Last Updated On September 09, 2020 / Written By Chloe Henderson

What Does POS Mean in Retail? An Introduction to Point of Sale Systems

For many businesses, the POS system is a vital solution that accepts payments, stores customer data, and tracks sales to improve retail management.

A retailer's ideal point-of-sale (POS) solution should be able to do far more than just carry out basic transactions. POS systems have evolved to include additional features that can simultaneously improve customer experience and satisfaction while optimizing management operations.

These systems have the ability to automate reporting processes so businesses can gain better insight into sales data, stock levels, and customer demand. Modern POS terminals offer advanced features and automated reports so businesses can maximize customer loyalty and company profits.

What is a POS System?

A POS system is a solution that handles payment processing and customer transactions. Whenever a purchase is made, the software records the incoming funds and outgoing items, as well as the consumer's information. POS services are equipped with hardware and information about the company's goods and prices to ensure speedy checkout for buyers.

The system also acts as a centralized database for other business operations when integrated with additional software. Processes such as inventory control, marketing, and sales can be tracked and analyzed within the system to generate detailed reports. These insights allow companies to understand what products have high turnover rates and where discounts should be added to clear out underselling stock. Additionally, marketing directors can plan effective campaigns using data to drive sales that target their demographic.

There are many types of POS systems that focus on the operations prioritized by different industries. In retail, sales software should optimize daily procedure efficiency, customer experience, and sales insight.

Components of a POS System

Most POS systems are accompanied by hardware that helps perform transactions. Standard tools used by retailers include-

  • Monitor - Computers or monitors display the software and provide other features such as employee schedules, clock-ins, and various reports. Smaller retailers and traveling vendors tend to prefer tablets for mobility purposes.
  • Barcode scanner - Scanners automate the checkout process by utilizing barcodes rather than manually recording sold items and calculating prices. Integrated software shares this information with inventory control systems to update real-time quantities.
  • Card reader - Card readers handle debit and credit card processing with magnetic stripe, chip, or near field communication (NRC) technology.
  • Receipt printer - For some retailers, email receipts may be popular among their buyers. However, major retail businesses should have receipt printers for easy purchase audits and returns.
  • Cash drawer - Cash drawers or registers are essential to keep physical money secure and recorded. Cash is still a popular payment method as it does not require additional fees, as do some credit cards.

4 Essential Features

Daily operations in the retail industry can become overwhelming and long-winded. A modern POS solution increases productivity by streamlining all procedures through automation. The software also provides reporting and management features that optimize retail efficiency. Essential POS system features include-

1. Sales Reports

While systems track sales, features that format quantitative data in comprehensive graphs or spreadsheets make trends more apparent. POS software should be able to generate sales reports based on-

  • Product
  • Hour
  • Employee
  • Profit percentage
  • Net profit
  • Retail amount

2. Inventory Control



Product sales are the primary source of revenue for retail businesses, therefore, inventory should be monitored to determine turnover rates and reorder points. To accurately track stock, POS solutions should be able to-

  • Automate scanning and counting
  • Manage product variations (size, color, bulk)
  • Track items across multiple stores
  • Consolidate orders
  • Establish reorder points for popular goods

3. Customer Management

Establishing customer relationships promotes loyalty and average sales, and should be prioritized by retailers. Sales services track customer data so that the business can improve their shopping experience. POS systems should able to-

  • Create a purchase history for loyal customers
  • Email marketing campaigns to buyers
  • Recognize loyalty programs
  • Send exclusive discounts and sales to loyalty members

4. Employee Management


Employee performance is as important as customer service and should be monitored to find who is hitting the sales targets. Collective information of every employee allows managers to determine who receives the most commissions and who is in need of additional training. The software should also be able to-

  • Seamlessly add employees into the system
  • Create and alter schedules
  • Email employees
  • Monitor wages, hours, and overtime
  • Analyze top and bottom sales representatives

Ideal Features for Retail Businesses

Additional POS features that optimize sales and marketing strategies can be beneficial to retail businesses. Stores looking to improve their customer service, stock control efficiency, and marketing performance should seek features such as-

  • Product Search - Shortcuts in a system allow employees to quickly look up any item to double-check prices, answer a customer's question, and find product variances. This feature saves the frustration of sending an associate to a different department to grab an item, making the buyer wait, and stalling the rest of the line.
  • Returns and Refunds - When deciding to buy an item, many consumers will make sure the company has a return policy. Therefore, systems should have flexibility and be equipped to grant returns, refunds, exchanges, and store credit or gift cards.
  • Product Variations - Based on assigned barcodes, software should recognize a product's variances, such as size and color, when scanned into the system. POS should also reflect price changes with composites or items sold in bulk at a discount.
  • Barcodes - Aside from scanning, systems should be able to print barcodes and labels to keep items organized and traceable. The barcodes will not only identify the product but also locate it within the department or other store locations.
  • Promotions - Manually changing prices with applied discounts and coupons can increase customer wait time and lead to human errors. The software should be able to automatically run all applicable promotions within an order to save the buyer time and money.
  • Customer Database - A customer database should keep a buyer's personal information along with their purchase history. This feature allows consumers to return items without receipts and helps marketing teams determine what deals to promote.

Business owners should consider their store's top priorities when choosing POS software. Additional features may be useful to retailers who are focusing on improving their customer service or marketing techniques.