A Complete Guide to POS Systems for Retail

A Complete Guide to POS Systems for Retail

Retail businesses are an invaluable part of the supply chain for nearly every consumer industry and niche, serving as the direct contact point for general consumers. They connect the gap between wholesalers or manufacturers and the customers, purchasing from suppliers and selling to the public. Retail markets can be traced back to ancient times, however, over the centuries, retail businesses have grown more technologically savvy. Point of sale (POS) systems have become a vital part of any retail business, identifying products, processing payments and completing sales transactions.

In 2021, total global retail sales are expected to reach a value of USD $25.04 trillion, with the numbers only expected to grow further in coming years. There is a healthy amount of competition in the retail market, especially with the growth in popularity of online shopping. Accordingly, it is imperative that retailers offer the best possible service to customers to beat the competition and form their own place in the market. A POS system is an easy and effective way to offer customers excellent service while also optimising operating efficiencies.

POS systems offer unique benefits for every type of business, here is a complete guide to POS systems for retail business owners.

What is a POS system?

Point of sale is traditionally the location of the business where the purchase or transaction takes place. Historically, shop owners or employees manually processed payments at a checkout point in the store, and that evolved into cash registers in the late 1800s, then the current POS systems.

POS system refers to all the components, hardware and software, that together complete customer transactions. Depending upon the niche, the number of hardware components in a POS system can vary. Basic equipment includes POS terminal, monitors, barcode scanner, cash drawer, payment processors and receipt printers. Cash registers are still used by a few small businesses, but their popularity is fading due to the superior software benefits of POS systems. Casio, a leader in cash registers recently announced that it is discontinuing production of cash registers.

The software used by a POS system is a key part of the overall setup as it links the various components and supports important features. The POS system identifies products, calculates billing, includes taxes, accepts payment, generates receipt and tracks sales. Additional features include inventory management, customer relationship management, reporting & analytics, and employee management.

Components of a POS System

The need for multiple components in a POS system can appear complex and intimidating. Understanding each part individually can help you find the best setup for your business. The two primary elements of a POS system are POS software and POS hardware.

1. POS Software

At the core of any POS system is the POS software that integrates and manages the different hardware components. There are a wide range of POS software providers available, including popular options such as Vend, Shopify, Square and Touch Bistro. Industry-specific POS software is available, for example for retail and restaurants. There is also open-source POS software that you can customise to suit your needs. The POS software you use will define the number of features that your POS system can support.

There are free POS software options available, but they generally involve a lot of hidden costs or offer limited functionalities. Paid POS software, whichever fits in your budget, is a better option for good quality features and optimum service. It is essential that the POS software is reliable as problems can disrupt your entire checkout process. When selecting POS software consider your business size, desired features, expected sales volume, and compatibility with any POS hardware components you may already have. Larger businesses will often require more complex POS software as compared to smaller businesses.

There are two types of POS software available based on the server location: on-premise and cloud-based POS software.

  • On-Premise POS Software

Also known as local, traditional or legacy, on-premise POS software is installed and stored directly on a server in your store. As the POS system runs on a closed internal network, it cannot be accessed by outside devices. On-premise POS software is reliable and can be used offline. There is generally a high upfront cost for the initial installation of the on-premise POS software, and an adequately sized server is needed, but there are no monthly recurring fees. Maintenance and software updating charges are extra, and will often require help from qualified technical support.

With on-premise POS software, since the hosting is local the data can only be accessed directly from the store, and not remotely. Data backup also need to be taken manually on a regular basis. A decent range of features are supported by on-premise POS software, but it can be challenging to configure additional features after the initial installation, and may need technical support. Due to its limitations, the popularity of on-premise POS software is receding, however, it is still in-demand for businesses with poor internet connectivity.

  • Cloud-Based POS Software

The evolution of the cloud has led to its applications in a wide range of areas, including POS software. Cloud-based POS software is a form of Software as a Service (SaaS) where all the POS data is hosted in a remote server on the cloud. A cloud-based POS software setup can be installed remotely and accessed from anywhere online. There are regularly scheduled updates and data backups that take place automatically, saving you time and effort. There are minimal installation costs for cloud-based POS software with subscription fees applicable either on a monthly or annual basis. All the update costs are included in the subscription fee; however, you may have to upgrade your subscription plan along with business growth.

As hosting is on a remote server, you do not need any specialised equipment or architecture to operate the cloud-based POS software. All that is required to run the software is a decent POS terminal and internet connection. They have excellent flexibility and support for integrations. Any new features, tools updates or integrations with third-party software providers can be incorporated with the cloud-based POS software when desired, increasing its functionality. The biggest limitation is that cloud-based POS software is heavily internet dependent. If there is a disruption in internet connectivity or the quality drops, the POS performance will be affected.

2. POS Hardware

POS hardware components are required to physically conduct each stage of the transaction process from identifying the product and price, to billing, and accepting payments. The basic hardware components for a POS system are the POS terminal, monitor, barcode scanner, cash drawer, payment processor and receipt printer. Additional components can be added depending on business needs, such as extra monitors, weighing scales or self-service kiosks. Compatibility between the different hardware components and with the POS software is essential for an optimally functioning POS system.

Hardware components for a POS system come in a variety of price points to suit the budget of all businesses. When setting up a new POS system, the hardware components will account for the biggest financial investment. Based on your business size and the number of customers expected, you may need multiple sets of POS hardware, further increasing the expenses. POS systems are flexible so more hardware components can be incorporated based on new requirements. Purchasing good quality POS hardware components is essential for a smoothly operating POS system. Any breakdowns during operation can result in crowding, long lines, and abandonment of purchasing by customers.

Here are the main hardware components of a POS system:

3. POS Terminal

The POS terminals or register is the most important component of the POS system, and is where the POS software is installed. It is the primary interface through which the POS software is operated and connects with the other POS hardware components.

For the POS terminal, you can use any device that has an adequate support for your desired POS software. Popular options for POS terminals are tablets, iPads, smartphones, laptops, desktops and dedicated POS devices. Many businesses start out with smaller tablets or iPads and move on to dedicated POS terminal devices. For retailers, portable POS terminals are a good option as they promote greater mobility, allowing staff to directly help customers.

4. Monitor

The monitor displays all the relevant data for each transaction, helping prevent errors while improving speed. There are two options for monitors, either a touch screen integrated POS terminal where the monitor is built-in, or a separate monitor if you have a normal POS terminal without a monitor.

Touch screen monitor can also be used as an additional input source if your chosen POS terminal does not have a touch screen. Extra monitors specifically for customer displays can be used in combination with the POS terminal and the main monitor for greater transparency and to encourage customer confidence. An extra monitor for customers can be helpful for retailers.

5. Barcode Scanner

A barcode scanner is necessary if you have a barcode system in place for your products. It facilitates speedy checkouts, especially of multiple items, by instantly identifying relevant information about the product. Barcoding your entire catalogue of products is an effective way for retailers to keep track of inventory and sales. It helps you identify the products that sell the most and provides useful guidance in how frequently you need to restock.

The barcode scanner you need will depend upon the type of barcodes you use, for example 1D, 2D or QR. While some barcodes and QR codes can be read by smart device cameras such as smartphones, for other barcodes you will need a compatible barcode scanner. There are a variety of scanners available in formats such as desktop, handheld and wireless. They can be connected with the POS terminal either through cables or via Bluetooth.

6. Cash Drawer

A cash drawer is inevitability needed by all businesses. Despite the popularity of cashless payments, cash is still a major form of payment, and will likely remain so. To store all the cash securely and be able to provide appropriate change to customers, a cash drawer is required. With multiple compartments and slots, cash drawers help keep cash organised and safe, and even have additional slots to store payment receipts and cheques.

The sizes of cash drawers tend to vary, with different capacities and numbers of slots and compartments, and you can choose a capacity depending on the frequency of cash transactions. Sturdy and robust, cash drawers tend to be large and heavy and are one of the bulkiest components of a POS system. It is typically connected with the POS terminal and the receipt printer, receiving opening orders from the operating system, and signalling completion of transaction to the receipt printer.

7. Payment Processors

Catering to the payment preferences of customers can help you increase sales in your retail business, encourage higher average order values and gain repeat customers. Apart from cash, other prominent modes of payment include credit/debit card payments and contactless payments through apps and digital wallets. To process card payments, you will need an EFTPOS or Electronic Funds Transfer at Point of Sale device that can read and swipe cards. The EFTPOS is often integrated with the POS software to help integrate transactions conducted through EFTPOS.

Although credit/debit cards and cash are the most popular methods of payment in Australia, depending upon you niche, location and target customers, you can support additional payment methods. Most digital payment wallets can be enabled through the POS terminal and POS software. For contactless payments such as tap-and-go payments, check what equipment is required to support them. Many EFTPOS devices can be used for contactless payments.

8. Receipt Printer

A receipt printer is an integral part of a POS system, as it produces custom receipts that act as a physical record of the transaction taking place. The receipt includes details of the transaction such as products, applicable discounts, date and time of purchase and even details on the employee who sold the item. Even with digital receipts gaining popularity, physical receipts are still preferred by customers, especially in retail if returns and exchanges are supported. Receipt printers are designed to be reliable and fast, capable of printing throughout the day with full accuracy.

Typically, receipt printers either use thermal printing or impact/dot-matrix printing technology and are available in a variety of price points. While impact receipt printers are suitable for warm environment and creating multiple copies of a single receipt, they are noisy and have poor printing quality. Thermal receipt printers have better printing quality, are fast and quiet, making them ideal for retail environments. There are fixed receipt printers and mobile receipt printers available, to support traditional and mobile POS systems.

POS Systems for Retail

POS systems have become an important part of retail businesses, providing a vast range of benefits such as streamlining sales, promoting better customer relations, and keeping track of transactions. With developments in POS technology and its significant applications in retail, there are industry specific POS systems that are designed precisely for retail.

  • Cloud-Based Retail Specific POS Software

Most of the dedicated retail features of POS systems are through the POS software. Retail specific POS software is capable of supporting large volumes of products, bulk data, fast checkouts, inventory management, customer relationship management and personalised offers. The configuration of the product catalogue is designed to support multiple variations of a single item, for example different sizes or colours.

Typically, in the form of cloud-based POS software, retail POS software enables staff to access customer data from anywhere at anytime so that they can encourage sales personally. Cloud-based POS software is automatically updated and saved, helping retailers avoid loss of any data or problems with the POS software. If you decide to expand sales to an eCommerce site, the POS software can integrate both sales channels so that you can manage them in a streamlined manner.

  • Combination of Mobile and Traditional POS Setups

Other than the POS software, there are several ways POS hardware components can be chosen and setup to suit a retail environment. Mobile POS systems, also known as mPOS are great for retail stores. With an mPOS, the POS system is portable and can be taken to wherever the need arises. This helps staff develop a rapport with customers and apply sales techniques such as upselling and cross-selling to increase average order values. An mPOS system primarily involves a mobile POS terminal, such as a tablet, smartphone, or iPad, and optional additional equipment like payment processors or receipt printers.

An mPOS system clearly supports greater mobility, but having only a mobile POS system can be confusing for new customers and lead to long lines. A combination of traditional fixed POS checkouts and a few mPOS devices is an excellent option for retail businesses. With a combination setup, you get the stability and features of fixed POS systems along with the flexibility and mobility of an mPOS. If there are long lines of customers, an mPOS setup can easily be converted into a temporary checkout point. If expenses are a constraint, you can start with either a fixed or mobile POS system, and expand to a combination setup when budget allows, or customers increase.

What are the features of a Retail POS System?

A POS system aims to increase the speed and efficiency of checkouts, while also providing you with accurate data to help improve your business. A retail business has unique needs and using a POS system specifically designed for retail businesses can help you succeed. Although the exact features supported by a POS system will depend upon the POS software you use, the key features of retail POS systems are:

  • Efficient Checkouts

The primary purpose of a POS system is to conduct transactions at the checkout point, and a retail POS system is well-equipped for fast and efficient checkouts. There is often a high risk of congestion and crowds at the checkouts, and this can be highly detrimental for a retail business. With crowds and slow checkouts, customers are likely to either leave their purchase entirely, or complete the current purchase and not return in the future. Retail shops generally have a large catalogue of products on offer, and the POS system needs to be able to stay up to date with all the products available.

The POS system should be easy to use and operate with an intuitive interface so that new employees and users can quickly understand its operations. All the POS hardware components should be fully integrated and compatible to function as a single cohesive unit. A carefully implemented barcode system combined with adequate barcode scanners will help in instantly identifying the products selected by the customers. Quick payments and fast receipts will complete the transaction. Based on the store size and number of checkouts you want to support; the POS software needs to be robust enough to manage multiple POS terminals.

  • Payment Processing

To encourage customers to spend more money and increase their average order value, it is necessary to support a variety of popular payment methods. A retail POS system should have adequate support for payments through cash, debit/credit card, mobile wallets and any other payment methods in demand. Robust POS software can keep track of multiple payment formats and apply any discounts or additional costs as needed.

Having a good quality EFTPOS device is important to support card and contact free payments, so that payments are accepted in the first attempt directly. If you sell high value products, you can also consider supporting split tender payments where customers can use more than one payment method for their bill. For example, paying for a purchase using both cash and a credit card.

Include as many details as possible regarding the transaction onto the receipts for greater transparency and to build customer trust. Apart from offering payment flexibility to customers, a retail POS system should accurately record all payment details for business record as well, to help in accounting, and financial planning. Tracking payment methods used can help in revising the POS setup when needed by adding new payment modes that are in demand, or removing those that are unpopular.

  • Inventory and Catalogue Management

Adequate inventory and catalogue management is necessary for all retailers to maintain the balance between demand from customers and supply from wholesalers/manufacturers. Identifying and understanding the best-selling products and available stock will enable you to setup an ordering schedule to prevent items from running out. A POS system in combination with barcodes is an ideal solution to all inventory concerns. Specialised retail POS systems can store products in variants for different styles, sizes and colours, helping employees track specific options required. Items can be grouped together in bundles based on categories or offers.

An integrated barcode and POS system will give you real-time and accurate knowledge of inventory, how many products have been sold and how many are left. As each product is scanned and sold at the POS checkout, it is reduced from the existing stock in the inventory. Automatic notifications can be setup to remind re-stocking when any popular product starts running low. If you have multiple stores and warehouses, a single inventory system can help you keep track of how many products have been sold and are still available. The POS system can help you identify which products have poor sales performance, and you can accordingly revise your overall catalogue offerings.

  • Returns and Exchanges

Offering customers the option to return or exchange purchased goods is a great way to encourage them to buy items they may otherwise be hesitant about. Returns are immensely popular whether it is supported by offline or online retailers, and not having the option for returns can put your retail business at a disadvantage. A retail POS system can help you conduct returns and exchanges easily and efficiently. Based on your preference, you can offer customers full refunds, exchange with other products, store credits or any other type of return.

The retail POS software will have an option for return or exchange, and can help you complete the transaction. As purchase records and data are stored with the POS software, employees can track the original transaction and associated customer details. The exact barcode and other identification details of the product can be recalled and printed again, so that pristine products can be returned to your catalogue. If there was a manufacturing issue with the item, it can be removed from the offering altogether, and the product details can help you raise the concern with the supplier. If you have a customer loyalty programme in place, credits or points from the return can be added to the customer’s account in place of a cash refund.

  • Information Access

Information is power, even more so when it comes to a retail store environment. With a robust POS system, all the data regarding customers and products is instantly available, and varying levels of access can be granted to employees. At the checkout, previous customer data can help speed up transactions by instantly drawing up customer details that were used in the past.

Data regarding products and availability of items can help sales personnel in solving queries of customers. If they are looking for a specific item, the POS system can instantly confirm if it is in stock, and even where it is located. If an item is out of stock, a POS system can inform when it will be coming in or if it can be found in another branch of the store or online.

Information regarding previous purchases, popular items, and key items for upselling and cross-selling can help employees increase average order volume. Based on the item that the customer is currently looking for, employees can find other suitable items to recommend to increase sales. A mobile POS system allows employees to directly interact with customers, form a rapport and encourage sales.

  • Customer Relationship Management

Building a positive and long-term relationship with customers is the key to success for any retail business. Any number of new customers cannot replace the value of loyal customers who shop from your brand again and again. A retail POS system helps you provide an improved and personalised customer experience. With a retail POS system, customers can easily join a loyalty programme directly from the checkout point, with details entered for the transaction. A unique record can be created for each customer, highlighting profile information, past purchases, preferred payment methods and more. This data can be used for marketing purposes, to present special offers and discounts, and to speed up transactions.

Customer loyalty programmes are a great way to encourage customers to shop again and with more frequency. Complicated loyalty programmes that require additional steps to participate have a higher chance of failure, as compared to easy to access programmes through POS system. When the customer loyalty programme is accessible through POS devices, you can instantly update customers on available points, bonuses, and other deals when they make a purchase. An accessible customer loyalty programme is engaging for customers and easier to manage for the business and employees.

  • Employee Management

A successful retail business is a joint effort of management and employees. Setting in place an effective employee management system from the beginning will help you in seamless expansion as and when business grows. While there are plenty of dedicated employee management software options available, they require extra time and efforts to operate, and can be susceptible to tampering. Using a retail POS system for employee management is efficient, time saving, and effective.

A retail POS system can support unique logins for each employee, keeping track of the work timings and number of sales completed by each employee. For stores with a shift system, employee shifts can be scheduled and managed directly through the POS system, including applications for changes in shift or absences.

Payroll management is also supported, with the POS system calculating approximate salaries based on wage policies and hours worked. If you have a commission-based sales setup, the commission for each employee can be automatically calculated based on the sales completed or any other parameter. A POS system overall helps you monitor the performance of employees, including finding top performers, stragglers and even any unfortunate thieves.

  • Marketing Tools

Marketing is a powerful tool as it helps in attracting new customers and encouraging existing customers to purchase again. A retail POS system is an excellent asset for marketing efforts by providing a database of addresses, email ids, and other details of existing customers. Targeted advertisements, coupons, newsletters and other deals can be sent to customers. Many POS systems have email marketing tools in-built, and can directly send promotional emails with minimal requirement for manual effort.

A POS system indirectly supports marketing efforts as well, by providing accurate data on sales performance and customers. This data can be used to launch independent marketing campaigns whether offline through advertisements or through digital marketing. Information on locations of majority of customers can indicate regions where marketing campaigns can be targeted. Furthermore, POS systems are an excellent way to monitor the performance of on-going promotions or marketing campaigns. Based on performance of past campaigns, future campaigns can be revised and adjusted for greater success.

  • Analytics and Reporting

Every item sold moves directly through your POS system and is recorded, creating a data warehouse that you can use to improve your business. POS systems can produce an abundance of analytical reports on everything from total sales, sales per month/week, best selling items, best selling categories, customer profiles, profits generated, and more. Based on the POS software you use, you can further customise the type of reports you want, their format, and who should have access to the reports.

Automated reports are better at recording all the minute details that might have been overlooked if the report were compiled manually. Data based insights can help you plan your business growth with greater consistency and higher chance of success. For example, reports on the sales of items and categories can guide you in refining your overall business offerings. Reports on the performance of marketing campaigns and promotions can help you identify the types of offers and discounts work best for your particular business and location.

  • Customisable Integrations

Retail businesses are unique in their own way and so are their needs and requirements from a POS system. A retail POS system has excellent support for customised integrations with additional tools to further improve the functionality of the POS system. Accordingly, you can add on the features and capabilities that your business needs, customising the POS system to suit you. Many POS systems have optional features available, while integrations can be used to incorporate existing tools that you may already be familiar with. The level of integration support will depend upon the POS software that you are using.

There are a wide range of integrations available, including for general applications and niche-specific uses. Payment integrations supports use of additional payment gateways while accounting can link POS data with external accounting software. If you currently have an eCommerce site or are planning to launch one in the future to support your business, eCommerce integrations can streamline and simplify overall management. Repetitive tasks can also be automated with the aid of customised integrations. Other popular integrations include for analytics, marketing, CRM, inventory, logistics, human resources, loyalty programmes, range planning, and enterprise resource planning (ERP).


Running a successful retail business is not easy, especially with the amount of competition in the market. A powerful tool with unlimited potential to help you succeed and grow is a POS system. With the evolution of POS technology, there are industry-specific POS systems available, including with dedicated POS software for retail. A retail POS system can help you with everything from efficient checkouts to payment processing, customer relationship management, inventory management, employee management, reporting and more.

For an optimised POS system, it is important that you choose good quality POS hardware components from a reputed seller. Setting up a POS system can involve a considerable investment, especially if you have multiple checkout points, however, the benefits are worth it. A good quality retail POS system tailored to your business needs can dramatically improve management and reduce manual efforts while optimising operational efficiency.

Here at POS Plaza, you can find a full range of all the necessary POS hardware components required to setup an efficient POS system. Whether you want an entirely new POS setup or an expansion of an existing POS system, we have top quality POS hardware and accessories in a variety of price points. Reach out to our experienced team today to discuss your POS needs.