
• Magstripe credit cards, which occur when the customer swipes their card in your credit card reader. 
• Chip cards, which are credit or debit cards with a near-field communication (NFC) chip to enable tap payments. 
• Contactless payments, which can include chip cards and mobile wallet payments using Apple Pay or Google Pay. 
• Gift cards, which can be either physical or digital and redeemed for in-store or online purchases. 
• Card-not-present transactions, which are when a customer pays with their credit card without being physically present. These transactions usually happen when customers enter their payment details during online checkout or when placing an order over the phone. 

What separates traditional POS systems from modern ones is mobile payment processing, which lets you serve customers and take payments anywhere you have an internet connection—whether it’s inside your store, at a fair, at a pop-up shop, or anywhere in between.

5. Improving in-store sales

The right POS features can help you serve customers using multiple channels and make more sales. 

For example, Shopify POS lets store staff send follow-up emails to indecisive in-store shoppers that feature products they were interested in—similar to an abandoned cart email, but for retail stores. While the customer eventually buys the products online, the sale is attributed to the store. This helps merchants quantify the crucial role stores play in product discovery and turn showrooming into sales.  

Offering flexible shipping and fulfillment options is another way to increase store foot traffic and improve sales with your POS system. 

A POS that offers flexible shipping alternatives can minimize the need for returns and exchanges and keep sales strong. That’s why the following pickup, purchase, and delivery options are quickly becoming table stakes:

Buy online, pickup in-store

Buy online, pickup in-store (BOPIS) lets shoppers buy products online and collect their order from whichever store location is convenient. This option helps shoppers get orders fast and save on shipping costs. Orders fulfilled with store pickup also tend to be returned less often, since shoppers can try products in-store before walking out. 

Home delivery 

After customers buy products in-store—especially heavy or large products like furniture—they don’t necessarily want to carry it with them. As an added convenience, offer home delivery. Or, if an item isn’t available in-store but is at another location, customers can buy in-store and have the item shipped to their home.

Hassle-free returns and exchanges 

Returns are also a great opportunity to make more sales and increase average order value. For example, customers who buy online and return in store can be incentivized to make additional purchases when they come in for the return. Rather than view the return as a lost sale, take it as an opportunity to potentially sell them additional products and, at the very least, build a more engaged customer relationship.

Some brands are viewing returns as an additional touchpoint, offering an extra discount if you use the store credit the same day.

6. Opening new stores faster

One of the biggest benefits of a mobile POS system is that it helps you open more stores—whether it’s a permanent location, a pop-up shop, or a kiosk at an event—in just a few clicks. 

With Shopify POS, there’s no need to go through a cumbersome setup process. Just add a new POS location, download the Shopify POS app on any smartphone or tablet, connect your card reader, and start selling. 

7. Adapting to changing business needs

As you add more products, reach more customers, hire more staff, expand into new markets, and open new stores, you want a POS system whose hardware and software supports your brand’s growth. 

When assessing your POS options, make sure it lets you use apps to extend its capabilities. Using apps, you can customize your POS system to fit your business’s unique needs. For example, Shopify merchants can choose from thousands of apps built by our trusted partners to help them with marketing, bookkeeping, scheduling, invoicing, and more. 

Since these apps work with both Shopify POS and your Shopify website, you can run your entire business from one back office rather than needing to jump between systems. 

What features should a POS system have?

Other than the core functionalities, there are other features you should make sure the POS system you choose includes: 

1. Integrated payment processing
2. Mobile checkout
3. Multichannel inventory management
4. Staff management 
5. Centralized reporting and analytics 
6. Flexible order fulfillment options 
7. Multi-store management
8. Customer relationship management
9. Apps and add-ons
10. Reliable support 

1. Integrated payment processing

Third-party payment processing agreements are notoriously difficult to navigate. With nebulous fees depending on the credit card type, hidden fees, long payout periods, and contracts that lock you in for multiple years, they can make managing cash flow more difficult than it needs to be.  

But Shopify POS comes with integrated PCI-compliant payment processing built for retailers. With Shopify Payments, merchants pay the same low, pre-negotiated rate for all credit cards. 

Boost your store’s sales by offering all popular payment methods—from credit and debit cards to Apply Pay and Google Pay—and track both in-store and online transactions and payouts from Shopify’s easy-to-understand back end. 

2. Mobile checkout

Customers hate waiting in line to pay. But one solution to long queues is bringing your checkout to them. 

With a mobile POS, store staff can look up inventory, process sales, returns, and exchanges, and take payments without leaving the customer’s side. Rather than having to wait in line to pay at the POS terminal, the POS terminal comes to them.

If staff often find themselves serving more than one customer at a time, mobile POS systems like Shopify POS let them save the customer’s cart and retrieve it later. This helps staff move from one interaction to the next without losing order details and spending precious time at checkout re-entering products into the customers cart. 

This is the type of hassle-free customer service modern shoppers expect. It lowers friction in the buying process, which results in a smoother shopping experience and greater overall customer satisfaction. 

3. Multichannel inventory management

While many POS systems help manage store inventory, most don’t help merchants manage that inventory across multiple channels, including multiple store locations, their online store, and warehouses. Effective inventory management is critical to running a successful operation—whether you operate one or many stores. 

Choose a POS system that centralizes your inventory into one system so you can manage it all from one place. This will help you order enough stock to satisfy demand while avoiding overstocking, inventory shortages, or tying up too much capital with too much stock. It will also prevent you from having to manually count and reconcile inventory each day to ensure the inventory availability on your online store reflects what you actually have in stock. 

4. Staff management

As your retail business grows, so will your need to hire staff. You’ll serve more customers and offer more services, and your store operations will get more complex. Invest in a POS system that helps you manage teams as they grow. At minimum, your POS should have scheduling and bookkeeping capabilities and give you visibility on each store staff’s performance (their daily sales, average transaction value, and average units per transaction, for example). 

And be mindful of POS systems that limit how many staff accounts you can create. You want a POS system that supports your team’s growth rather than limits it. 

5. Centralized reporting and analytics

Data and reports help you spot trends, capitalize on opportunities, and make decisions with confidence. Your POS system should have built-in data and reports that help you track your inventory, revenue, which products are selling or languishing, your customers’ purchase history, and your staff’s performance. 

While POS data typically includes the data collected at the point of sale (physical transactions), that can be problematic for a brand that sells both in-person and online. If you’re a multichannel seller, the last thing you want is data that’s siloed by the sales channel. That will cause you to spend countless hours in spreadsheets to find the data points you want. 

Instead, choose a system like Shopify POS that unifies your in-store and online data to one place. This will help you understand the big picture—how each channel affects the other, how customers shop on both channels, and your store’s impact on online revenue in the surrounding area.  

6. Flexible order fulfillment options

Modern consumers want the flexibility to shop however they want. Whether it’s online, in-store, or through social media platforms like Instagram—retailers need to build a buyer’s journey that puts customers in control if they want to meet customer expectations and build brand loyalty.  

If you choose a POS system that doesn’t integrate well with your ecommerce platform, though, it can be difficult to offer flexible delivery options like click-and-collect or curbside pickup. Choosing a POS system that speaks to your ecommerce platform will help you unify those channels and let shoppers discover, buy, and receive orders however is most convenient for them. 

7. Multi-store management

As your network of retail stores grows, you want your POS system to support that growth. Ensure your point-of-sale system lets you manage inventory across multiple locations and keep each store’s reporting up to date as products are received, transferred, sold, returned, and exchanged. 

Along with having complete visibility on each store’s revenue and profits, you’ll also want to be able to manage the customer data and staff accounts across each of your store locations. 

8. Customer relationship management

Whenever a customer buys something from your brand, there’s a paper trail. Your POS system records what they bought, where and when they bought it, the total value of that transaction, and more. But you also want your POS system to record who bought it. 

Ensure your POS system lets you create customer profiles that centralize both their contact information and their purchase history for what they buy both online and in-store. This will help fuel your email marketing, and loyalty programs—both of which help increase retention, repeat purchases, and customer lifetime value. 

9. Apps and add-ons

While your POS system will come with many features built in, you also want the flexibility to extend its capabilities with apps and add-ons. These quite literally add on to your point-of-sale and let you do more from the same system.

With Shopify, you can choose from thousands of apps in the Shopify App Store, built by our trusted partners. Find an app to help you do virtually anything, including marketing, merchandising, shipping, store design, and more.

10. Reliable support

Even if you’re using a POS system that’s easy to understand, there will come a time when you need help from an expert. When that happens, the last thing you want is to not have any support options.

Make sure the point of sale you choose comes with around-the-clock free customer support via email, chat, or phone. 

With Shopify, you can count on our support team to be with you every step of your journey. From onboarding or migrating from another tool to Shopify POS to training your staff and more, our team is ready to help your business handle any challenges. 

The 9 types of POS systems

There are nine types of POS systems commonly used today:

1. Retail POS
2. Mobile POS
3. Cloud-based POS
4. On-premise POS
5. Multichannel POS
6. Tablet POS
7. Desktop POS
8. POS apps
9. Open-source POS

1. Retail POS

A retail POS has features tailored to help merchants with a brick-and-mortar store manage inventory and orders, sell products, process payments, and manage customer relationships and staff.  

Some point-of-sale systems, like Shopify POS, also come with reports and analytics that unify in-store and online sales and inventory, making it easier for merchants selling in person and online to manage their business in one place, rather than jumping from one system to another. 

2. Mobile POS (mPOS)

A mobile point-of-sale system is usually cloud-based and can be used anywhere. Store owners can take transactions from a central point of purchase, like a traditional checkout counter or cash register, or wherever they need it to be.

To take transactions on the go, retailers often use hardware like a tablet or smartphone and a card reader to take payments. 

3. Cloud-based POS

A cloud POS is a web-hosted point-of-sale solution that can be accessed using any computer, smartphone, or tablet with an internet connection. Unlike their predecessors—on-premise POS systems—you don’t need an on-premise server to use a cloud POS system. Everything is stored on remote servers. 

4. On-premise POS

An on-premise POS (also known as a legacy POS) stores information on a local server. Oftentimes, that server is on your computer’s hard disk. On-premise POS systems work similar to a program you install on your computer.

While these POS systems used to be popular, since the advent of the cloud, many POS systems are transitioning toward mobile. On-premise servers are cumbersome, stationary, and typically require manual updates and maintenance. 

5. Multichannel POS

A multichannel POS can integrate with various commerce channels, an increasingly important capability. These channels include your own website, third-party online marketplaces, your store, pop-up shops, event sales, wholesale, social media, and more. 

6. Tablet POS

A tablet POS can be both mobile and docked to a station. These POS systems run on Android tablets or iPads, acting as either the main POS or supplementing your central POS station. This is also called an mPOS. 

7. Desktop POS

POS systems that run on a desktop computer are typically on-premise solutions docked to a checkout station. They’re bulky, but often more powerful and reliable, depending on the hardware you choose. 

8. POS apps

Depending on the POS, there are a few point-of-sale apps to choose from. POS apps work with your hardware and other compatible devices to enable you to access your data and manage business operations. 

9. Open-source POS

Open-source software allows companies to use their source code to build custom solutions with their platform. You can build your open-source POS system internally or with external collaborators. 

How to choose the best POS system

Whether you’re thinking about opening your first retail store or are unsatisfied with your current POS and thinking of switching, it’s critical to choose a POS system that supports your current needs and will help your brand as it grows and its needs evolve. 

Setting up your first POS system, or switching to another POS system, can seem daunting. With a nearly endless array of options, specifications, and reviews to compare, researching which POS to choose can feel overwhelming. 

Finding the right POS system requires a lot of upfront research and consideration—but the return on your investment is worth it. Start by assessing your current needs, and then think about your future: Do you want to sell both online and in-store? Do you want to open more stores?

To ensure your business is set up for success, your POS system should:

• Process sales and take payments
• Help you make flexible returns, exchanges, and store credits (e.g., buy online, return in-store)
• Help you make flexible payment, purchase, and delivery options
• Help you serve multiple customers effectively 
• Offer full visibility into your inventory across all locations, updated in real time
• Enable you to sell everywhere your customers are
• Provide robust analytics and reporting capabilities
• Offer quick access to customer profiles, order histories, and loyalty programs
• Offer robust app integrations to extend your POS system’s capabilities
• Easily integrate with your business tech stack (e.g., marketing, accounting software, etc.)

The most important part of finding the right POS is doing your due diligence. When you’re running a business full time, it can be difficult to find the time to assess your needs, research your options, and plan your path forward.

But here are a few ways to research POS systems, test your options, and ensure that you’re making an educated decision that puts your business in the best position to succeed, today and in the future.  

Ask your network

A great place to start is by asking the people you know and trust. This could be both internally and externally. Maybe you have an experienced employee who can make a recommendation—they already know the ins and outs of your business and, more importantly, use your current POS and interact with customers regularly. They know your current POS system’s strengths and its shortcomings, and can offer useful feedback on what features you should look for in your next POS system.

Alternatively, you can ask someone outside your company who has extensive experience in the retail space and with POS systems. They could be a consultant, another merchant, or an agency that helps retailers regularly.  

Check review sites

To understand how other businesses are using a particular POS, read through a few review sites. You can compare competing POS systems and get a better grasp of each one’s benefits and limitations from retailers who have firsthand experience.

Here are a few great websites to check for business technology and tools:

• G2
• Capterra
• Merchant Maverick
• Software Advice

Read case studies

For more details on how a specific POS system can help you succeed, try checking out a few case studies published by the POS provider. These articles offer insights into individual business success stories, including accounts of how a POS drove better business results.

Here are a few success stories to read if you’re considering Shopify POS: 

• How Tokyobike Synced Their Storefronts and Doubled Sales
• How LIVELY’s Omnichannel Approach Increased Average Order Value by 80%
• How elph ceramics’ Unified its Customer Database and Lifted Retention Rates to 30%

Try for free

If a POS system provider gives you the option to try its product before buying, do it! A trial can give you a sense of whether a POS will meet your business’s unique needs. You’ll get to play around with its features, see how easy it is to use, and test the quality of its customer service before paying for its services. 

If the POS provider doesn’t let you try its product before buying, consider that a red flag. It’s likely because the product is difficult to self-learn—which means more time speaking with support rather than running your business. 

Check contract minimums

Look out for contract minimums, as some POS systems require merchants to agree to stick with their tool for a fixed amount of time. This is limiting for a number of reasons and can lock you into using a tool that isn’t right for your business. 

Instead, prioritize POS systems that come contract-free and give you flexibility to choose either a monthly or annual subscription. 

See it in the real world

As a final step in finding the right POS, go shopping. Visit the stores of retailers you admire, see what POS system they use, and experience how it feels to be their customer. Next, ask them what they like and don’t like about their POS system. This unbiased opinion may help you decide which POS system is right for you. 

What’s the best POS system for retail?

Every retail business has its own needs, and every business owner has to choose the POS that best meets those needs. While we’re biased, we work hard to make Shopify POS the best solution for merchants who sell online and in person by unifying all the tools and reports they need into one easy-to-understand back office. 

For retailers who want to sell everywhere their customers are, Shopify POS is the best POS system. It lets you manage your online and physical store inventory in the same place and comes with hundreds of reports that unify store and online data. Plus you get unlimited staff accounts and registers, the ability to create custom staff roles and permissions, and omnichannel selling features that no other POS system has out of the box. 

Shopify POS also integrates seamlessly with your Shopify online store. If you have omnichannel aspirations, Shopify is the best way to realize your goals while avoiding complicated workarounds or confusing, unreliable customizations.

Shopify POS helps us use online transitions to influence the in-store experience. It helps us better understand how our customers shop and helps us improve our brand experience to reflect their preferences.

POS systems: mission control for your retail business 

Now that you have a better understanding of POS systems, hardware, and software, you’re ready to find the right one for your business. 

Whether you just want to test the waters of physical retail with a pop-up shop, are ready to open your first permanent location, or are an experienced retailer with multiple stores, Shopify POS comes with tools and features that put you in a position to succeed. 

With more customers shopping both online and in-store, it’s important that your POS system helps you do that rather than forces you to use complicated workarounds. The future of commerce is omnichannel—sell wherever your customers are, and thrive with Shopify.