What Are POS Systems?

Modern POS systems have evolved into comprehensive retail technology platforms with sophisticated tools that engage buyers across multiple touchpoints.

To meet increasing consumer expectations for convenience and technology-enabled shopping, POS systems now support omnichannel experiences through features like buy online, pick up in store (BOPIS), and click and collect. Integration of advanced technologies, including computer vision, artificial intelligence (AI), and Internet of Things (IoT) devices, enable automated checkouts, smart vending, and self-service options. Connectivity to other business systems has unlocked robust retail analytics capabilities.

These POS system advancements are helping retailers optimize operations, enhance the customer experience, and stay competitive in an increasingly digital retail landscape.

Benefits of POS Systems

POS systems offer retailers a range of benefits, including:

• Faster checkout processes: POS systems streamline transactions, reducing customer wait times and increasing the number of customers who can be helped through full- and self-service methods. Automated item scanning and identification help reduce manual entry transaction mistakes.
• Customer data management: Customer purchase data stored in POS systems can be used to generate personalized offers or understand broader shopping patterns to inform loyalty programs, promotions, and inventory and marketing strategies.
• Improved inventory management: POS systems provide automated inventory tracking and can be linked to other systems for automatic reordering. Comparison of automated and manual inventory counts helps retailers spot discrepancies, while inventory data analysis enables optimized purchasing decisions to control costs and maintain appropriate stock levels.
• Employee performance tracking: Employee activity data, including hours worked and sales figures, can be retrieved from POS systems. This data can help with staffing, scheduling, and other management reviews.
• Reporting: Data from all POS systems can be aggregated and used to analyze sales, customer purchasing behaviors, inventory, and other key business metrics to help optimize operations and identify areas needing adjustment.
• Integration with other systems: POS systems are just one technology that collects information about a business and its customers. Through integration with other systems and technologies, retailers can gain a comprehensive view of all aspects of their business and across all customer touchpoints.
• Scalability: POS systems are designed to accommodate business growth, though scalability needs in terms of volume and capabilities should be evaluated at purchase or during contract renewals.

The addition of technologies, including AI, edge and cloud computing, and computer vision, combined with retail analytics, further extends these benefits by enabling near-real-time insights and unlocking new customer experiences and levels of efficiency. Retailers can use these data-driven capabilities to gain a competitive edge and increase ROI.

Examples of POS Systems

Many POS system options are available to support a range of retailer use cases and needs.

All-in-One and Desktop POS

Desktop POS systems are PC or laptop solutions used to handle all sales transactions. They connect to payment devices and other business applications used for marketing or accounting purposes. All-in-one desktop POS systems combine a computer, touchscreen, and transaction tools into a single, compact unit, saving valuable retail floor space.

Mobile POS

Mobile POS (mPOS) systems transform tablets and handheld devices into portable payment terminals that employees use to process ultraconvenient transactions anywhere on the premises. These systems can also leverage edge computing to deliver near-real-time customer analytics.

Cloud-Based POS

Cloud-based POS systems use cloud computing for transaction processing, storage, and data analysis, making them scalable and efficient. Retailers favor these data-driven systems for their flexibility, ease of integration, centralized management, and near-real-time data access from anywhere via an internet connection. These systems support contactless transactions and help improve operations. Many retailers use a hybrid cloud approach to optimize inventory and customer interactions while managing costs.

AI-Powered POS

AI-powered POS systems can streamline the customer experience, create operational efficiencies, and reduce theft. Object detection, digital sensors, and motion analytics can enable features that eliminate barcode scanning, recognize differences in bagged items, and enable unstaffed retailing. AI-based POS can also automate inventory management, reordering, employee scheduling, and personalized upsell recommendations.

Omnichannel POS

The shift toward hybrid shopping experiences, meaning online and in store, necessitates a robust data integration strategy for consistent customer interactions across touchpoints. An omnichannel POS system integrates sales channels, enhancing customer experience and operational efficiency. Key benefits include improved inventory visibility, personalized engagement through mobile apps and kiosks, and support for seamless transactions across devices.

Self-Checkout and Contactless POS

Self-checkout POS systems are common in retail settings like grocery stores, restaurants, banks, and hotels. These systems minimize staff involvement by allowing customers to handle most transaction steps. Frictionless self-checkout and contactless POS use technologies like computer vision, AI, and mobile wallets to streamline the buying experience. Self-service kiosks, a type of self-checkout, cater to specific needs like selling movie tickets and often have AI features for accurate scanning, theft prevention, and touchless checkout.

POS System Use Cases

It’s important to explore common features across form factors to assess which best align with business needs while providing a differentiated customer shopping experience.

Payment Processing

Payment processing is a crucial feature of modern POS systems. While cash and checks were once the only options, today’s POS technology provides businesses and customers with more-convenient, frictionless payment-processing capabilities. While POS systems aren’t payment processors themselves, most can integrate with third-party payment processors to handle credit and debit card payments.

Inventory Management

Accurate and near-real-time inventory management is critical for businesses, as poor inventory management and stockouts can significantly impact the bottom line. Retailers can integrate edge-to-cloud solutions into their POS technology to collect, process, and analyze data using AI and machine learning to streamline processes, automate forecasting, and improve efficiency.

Customer Purchase History

Every customer interaction generates valuable data in the POS system that retailers can analyze to better understand their customers, enhance shopping experiences, personalize communications, and identify opportunities for targeted product recommendations. When leveraged effectively, this benefits both customers and stores. Customers find what they want more easily, and retailers build loyalty while increasing profits.

Real-Time Sales Data

Collecting, processing, and analyzing POS data in near-real time can help retailers enhance customer experiences, manage inventory better, mitigate product loss, and make more-informed data-driven decisions. For example, retailers can display dynamic promotional content on digital signs that sync with POS sales data and retail analytics. This prevents advertising out-of-stock or low-inventory products.

Challenges of POS Systems

To deliver the shopping experiences customers expect and gain maximum operational benefits, POS systems must be reliable, connected, responsive, scalable, and easy to use. However, integrating POS systems with existing systems and devices can be challenging due to compatibility issues and fragmented data.

Robust technical infrastructure is needed to support modern technologies like AI, computer vision, and edge computing while staying within budgetary constraints.

Protecting customer data with encryption at the POS, a secure network, and cybersecurity protocols is a critical priority, as is properly maintaining systems. System performance testing and monitoring can ensure successful connectivity and data flow across various applications and environments.

While complex, retailers can work with technology partners to address these issues and accelerate the time to value for their investments.

The Future of POS Systems

Enhancements to POS systems will continue to elevate customer engagement through an omnichannel approach. Future areas of development include:

• AI in POS systems: As technology advances, AI-powered POS systems will become the central “brain” of modern stores, bringing new use cases and customer experiences to life, and helping retailers use real-time data to run their businesses more efficiently and effectively.
• Untethered POS systems: Mobile POS systems will continue revolutionizing the checkout model by bringing the register to customers anytime, anywhere.
• Alternate payment methods: The modern POS will be able to accept alternative payments and payment arrangements, going beyond prepaid cards, gift cards, and digital wallets to cryptocurrency, custom payments, and buy now, pay later (BNPL). Other alternative payment methods could include direct account debits, bank transfers, and peer-to-peer (P2P) platforms.
• Omnichannel experiences: POS technology will continue to enhance personalization in omnichannel experiences, using customer data to offer dynamic pricing and promotions, simplify purchases and returns, and speed up deliveries.
• POS data analytics: POS data analytics will leverage more-advanced algorithms, offer improved predictive capabilities, and seamlessly integrate with other business areas to offer deeper insights to companies of all sizes. This will effectively turn POS systems from simple transaction processors into intelligent business advisers.
• Cloud-based software: As businesses increasingly blend online and in-store transactions, they will likely rely on cloud services to support faster, more agile POS services. Traditional server-based systems will be replaced by progressive web applications that offer smartphone-like functionality through cloud and edge computing solutions.

As customer behavior and expectations continue to change, adopting modern POS technologies will be crucial for retailers to maintain effective customer engagement across all channels.