Everything You Need to Know About POS Terminals

For generations, the sweetest sound to a retail store owner was the “ka-ching!” their cash register made with every sale.

The more they heard it, the better their day.

Of course, a lot has changed in the past decade or so.

Nowadays, the sound isn’t nearly as common.

Fortunately, this isn’t a bad thing. That’s because the vast majority of store owners have replaced their old registers with POS (Point-of-Sale) terminals instead. Far from just ringing up sales, these machines are capable of carrying out tasks that empower store owners to reach new levels of success.

What are POS terminals?

POS terminals are really just standard-issue computers that run software designed to facilitate a store’s necessary operations at the point of sale.

The point of sale (also commonly referred to as the point of purchase) refers to wherever transactions take place within a store. For the vast majority of retail locations, the point of sale occurs at a designated counter or checkout area.

Therefore, the most basic purpose a point-of-sale terminal serves is simply allowing a customer to pay for their items. Nowadays, this means reading their credit or debit card, confirming the purchase is authorized and then triggering the printing of a receipt.

However, point-of-sale terminals are generally expected to do much more. Most stores count on their terminals to play a major role in managing their inventories.

For example, a florist may depend on their point-of-sale terminal to tell them if an arrangement is still onsite, out for delivery, or has already been delivered. In the past, confirming the arrangement’s location would have involved a manual process that may have even included calling the driver to check on its status.

Point-of-sale terminals feed this kind of information into a system that makes it available with just a few clicks.

How POS terminals work

A store may have one or numerous POS terminals, depending on their needs. Each of these terminals consists of a credit-card swiper, receipt printer, and usually some kind of cash drawer. The terminals are all connected to the same server, which provides a central database for collecting information about all the transactions that occur in a single store.

Many store owners will also connect a barcode scanner. There is almost an endless array of equipment that can be added to a point-of-sale terminal in order to meet a store’s unique needs.

Once the POS system is set up – meaning it has been activated and “loaded” with the UPCs or other codes for the store’s inventory – the cashier merely has to scan an item for its data to be recorded in the main server.

The terminal then sends the price to the system’s display. It will continue adding to the total as more items are scanned.

At the same time, it’s sending other important data points to the server. Aside from updating the store’s internal inventory, it’s also recording which employee number is ringing up these sales.

This is extremely important information for the storeowner. If items go missing during a certain shift, they’ll want to know who was working the register, as they may be one of the guilty parties. Likewise, if the same mistake keeps getting made, knowing who is responsible will allow for the necessary training opportunity.

The 3 benefits of POS terminals

There are dozens of different POS terminals on the market right now, so the exact benefits you enjoy will depend on the model you choose.

That being said, the reason these devices have completely taken over retail is that even the most basic versions offer benefits no store can afford to be without.

Here are the three most common examples.

1. Detailed reports tell you what happened throughout the day

As we already touched on, point-of-sale terminals can report on every transaction that occurs. Again, this is extremely helpful if one or more employees are not doing their jobs properly – whether on purpose or unintentionally.

That’s far from the only benefit, though.

These kinds of detailed reports can also tell you when certain items become most popular. If you’re a shoe store, for example, then these reports can tell you which styles, colors, or even sizes are selling the most, so you can ensure that you don’t run out.

Or,  if you run a general store with several departments, you may want to adjust where your employees congregate depending on what products sell best during different hours.

In the past, store owners would have to be present for hours at a time over the course of several weeks before they could glean these kinds of insights. With many POS systems, they can check this information remotely.

2. Better customer tracking creates new marketing opportunities

Target once famously made headlines for knowing when a teenager was pregnant before her father did.


Their advanced data-mining system recognized that the purchases she was making aligned with a woman who was pregnant.

Now, to be clear, most point-of-sale terminals aren’t going to offer their operators that same level of insights.

However, what they do offer is important data about customer behavior.

Again, think about a florist. Imagine how helpful it is to know exactly who ordered flowers last Valentine’s Day, so you can offer them a deal to ensure they do it again.

Or, consider stores that sell baby merchandise. By knowing when a parent purchased a onesie for a 3-month old, you can figure out when they’ll need merchandise for when their child turns 6 months or 1 year old.

Some POS systems allow you to create customer groups — e.g., VIP shoppers, pop-up shop customers, friends and family, etc. Having these gropings enables you to run relevant marketing capaigns with ease. If you know who your top customers are, for example, then you can send “secret” offer or invites to exclusive events.

3. You’ll actually save boney while enjoying these benefits

Understanding which employees are doing their jobs properly and how your customers behave will both add substantial amounts to your bottom line.

At the same time, point-of-sale terminals will also go a long way toward saving you money. So, if you had resigned yourself to making the most of outdated PCCDs (PC cash drawers), you should know that those machines actually dig into your profit margins.

The amount is not inconsequential, either.

According to “Total Cost of Ownership for Point-of-Sale and PC Cash Drawer Solutions: A Comparative Analysis of Retail Checkout Environments“, a point-of-sale system will save you, on average, 38% to 48% over a PC cash drawer.

For most store owners, that’s reason enough to make the switch ASAP.

Further Reading

If you need more info on how to effectively compare different point of sale solutions, download Vend’s POS Buyer’s Guide. In this resource, you will learn the 7 secrets to find a reliable POS system, and avoid the costly mistakes most retailers make when choosing a new retail platform.

In it you’ll learn:

  • How to budget for your POS system
  • How to find and vet providers
  • How to get the most out of the solution

Learn More

3 Considerations to make before buying a POS terminal

As we mentioned above, no two point-of-sale terminals are exactly the same. While the aforementioned benefits are available in any device, you’ll still have a number of options to consider when comparing your many options.

Here’s a quick guide to help you make the best possible decision.

1. Cloud vs on-premises

Unless your store has unique needs that completely preclude the option, consider beginning with a cloud-based system.

The benefits are twofold.

First, you can use a simple tablet for your actual terminal, which leads to additional savings.

Second, cloud-based options generally come with a free trial. You can download it onto your tablet and give it a test-drive before investing any money in it. This also means you can test several before making a final decision.

That’s a big advantage if you think your store may have unique needs that will require some of those costly bells and whistles but aren’t yet sure.

2. Contracts and terms

Rigid, long-term contracts (most of which require payment up front) can put you in a bind if a solution turns out to be a poor fit for your business. Not to mention: today’s retail environment requires merchants to adapt to changes quickly, and having an ironclad contract could curb agility and growth

Choose a subscription-based POS that makes it easy for you to scale up (or down) depending on your needs. If you discover that it’s not the best fit for your business, you can always switch with minimal hassle.

3. Pricing

As we mentioned in our article on the 7 costly mistakes when choosing a point of sale system, it’s fine to go for a cost-effective POS, but make sure you aren’t compromising important features in the process.

A cheap and low-quality POS system may lack the critical features and functionalities required to run a competitive retail business. Choosing the cheapest option may save you a bit of cash, but the time you spend coming up with workarounds and making up for the system’s shortcomings could end up costing you more in the long run.

Create a list of the core features you need (or might need), and then look into solutions that meet your “must-have” requirements. That way, you’re not making compromises when it comes to the significant components of your POS.

Recognize that you may need to spend a bit more for a top-notch system — so set a realistic budget, and view your POS system as an investment that’ll help your business grow and stay competitive.

Speaking of POS costs…

Understanding the cost of a POS terminal

Of course, you need to consider the cost of a POS terminal, too.

For the conventional setup that involves an actual register, you can expect to pay about $1,250 for the hardware and software with an additional $1,000 every year to use the system

If you’re using tablets, the initial investment will be far less, but you’ll still need to look at fees for:

  •       Setup
  •       Individual Transactions
  •       Monthly Subscriptions
  •       Cancellation

Some systems will have these fees. Some won’t. Be sure to check so you know exactly what your costs will be.

Further Reading

If you want to learn more about POS pricing and how to calculate your costs, we’ve put together a detailed piece on key numbers around POS system pricing, as well as the top considerations to bear in mind when budgeting for a solution.

Learn More

Adding a POS terminal to your store

As you can see, while a point-of-sale terminal will definitely simplify your business, you have a lot to think about before picking one.

That said, you should still be very excited about the promise of a POS system. Once yours is set up and running, you can expect greater convenience, capabilities, and profit, while lowering overhead – that’s a tough combination to beat!

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.