What Is a Point-of-Sale (POS) system and how does it work?

A POS (Point of Sale) is the system where a retail transaction is completed. It combines hardware and software to process sales, accept payments, issue receipts, and manage inventory. POS systems streamline checkout, track customer purchases, and support business decisions through real-time sales data.

Here are the 5 main types of POS.

Standalone POS

Standalone POS systems have come a long way from being mere cash registers. They can now not only accept payments, but also perform advanced retail tasks that are helpful in a number of ways. While they still accept multiple forms of payment and make it easier for retail staff to process payments and seamlessly store customer information, they also help perform different retail-oriented backend operations.

Today's sophisticated standalone POS devices also have integrated software and can save sales information on centralized servers. This is especially true if a tablet-based software program is being used. Some of the advanced features they now offer include reporting and analytics, integrated transaction processing, and essential inventory management.

However, most are designed to function as compact solutions for small businesses. They are good options for brick-and-mortar stores that have a limited number of staff. Advanced or not, standalone POS systems can only be used at a single location and are unsuitable for larger businesses that manage multiple checkout locations. Moreover, using multiple standalone POS systems requires overhead manual work to synchronize data between systems.
Although it has the advantage of giving what small store owners need to process payments quickly, there are better options for those who plan to scale up their operations.

Omnichannel POS

An omnichannel POS helps retailers collect payments anytime, anywhere. Most importantly, it helps implement an omnichannel shopping strategy that gives customers a frictionless shopping experience.
An omnichannel POS collects data from various touchpoints in real-time and ensures that customers get a uniform experience regardless of where they interact.

As most customers start their purchase journey on a particular platform but check out on another, omnichannel POS is the perfect solution to address non-linear buying behavior. It also creates a unified customer view that eliminates the problem of siloed and duplicated data.

Regardless of how erratic a customer's buying behavior is, all data is updated in real-time across platforms so that customers get a seamless shopping and checkout experience regardless of the touchpoint.
Both small and large businesses can use omnichannel POS systems, and it is perfect for scaling up alongside scaling down. However, it is important to note that all omnichannel POS systems may not allow scaling up operations, or support integrated payments.

Centralized POS

A centralized POS system is geared towards stores that have multiple physical and virtual locations. It gathers data from different stores, warehouses, and distribution centers to help retail businesses manage their sales more efficiently. Although centralized POS systems may seem similar to omnichannel POS systems, they offer more features and opportunities to scale up.

While omnichannel POS systems focus on enhancing customer experience by offering a unified shopping experience, centralized POS systems help retailers with several physical stores to manage their backend processes efficiently.

Centralized POS systems possess all the omnichannel features in addition to helping retailers scale up and process payments seamlessly. It is particularly well-suited for businesses that have plans to grow in the near and distant future. Moreover, a centralized approach toward all data that is updated in real time helps businesses to foresee and leverage potential opportunities to scale up.

A centralized POS system is excellent for both B2C and B2B vendors, wholesalers, and retailers dealing with bulk materials and products.

Integrated POS

An integrated POS system not only records sales and accepts payments but also processes payments and completes transactions. It eliminates the need to manually enter purchase-related data manually, making checkout quicker and smoother.

Integrated POS systems focus more on the payment processing part of the checkout experience and help customers and retailers save time. As payments go through smoothly, customers are less likely to abandon carts at the counter or on the checkout page. In addition to credit cards, integrated POS systems accept multiple types of payments, such as Apple Pay, Google Pay, PayPal, gift cards, loyalty points, etc.

In addition to the specific focus on payments, an integrated POS system performs all the tasks a regular POS system does. However, unless specified, it cannot be taken for granted that an integrated POS system also provides an omnichannel shopping experience.

Smart POS

A Smart POS is an advanced evolution of traditional POS systems, integrating features from omnichannel and centralized POS:

Omnichannel Functionality: Operates on cloud-based software, allowing seamless access across multiple devices and platforms, ideal for businesses offering both online and physical store experiences.
Centralized Management: Manages inventory and data from various locations in a central hub, providing real-time insights and simplifying stock control.

However, Smart POS goes beyond these functionalities by offering additional features like:

• Advanced Payment Processing: Handles various payment methods including credit cards, digital wallets, and contactless payments.
• Data Analytics: Collects and analyzes sales data to provide insights into customer behavior and buying trends.
• Improved Customer Management: Supports loyalty programs, targeted promotions, and customer relationship management tools.

7 Important POS software features

Sales processing and management

A POS system's most important function is to accept different kinds of payment and complete sales transactions effortlessly. It also collects essential customer and purchase-related data, which helps generate valuable reports and insights.

Sales and marketing teams can use these insights to identify top-performing products, high-value customers, and specific market trends. This helps them make data-driven decisions that lead to effective sales management. Most importantly, the sales team can kick-start sales campaigns that are based on real-time and historical data.

Inventory management

Inventory management is an important feature of a comprehensive POS system.

After each successful sales transaction, the POS automatically updates the inventory to ensure that a particular item is sold. Retailers can access this information in the backend and ensure that the stock is replenished as and when required. This helps avoid issues related to under-stocking and overstocking.

Most importantly, purchase orders are processed quickly and delivered to the customer on time.

Customer relationship management (CRM)

CRM functionality is an absolute must in a POS system. During checkout, important customer information such as billing address, payment details, and purchase-related information is stored.

This helps later when customers request returns and refunds and also when they seek after-sales support. In some cases, this information also saves you from false chargeback claims, also known as friendly fraud. In addition, a POS with CRM generates richer insights that provide a clearer picture of each customer. This helps to personalize marketing communication and provide more meaningful customer support.

Employee management

Employee management helps you perform basic HR tasks such as creating and updating employee profiles at the store level. Most importantly, you can grant or remove access to various features of a POS system. It also helps employees to clock in and clock out and mark their attendance.

Store managers can monitor how each team member performs and encourage them to be more productive.

Reporting and analytics

A POS system collects different kinds of data, starting from customer information to product-related data.

In addition, it also gathers valuable information related to sales, returns, and success of loyalty programs.
Many POS systems are equipped with predictive analytics, which help generate meaningful insights and reports. These smart insights can be used to make informed decisions that help drive more sales and enhance revenue figures.

Security and compliance

A POS system collects confidential and private information about customers.

Stringent guidelines regarding data protection and safeguarding customer privacy require a POS system that offers security and compliance with regulations as a standard feature.

Some regulations you must be aware of include the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Choose a POS system that offers encrypted transactions, fraud detection, regular software updates, and secure user authentication.

Pricing and discount management

Lastly, ensure that the POS you choose offers pricing and discount management.

Depending on insights derived from inventory management, you will need to offer discounts to clear stock. You must also implement loyalty programs and reward points to nurture and sustain existing customers.

Choose a POS that helps you implement customized discounts and loyalty programs quickly and easily. Most importantly, ensure that all this data is centralized so that the exact prices and deals are visible across all your physical stores and online touchpoints.