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Overview of POS Systems
The type and number of hardware devices involved depends not only on the physical size and location of a business, but also on its branding/marketing strategies. For example, retailers frequently employ "stores within a store," where the idea is to capture sales immediately at multiple retail displays placed throughout a single store. The advantages include not only the ability to better capitalize on impulse purchase decisions, but also to eliminate long register lines at crowded exits that might discourage shoppers from shopping there again.
Hardware comprises terminals and peripherals that involve one, or a combination of, devices:
- Touchscreens (either all-in-one units or terminal add-ons)
- Barcode scanners
- Credit card readers
- Check readers
- Cash drawers
- Receipt printers
- PIN (Personal Identification Number) pads
- Electronic cash register terminals
- Off-the-shelf personal computers
- Mobile phones
- Checkout scales
It is becoming increasingly common for these devices to function on mobile or wireless platforms, which further adds to the flexibility regarding placement of the terminals as well as the environments under which they can function. In addition, Web-enabled terminals allow for inventory tracking across geographically disperse locations; and also provide for remote training, operation, and diagnostics.
In terms of software, certain industries have different POS needs-e.g., a restaurant POS has different software requirements than a hardware store or a hotel operation. The size of the business also determines the type of software. For instance, a small "mom-and-pop"–type business has less complex needs than a large chain retailer.
In some cases, the operating system (OS) may be proprietary, but there are also standard Windows, Mac, UNIX, and Linux offerings. The generally accepted industry standards for dedicated POS systems are OPOS (OLE Point-of-Sale), which is Object Linking and Embedding technology developed by Microsoft (and hence is a Windows-specific application); and JavaPOS, which uses the Java programming language and therefore is OS platform-independent.
Some Mac-based systems include Prosperity POS, LavuPOS, ShopKeep POS, and Lightspeed. There is also a QuickBooks POS that is attractive to those who already use QuickBooks accounting and payroll software.
An increasingly popular choice is a Web-based platform, also called a cloud-based POS, because it is largely OS- and device-agnostic. Web-enabled POS systems can not only run on any computer with an Internet connection and browser; but also on smartphones, tablets, and other mobile devices.
An additional advantage is that cloud-based systems run remotely from one or more secure servers, eliminating the need to install and update software at the local level. In addition, the centralization of data provides a single repository that can be accessed across geographic and organizational locations via a simple Internet connection, which also reduces operational overhead costs.
POS systems come in a variety of "flavors." There are complete bundled packages of hardware, software, and services that may be put together by the OEM (original equipment manufacturer) or a reseller. You can opt to buy a system, a single terminal, or input/output (I/O) device with software to use a computer, smartphone, or tablet. Systems can be leased or bought, and some systems are free with a contract for a payment-processing agreement.
After-sale services include basic on-site repair and remote telephone support, email support, and upgrades. Such after-purchase care may run for a predetermined limited period or may require a service plan at an additional cost. Warranties can run from one to three years, although some vendors offer lifetime warranties.
Additional services, typically arranged by the POS vendor through a third party, include credit card processing, cash advance and loan services, financing, remote backup, and equipment leasing.
POS systems broadly fall into these industry-specific packages:
Retail: The retail industry is one of the predominant users of POS terminals, which are almost always integrated into inventory and accounting back-office functions. In addition to processing purchasing transactions, the POS system also accommodates the use of customer loyalty cards, gift cards, gift registries, and coupon redemptions.
Hospitality/Hotel: The hospitality/hotel industry needs to track guests as they interact with various services throughout their visit: from dining room to guest room to a golf or tennis lesson reservation to a spa visit. POS systems can also provide handy displays of guest preferences in amenities and housekeeping. They allow hospitality staff to anticipate guest needs, rather than respond to requests, thereby raising service levels and customer satisfaction and loyalty. POS software is usually integrated with property management software.
Restaurant: Some of the first touchscreen terminals were used in the restaurant industry, particularly in fast-food chains. Today, they are the standard means to input and track orders, process payments, and generate customer receipts. A growing trend in quick-serve restaurants is the use of wireless pagers to notify customers when their orders are ready for pickup. Even in fine-dining segments, waiters are equipped with mobile input devices to send an order directly from the table to the kitchen. The same device notifies waiters when orders are ready for delivery to the table.
Grocery: In the grocery business, in particular, POS systems can be part of self-checkout systems, and will typically incorporate weight scales. Some systems also allow customers to use bar scanners to record their selections as they place products into their carts, and thus expedite the final checkout process. At the point-of-sale, data that directs decisions within an organization-such as inventory, purchasing, discounting, and marketing-is gathered. Good POS systems will give you the confidence that decisions are based on data, not hunches. A prime example of how this data comes together at the point of sale is the ability to generate instant coupons based in part on what the customer has just purchased. Strong grocery and retail POS can generate just-in-time marketing, personalized for the customer at the checkout counter.
Salon: The hair and beauty industry needs to enter, modify, and track client appointments and preferences in a system that can generate performance reports and loyalty profiles as well as identify and correct workflow inefficiencies. The POS system also maintains an inventory of beauty-care products and compiles a database of customer emails to send appointment-reminder notices, special offers, and other notifications.
Choosing a Vendor
The variety of POS solutions and providers is really as diverse as the industries served. Manufacturers and developers may be a single entity to offer all-in-one hardware, software, and service packages, or may be assembled from various companies and offered by a distributor as an integrated package.
Value-added resellers may be independent agents or partners of distributors that design and support solutions comprising products from multiple manufacturers.
You should evaluate the best POS vendors in terms of hardware, software, after-purchase care, and technology.
Questions to Consider
- What Are Your Needs? The size and complexity of the business dictates the size and complexity of the POS solution. The provider should have demonstrated expertise in your industry and be able to identify critical features and benefits that pertain to your specific needs. Will an off-the-shelf package satisfy, or do you have customized requirements?
- Ease-of-Use? You and your employees must find the software intuitive and user-friendly. At the same time, the system needs to be functional to fit your requirements. Generally, the more complex your needs, the more features you'll require, and with that typically comes a trade-off in ease of use. However, complexity need not require a dedicated IT staff. The best systems balance ease of use and complexity to provide resources that are, with a little training and experience, not overly difficult to use.
- What's the Track Record? The POS vendor should have a success story. If the vendor is a distributor or VAR (value-added reseller), what's the reputation of the products/services it resells? Who provides after-purchase support-the vendor, the OEM, or a third party? What disaster-recovery contingencies are offered, and what level of confidence is provided to ensure that both a computer crash as well as a physical catastrophe (such as a fire or flood) are covered?
- Is the System Upgradeable? The advantage of many off-the-shelf packages is that they come with software upgrades to avoid planned obsolescence. If you do need to customize, ensure that customization does not come at the cost of an inability to incorporate new technology. Also, you might want to start with something basic and eventually grow into something more sophisticated. Make sure the system is easily expandable to grow with evolving needs.
- What's the Level of Training? Training for you and your employees shouldn't necessarily be limited to pre-installation or the first day on the job. Also, once you're comfortable with the system, you might want to customize certain reports or incorporate advanced features. Make sure the POS vendor offers after-installation training to help you take full advantage of the system.
- Is the System Secure? Visa, for example, requires all merchants to adhere to the Payment Application Data Security Standard (PA-DSS) for all credit-card processing transactions. Also, if the POS system allows for remote access, how does that access remain secure? What kind of password and user authentication system is used? Is a firewall in place to block unauthorized Internet access? Does the system come with virus and malware protection? Who manages security-you or the vendor?
- Will the POS System Integrate with Other Business Systems? The advantage of a POS system extends beyond customer transactions to encompass a range of business reporting, accounting, and tracking functions. If you're just starting to automate, your decisions will be easier to make in this regard, as you have more flexibility to design the system. However, unless you're willing to entirely discard any existing systems, ensure that the POS system can seamlessly integrate with your other business systems. Otherwise, any theoretical gains in productivity are lost when incompatible systems can't "talk" to one another.
Systems can be leased or bought; some systems are free with a contract for a payment-processing agreement. Generally speaking, the more complex the system and the more terminals, the higher the expense. Basic cash registers can cost up to $500, but POS terminals can run as high as $4,000 each, with additional expenses for installation and programming, particularly if they involve proprietary software.
The good news is that, as with all forms of technology, systems are getting less expensive and more affordable, and even small businesses can take advantage of them. Also factor in that whatever the upfront costs might be, the return on investment in terms of greater efficiency and improved customer satisfaction make this type of purchase worthwhile. Moreover, with the growing popularity of Web-based solutions, particularly for smaller businesses, there's a range of economical choices that can be fitted to popular smartphone, tablet, and PC platforms.
Some of the key factors you should take into consideration when comparing vendors are listed below.
Glossary of Terms
- Barcode: Randomly printed patterned spaces and bars (sometimes including numerals) that can be scanned into a computer to identify the product and related characteristics.
- Cash Drawer: Connected to the POS terminal to store cash payments.
- Central Control Unit (CCU): The computer hub to which all terminals are connected.
- Check Conversion Service: Bank-provided service that allows processing of checks as a debit transaction; requires a check reader to scan and verify checks.
- Customer Relationship Management (CRM): Usually refers to software that enables lifetime management of a customer's data, including analyzing that data for marketing opportunities. POS data often feeds into CRM systems.
- EBT (Electronic Benefit Transfer): A card used to allow processing of state government benefits through a POS system.
- EDC (Electronic Draft Capture): Provides the ability to automatically balance, settle, and authorize credit card transactions.
- EDI (Electronic Data Interchange): Allows for purchase-order creation between a POS system and another vendor's system.
- End-to-End Encryption: Protects consumer credit information by encrypting data transmitted at the point-of-sale and processed through the network. PCI (Payment Card Industry): Guidelines designed to shield credit card information from fraud and misuse.
- Peripheral: Any POS device, including PIN pads, check readers, card readers, barcode scanners, cash drawers, touchscreens, weight scales, and customer devices.
- Perpetual Inventory: Constant monitoring and tracking of inventory in terms of quantity on hand and total value to continually reflect current receipts, returns, and sales reported in real-time.
- PIN (Personal Identification Number) Pads: Part of a POS system that allows customers to swipe credit cards and debit cards, verify the amount charged, enter a PIN number or signature, and pay for a purchase.
- Point-of-Sale (POS) System: A combination of software and hardware that facilitates commercial transactions, often including a credit-card reading device and/or a cash register.
- Signature Capture Device: Component of a credit card terminal used to record a customer's electronic signature to authorize a transaction; eliminates need to maintain paper receipts.
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