POS Software: What Point of Sale Software Is and How To Use It

Merchant using Shopify POS software at their retail store

If you want to start selling in person, you need POS (point-of-sale) software. 

Whether you want to sell at events, are planning your first pop-up shop, or are ready to open your first permanent location, POS software is what you’ll use to manage store operations, ring up customers, accept payments, and track store sales.

Researching your point-of-sale software options? Read this overview to discover the right POS for your business. 

What is POS software?

POS software is the operating system you use to manage physical stores and sell in person. It’s what store staff use to find products, add them to a customer’s order, and accept payments.

POS software also has helpful tools like sales reporting, inventory management, and integrated loyalty programs. 

More modern software, such as Shopify POS, is built for merchants who sell online and in person. It connects to your ecommerce platform and lets you run your entire business from one place rather than with two separate systems.

Shopify POS software

Unify your sales channels with Shopify

Only Shopify unifies your sales channels and gives you all the tools you need to manage your business, market to customers, and sell everywhere in one place.

What’s the difference between POS software and a point-of-sale system?

POS software is an operating system. The Shopify POS app, for example, is POS software. Once it is installed on a connected device like an iPad or touchscreen tablet, it becomes your cloud-based POS system. 

While it is just that—software—a POS system is the combination of software and hardware, like tablets and card readers. Your POS system is what you use to look up products, check out customers, accept payments, and make sales. 

Modern POS systems are like well-organized filing cabinets, where all the information you need is readily accessible and easily updated when changes are made. With a POS system, you can get an accurate picture of your business operations in an instant.

What features should POS software include?

Some POS software, like Shopify POS, connects to your online store and includes the features below. Other types may require you to use different software to get the POS features you need. 

Integrated payment processing

Partnering with a third-party payment processor used to be the only way to accept payments, but has its drawbacks. Oftentimes, you would need to manually enter card numbers and order totals into your payment terminal at checkout. This increases the risk of under- (or over-) charging customers, and slows down checkout.

Third-party payment processing fees also vary depending on which credit card your customer uses. As a result, the amount you spend per month on transaction fees fluctuates, making managing cash flow more difficult than it needs to be. 

But Shopify POS comes with Shopify Payments—payment processing that’s fully integrated with your point-of-sale software. Order amounts are automatically pushed to your card reader, so you never have to manually enter card details. You can also track transactions and see when funds will be deposited in your bank account in Shopify admin.

💡 TIP: Shopify Payments is included in all Shopify POS plans, no sign-up or setup fees required. Control your cash flow better and pay the same pre-negotiated rate for all credit cards, starting at 2.4%.

Mobile checkout 

If you’ve ever shopped at a store with a traditional cash register, you know how frustrating it is to wait in line to pay. With POS software, you can banish lineups to pay and bring your checkout to customers. 

Point-of-sale software like Shopify POS can be installed on any tablet or smartphone, making it a mobile POS (mPOS) system. With mobile devices, store staff can look up inventory, process sales, returns, and exchanges, and take payments, without leaving the customer’s side. Rather than having customers wait in line to pay at the checkout counter, it comes to them. 

If staff often find themselves serving more than one customer at a time, a mobile POS system lets them save a 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. 

mPOS software helps you give 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. 

Centralized inventory management

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

Choose software that centralizes your inventory into a single 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. 

As Sophie Rankine, co-founder of ceramics brand elph ceramics, says, using POS software that speaks to your ecommerce platform will also prevent you from manually counting and reconciling inventory each day to ensure the stock availability on your online store reflects what you actually have in stock. 

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, reconcile inventory, and update stock quantities customers saw on our website. With Shopify POS, our stock levels sync automatically with our online store.

Sophie Rankine, Co-Founder, elph ceramics

Customer relationship management (CRM) 

A customer relationship management (CRM) tool connects to your POS software, and shows you what customers bought and when they bought it. That data helps you personalize your communications, marketing, and customer service. 

While some setups require you to use third-party CRM software, Shopify POS records what customers buy, where and when they bought it, the total value of that transaction, and their contact information. 

When paired with tools like Shopify Email, these built-in CRM features will help fuel your email marketing and loyalty programs—both of which help increase customer retention, repeat purchases, and lifetime value. 

🤝 LOYALTY TIP: Use loyalty apps like Smile to boost customer retention and let shoppers collect and redeem points every time they shop with your brand online or in store.

Unified reporting and analytics 

While POS software’s reports usually include data collected exclusively at your store, 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 sales channel. When that happens, you’re forced to manually create spreadsheets to aggregate online ordering and store data and find the insights you want. 

That’s where POS software that unifies online and in-person selling is useful. Online and physical store data is found in the same reports, which helps you get a complete view of your brand’s performance faster. You can also set up integrations with your accounting software and other tools to bring everything together. 

We use Shopify regularly to monitor sales and key performance indicators, both in-store and online. The user-friendly way that this information is presented is so important and it makes it easy to see what is working.

Miquel Cardona, Chief Business Development Officer, PDPAOLA

💡 PRO TIP: Only Shopify POS unifies your online and retail store data into one back office—from customer data to inventory to sales and more. View easy-to-understand reports to spot trends faster, capitalize on opportunities, and jumpstart your brand’s growth.

Employee 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 POS software 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. 

Staff roles and permissions also make it easier to manage your retail staff. With them, you can set boundaries on what store associates can and do, without manager approval—like changing a product’s price or applying a discount to a sale. 

Physical and email receipts 

Providing customers with proof of purchase is something all POS software should do. Not only do receipts make processing returns and exchanges easier, they can also be a great way to collect a customer’s contact information and create a customer profile at checkout. 

Sending digital receipts via email is a great way to collect customer contact information at checkout, build your email list, and fuel your retention marketing efforts. Just make sure they’ve opted in to hearing from you before you send them anything.

Gift cards that work online and in-store 

Gift cards are becoming increasingly popular. In fact, the value of the gift card market in the US was $160 billion in 2019 and is estimated to reach $221 billion by 2024. This growth is partly due to rising adoption of gift cards by millennials and the increasing demand for digital gift cards (eGift cards) that shoppers can redeem both online or in-store. 

But not all POS software allow shoppers to use eGift cards in-store or to use physical cards online, which is frustrating for customers. Ensure your software gives customers the flexibility to pay for purchases with gift cards wherever they choose to shop. 

💡 PRO TIP: With Shopify POS, you can sell physical and digital gift cards that can be redeemed both in-store and online. Sell physical gift cards in store and email digital gift cards to customers that they can redeem wherever they prefer to shop.

Flexible order fulfillment options 

POS software that connects to your online store also helps you offer fulfillment options that let customers receive orders in a way that’s convenient for them. 

Offering in-store pickup (also known as buy online, pickup in-store) can help increase store traffic. Once a customer is in-store, that’s another opportunity to serve them, help them discover more products, and add items to their order.

Ship-to-customer order fulfillment, on the other hand, can help boost store sales, especially if you run a low-inventory business or run out of stock often. Rather than being limited to selling products your store has in stock, you can complete sales for out-of-stock items and ship them to customers from whichever store location or warehouse has available stock. 

Offering fulfillment options like in-store pickup and ship-to-customer can be difficult when you use different systems to manage your online and physical store. It may require third-party plug-ins or complicated workarounds. But when you use the same platform to run both, it’s straightforward to set up. With Shopify, for instance, these fulfillment options are built in and can be set up in minutes from Shopify admin.

What hardware does POS software run on?

If you have a pop-up shop, plan to sell at events, or have a permanent physical storefront, you need to connect your POS software to the right hardware to accept payments and track sales. 

At the very least, you’ll need to install your software on a tablet or smartphone. Once installed, that tablet or smartphone becomes your tablet or smartphone becomes your POS terminal. To accept in-person payments, you’ll need a card reader. 

Here’s a breakdown of common types of POS hardware a retail business needs. Keep in mind the hardware you need depends on your store setup, and the cost of your POS system will fluctuate depending on how much hardware you need. 

  • Connected device, such as an iPad or other tablet. To use POS software, you’ll need to install it on a portable device. Once your software is installed on a device, it becomes your tablet or smartphone becomes your POS terminal and is what you’ll use to find products and check out customers. 
  • Credit and debit card reader. A card reader is essential if you want to securely accept card payments at your store. Ensure your card reader accepts contactless payments like ApplePay, chip cards, and magstripe cards. 
  • Cash drawer. For the customers who still want to pay cash, you need a cash drawer. Connect your POS software to your cash drawer and start cash tracking sessions to balance your cash drawer faster at the end of each day. 
  • Receipt printer. While email receipts are popular, you’ll likely need a receipt printer as well. A receipt will show customers what they purchased, when they purchased it, which store they purchased it at, and how much they paid.
  • Bar code scanner. Bar code scanners are used to read an item’s product tag and add it to a customer’s cart at checkout. It can also be used to count inventory faster. 

What are the benefits of POS software?

POS software that connects with your online store helps you run your whole business from one system. When ecommerce and retail stores talk to one another and are managed in the same place, it makes managing and growing your business more straightforward. 

Manage your inventory in one place 

If you sell online and at your store using different systems, chances are you use an application program interface (API) to share inventory data between the two. While APIs do share data between two systems, they’re not always reliable.

APIs are built by third parties—that is, companies that aren’t your ecommerce platform or your POS software provider. While the API does share data between both systems, oftentimes that data isn’t shared in real time. 

In many cases, the API can’t share data as fast as it changes in either system. As Felix Ilett, head of sales for resort wear brand Mister Zimi, explains, relying on APIs to share inventory data between your POS software and ecommerce platform has its risks.

“We had a pretty cataclysmic event during our online warehouse sale,” says Felix. “There was a significant amount of people shopping on our site, and Vend POS’ API refresh rate couldn’t keep up with our online transaction volume. That caused our website to display incorrect inventory availability, which resulted in us overselling certain items.”

The team had to spend countless hours figuring out which inventory they had oversold, issuing refunds, and managing damaged customer relationships. 

Our customers’ confidence means everything to us. The whole experience made us realize we wanted our inventory management to function entirely within Shopify, rather than using disparate systems connected by an unreliable API.

Felix Ilett, Head of Sales, Mister Zimi

With Shopify POS, you don’t have to manually count your store inventory and jump from your ecommerce platform to your POS software to reconcile quantities on hand. Inventory quantities are adjusted in real time as you sell products online or at your store. This ensures your inventory data is reliable. The product availability shoppers see online is the same as what you actually have in stock at your store or warehouse. 

See online and store reporting in one place 

When your ecommerce and retail store data run on the same system, it’s easier to get a complete view of your business. 

Instead of exporting data from your ecommerce platform and POS software to build custom reports, you 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. 

💡 TIP: Analyze your POS and ecommerce data together to be more cost effective with your inventory, measure your store’s impact on online sales, repeat purchases, lifetime value, and more.

Get a complete view of your customers 

When POS systems and ecommerce platforms are connected, it helps you collect, track, manage, and use customer data more effectively. 

With Shopify POS, for instance, you can create customer profiles and see their complete purchase history—everything they bought online or at your store is listed, along with how much they’ve spent to date, the number of times they’ve ordered, and how long they’ve been a customer. Rather than exporting data and building custom spreadsheets, all your customer data is in one place and updates automatically in real time. 

📈 MARKETING TIP: Want to put your customer data to work? Try Shopify Email to segment email lists, design and send branded emails, and track campaign results directly from Shopify admin.

Improve in-store sales

Running your retail and online store from the same system also makes it easier to serve customers and improve store sales. 

Most POS software can suggest products that complement what a customer is interested in buying. This makes it easier for staff to recommend relevant products and increase order values. 

But modern POS software help store staff convert lost opportunities into sales. For example, Shopify POS lets store staff send follow-up emails to indecisive in-store shoppers about the products they were interested in—similar to an abandoned cart email, but for retail stores. If 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. 

Accept in-person payments 

POS software should make accepting in-person payments straightforward. When customers buy products, it helps process the transaction and route funds to your bank account. 

It allows you to accept all popular payment methods, including: 

  • Cash, which is then deposited into your cash register. 
  • Magstripe credit cards, which allow the customer to swipe their card in your credit card reader. 
  • Chip cards, which are credit or debit cards with a near-field communication (NFC) or EMV 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 either in-store or online purchases. 
  • Card-not-present transactions, which are when a customer pays with their credit card without being physically present. Typically, these transactions happen when customers place an order over the phone. 

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

What is the best POS software for retail?

Every small 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.

With Shopify, you can manage online and physical store inventory in the same place, and view hundreds of reports that unify store and online data. Plus, Shopify POS comes with unlimited staff accounts and registers, the ability to create custom staff roles and permissions, and selling features that no other POS software has out of the box. 

Shopify POS also integrates seamlessly with your Shopify online store. If you aspire to sell online and in-store, Shopify is the best way to realize your goals while avoiding complicated workarounds or jumping between multiple systems. 

Using multiple systems to manage our online and physical stores was frustrating. Managing all our sales channels from Shopify simplifies how we run our business and makes it easy to view data and compare their performance—from conversion rates and sales volume to customer value and beyond.

POS software: your retail store’s operating system

Now that you know what POS software is, you’re ready to find the best POS system for your business.

Whether you’re just exploring the idea of selling in person, thinking of opening your first pop-up shop, or ready to open your first retail store, it’s important to find software that helps you today and for what’s next. Choose a new POS system that will support your growth. 

If you have aspirations of selling online and in retail stores, ensure that the POS software you choose integrates with your ecommerce platform. With Shopify, you get all the tools to promote and sell your products on multiple sales channels. Sell everywhere your customers are, and run your entire business from a single place. 

Sell everywhere your customers are

Only Shopify POS unifies online and in-person selling and gives you all the tools you need in one place to manage your business, market to customers, and sell everywhere.

Point-of-sale (POS) software FAQ

How does a POS system work?

Point-of-sale systems work by collecting and recording data from every purchase made at a retail store. They then use this data to generate vital transaction reports that allow businesses to track sales data, and manage credit card processing, customer history, inventory, and more.

What is a POS example?

A POS example is any type of system used to process transactions. This could include a cash register, a self-service kiosk, or an electronic payment terminal.

Is a POS system a software?

A retail POS system involves both hardware and software. It’s used to manage sales and customer transactions in retail stores, restaurants, and other hospitality facilities.

What is POS software and hardware?

POS software is a computer application that allows retailers to manage their sales transactions and customer information. POS hardware consists of the physical components used to record, process and store sales transactions, such as cash registers, bar code scanners, receipt printers, and payment terminals.