Point of sale
The point of sale (POS) is the time and place where a retail transaction is completed. It is the point at which a customer makes a payment to the merchant in exchange for goods or after provision of a service. At the point of sale, the merchant would prepare an invoice for the customer (which may be a cash register printout) or otherwise calculate the amount owed by the customer and provide options for the customer to make payment. After receiving payment, the merchant will also normally issue a receipt for the transaction. Usually the receipt is printed, but it is increasingly being dispensed electronically.
The POS in various retail situations would use customized hardware and software tailored to their particular requirements. Retailers may utilize weighing scales, scanners, electronic and manual cash registers, EFTPOS terminals, touch screens and a variety of other hardware and software available. For example, a grocery or candy store may use a scale at the point of sale, while a bar and restaurant may use software to customize the item or service sold when a customer has a meal or drink request.
The point of sale is often referred to as the point of service because it is not just a point of sale but also a point of return or customer order. Additionally, today POS software may include additional features to cater for different functionality, such as inventory management, CRM, financials, warehousing, etc.
Retailers and marketers will often refer to the area around the checkout instead as the point of purchase (POP) when they are discussing it from the retailer's perspective. This is particularly the case when planning and designing the area as well as when considering a marketing strategy and offers.
Some point of sale vendors refer to their POS system as "Retail Management System" which is actually a more appropriate term given that this software is no longer just about processing sales but comes with many other capabilities such as inventory management, membership system, supplier record, bookkeeping, issuing of purchase orders, quotations and stock transfers, barcode label creation, sale reporting and in some cases remote outlets networking or linkage, to name some major ones.
Nevertheless it is the term POS system rather than Retail Management System that is in vogue among both end-users and vendors.
Software prior to the 1990s
Early electronic cash registers (ECR) were controlled with proprietary software and were limited in function and communications capability. In August 1973 IBM released the IBM 3650 and 3660 store systems that were, in essence, a mainframe computer used as a store controller that could control up to 128 IBM 3653/3663 point of sale registers. This system was the first commercial use of client-server technology, peer-to-peer communications, local area network (LAN) simultaneous backup, and remote initialization. By mid-1974, it was installed in Pathmark stores in New Jersey and Dillard's department stores.
One of the first microprocessor-controlled cash register systems was built by William Brobeck and Associates in 1974, for McDonald's Restaurants. It used the Intel 8008, a very early microprocessor. Each station in the restaurant had its own device which displayed the entire order for a customer—for example:  Vanilla Shake,  Large Fries,  BigMac—using numeric keys and a button for every menu item. By pressing the [Grill] button, a second or third order could be worked on while the first transaction was in progress. When the customer was ready to pay, the [Total] button would calculate the bill, including sales tax for almost any jurisdiction in the United States. This made it accurate for McDonald's and very convenient for the servers and provided the restaurant owner with a check on the amount that should be in the cash drawers. Up to eight devices were connected to one of two interconnected computers so that printed reports, prices, and taxes could be handled from any desired device by putting it into Manager Mode. In addition to the error-correcting memory, accuracy was enhanced by having three copies of all important data with many numbers stored only as multiples of 3. Should one computer fail, the other could handle the entire store.
In 1986, Gene Mosher introduced the first graphical point of sale software under the ViewTouch trademark on the 16-bit Atari 520ST color computer. It featured a color touchscreen widget-driven interface that allowed configuration of widgets representing menu items without low level programming. The ViewTouch point of sale software was first demonstrated in public at Fall Comdex, 1986, in Las Vegas Nevada to large crowds visiting the Atari Computer booth. This was the first commercially available POS system with a widget-driven color graphic touch screen interface and was installed in several restaurants in the USA and Canada.
Modern software (post-1990s)
In 1992, Martin Goodwin and Bob Henry created the first point of sale software that could run on the Microsoft Windows platform named IT Retail. Since then a wide range of POS applications have been developed on platforms such as Windows and Unix. The availability of local processing power, local data storage, networking, and graphical user interface made it possible to develop flexible and highly functional POS systems. Cost of such systems has also declined, as all the components can now be purchased off-the-shelf.
In fact as far as the computer is concerned, off-the-shelf versions are usually more powerful than those proprietary pos terminals provided by POS vendors and more RAM can also be easily added if needed. Furthermore touchscreen tablets and laptops - both Windows or Android types - are readily available in the market. And they are also more portable than traditional pos terminals. The only advantage of the latter has is usually because they are built to withstand rough handling, food and drink spillages; however this is not a concern for non F & B businesses.
The key requirements that must be met by modern POS systems include: high and consistent operating speed, reliability, ease of use, remote supportability, low cost, and rich functionality. Retailers can reasonably expect to acquire such systems (including hardware) for about $4000 US (as of 2009) per checkout lane.
POS systems are by far one of the most complex of software because of the features that are required by different end-users. The reporting functionality alone is subject to so many demands especially from those in the retail/wholesale industry.
POS systems are also very demanding in terms of accuracy given that monetary transaction is constantly involved not only via the sale window but also at the backend through the receiving and inputting of goods into the inventory.
A POS system in some retail/wholesale businesses is often attempted to be used as inventory management system which is a highly complex software by itself not to mention that inventory management is a full-time job which many businesses are not really prepared to undertake.
Anyway when a user wants to find out how his products are performing the POS system must be able to provide a comprehensive report of not only the sales but also the balance quantity, profit margin, so forth.
Other requirements include that the system must have functionality for membership discount and points accumulation/usage, quantity and promotional discounts, mix and match offers, cash rounding up, invoice/delivery-order issuance with outstanding amount. It should enable a user to adjust the inventory of each product based on physical count, track expiry of perishable goods, change pricing, provide audit trail when modification of inventory records are performed, be capable of multiple outlet functionality, control of stocks from HQ, doubling as an invoicing system, just to name some.
Although POS systems based on the sale window interface alone all appear to be similar it is really under the hood that end-users come to know by and by whether the software functionality they required are available. For this reason for those looking to purchase a POS system, perhaps one of the best routes to a prudent purchase decision is to find out from other users in a similar trade about their experience with various POS systems. Given the complexity of the software even this fact-finding process takes much effort but it is far better than ending up with a system that you will live to regret for years.
Another way is to ask for a demo installation of the POS system from a vendor so that you can test out the functionality. However because of the complexity of the software it is not likely that you may get to test out the features comprehensively enough.
Hardware interface standardization (post-1980s)
Vendors and retailers are working to standardize development of computerized POS systems and simplify interconnecting POS devices. Two such initiatives are OPOS and JavaPOS, both of which conform to the UnifiedPOS standard led by The National Retail Foundation.
OPOS (OLE for POS) was the first commonly adopted standard and was created by Microsoft, NCR Corporation, Epson and Fujitsu-ICL. OPOS is a COM-based interface compatible with all COM-enabled programming languages for Microsoft Windows. OPOS was first released in 1996. JavaPOS was developed by Sun Microsystems, IBM, and NCR Corporation in 1997 and first released in 1999. JavaPOS is for Java what OPOS is for Windows, and thus largely platform independent.
There are several communication ways POS systems use to control peripherals such as:
- Logic Controls \ BemaTech
- Epson Esc/POS
- UTC Standard
- UTC Enhanced
- ICD 2002
- CD 5220
- ADM 787/788
There are also nearly as many proprietary protocols as there are companies making POS peripherals. Most POS peripherals, such as displays and printers, support several of these command protocols in order to work with many different brands of POS terminals and computers.
Cloud-based POS (post-2000s)
The advent of cloud computing had given birth to the possibility of POS systems to be deployed as software as a service, which can be accessed directly from the Internet, using any internet browser. Using the previous advances in the communication protocols for POS's control of hardware, cloud-based POS systems are independent from platform and operating system limitations. Cloud-based POS systems are also created to be compatible with a wide range of POS hardware and sometimes tablets such as Apple's IPad. Thus cloud-based POS also helped expand POS systems to mobile devices, such as tablet computers or smartphones. These devices can also act as barcode reader using a built-in camera and as payment terminal using built-in NFC technology or an external payment card reader. Cybertill, which is based in the UK, claims to be the world's first multichannel cloud-based POS system.
Cloud-based POS systems are different from traditional POS largely because user data, including sales and inventory, are not stored locally, but in a remote server. The POS system is also not run locally, so there is no installation required.
The advantages of a cloud-based POS are instant centralization of data (important especially to chain stores), ability to access data from anywhere there is internet connection, and lower start-up costs.
Cloud based POS requires an internet connection. For this reason it important to use a device which has its own 3G capability in case the device's primary internet goes down. First Data's Clover mini and mobile are examples of cloud based POS which have their own internet capability in the event that the primary internet fails.
In addition to being significantly less expensive than traditional legacy point of sale systems, the real strength of a cloud based point of sale system is that, like the Apple iPhone's app store, there are developers all over the world creating software applications for cloud based POS. Cloud based POS systems are often described as future proof as new applications are constantly being conceived and built.
The retail industry is one of the predominant users of POS terminals.
A retail point of sale system typically includes a cash register (which in recent times comprises a computer, monitor, cash drawer, receipt printer, customer display and a barcode scanner) and the majority of retail POS systems also include a debit/credit card reader. It can also include a conveyor belt, weight scale, integrated credit card processing system, a signature capture device and a customer pin pad device. While the system may include a keyboard and mouse, more and more POS monitors use touch-screen technology for ease of use, and a computer is built into the monitor chassis for what is referred to as an all-in-one unit. All-in-one POS units liberate counter space for the retailer. The POS system software can typically handle a myriad of customer based functions such as sales, returns, exchanges, layaways, gift cards, gift registries, customer loyalty programs, promotions, discounts and much more. POS software can also allow for functions such as pre-planned promotional sales, manufacturer coupon validation, foreign currency handling and multiple payment types.
The POS unit handles the sales to the consumer but it is only one part of the entire POS system used in a retail business. "Back-office" computers typically handle other functions of the POS system such as inventory control, purchasing, receiving and transferring of products to and from other locations. Other typical functions of a POS system are: store sales information for enabling customer returns, reporting purposes, sales trends and cost/price/profit analysis. Customer information may be stored for receivables management, marketing purposes and specific buying analysis. Many retail POS systems include an accounting interface that "feeds" sales and cost of goods information to independent accounting applications.
Also meriting mention is that a multiple point of sale system used by big retailers like supermarkets and departmental stores has a far more demanding database and software architecture than that of a single station seen in small retail outlets. A supermarket with high traffic cannot afford a systemic failure, hence each point of sale station should not only be very robust both in terms of software, database and hardware specifications but also designed in such a way as to prevent causing a systemic failure - such as may happen through the use of a single central database for operation purpose.
At the same time updating between multiple stations and the backend administrative computer should be capable of being efficiently performed, so that on one hand either at the start of the day or at anytime each station will have the latest inventory to process all items for sale, while on the other hand at the end of the day the backend administrative computer can be updated in terms of all sale records.
This gets even more complicated when there is a membership system requiring real-time two-way updating of membership points between sale stations and the backend administrative computer.
Retail operations such as Hardware stores (Lumber Yards), Electronic stores and so called multifaceted super-stores need specialized additional features compared to other stores. POS software in these cases handle special orders, purchase orders, repair orders, service and rental programs as well as typical point of sale functions. Rugged hardware is required for point of sale systems used in outdoor environments. Wireless devices, battery powered devices, all-in-one units, and Internet-ready machines are typical in this industry.
Recently new applications have been introduced, enabling POS transactions to be conducted using mobile phones and tablets. According to a recent study, Mobile POS (mPOS) terminals are expected to replace the contemporary payment techniques because of various features including mobility, upfront low cost investment and better user experience. Convenience of conducting remote financial transactions is expected to augment the demand from small and medium businesses for mPOS.
The blind community in the United States engaged in Structured Negotiations in the mid-2000s to ensure that retail point of sale devices had tactile keypads. Without keys that can be felt, a blind person cannot independently enter her or his PIN. In the mid-2000s retailers began using 'flat screen' or 'signature capture' devices that eliminated tactile keypads. Blind people were forced to share their confidential PIN with store clerks in order to use their debit and other PIN-based cards. The blind community reached agreement with Walmart, Target, CVS and eight other retailers that required real keys so blind people could use the devices.
Hospitality point of sale systems are computerized systems incorporating registers, computers and peripheral equipment, usually on a computer network to be used in restaurants, hair salons or hotels. Like other point of sale systems, these systems keep track of sales, labor and payroll, and can generate records used in accounting and bookkeeping. They may be accessed remotely by restaurant corporate offices, troubleshooters and other authorized parties.
Point of sale systems have revolutionized the restaurant industry, particularly in the fast food sector. In the most recent technologies, registers are computers, sometimes with touch screens like iPad POS. The registers connect to a server, often referred to as a "store controller" or a "central control unit". Printers and monitors are also found on the network. Additionally, remote servers can connect to store networks and monitor sales and other store data.
Typical restaurant POS software is able to create and print guest checks, print orders to kitchens and bars for preparation, process credit cards and other payment cards, and run reports. In addition, some systems implement wireless pagers and electronic signature-capture devices.
In the fast food industry, displays may be at the front counter, or configured for drive-through or walk-through cashiering and order taking. Front counter registers allow taking and serving orders at the same terminal, while drive-through registers allow orders to be taken at one or more drive-through windows, to be cashiered and served at another. In addition to registers, drive-through and kitchen displays are used to view orders. Once orders appear they may be deleted or recalled by the touch interface or by bump bars. Drive-through systems are often enhanced by the use of drive-through wireless (or headset) intercoms. The efficiency of such systems has decreased service times and increased efficiency of orders.
Another innovation in technology for the restaurant industry is wireless POS. Many restaurants with high volume use wireless handheld POS to collect orders which are sent to a server. The server sends required information to the kitchen in real time. Wireless systems consist of drive-through microphones and speakers (often one speaker will serve both purposes), which are wired to a "base station" or "center module." This, in turn, will broadcast to headsets. Headsets may be an all-in-one headset or one connected to a belt pack.
In hotels POS software allows for transfer of meal charges from dining room to guest room with a button or two. It may also need to be integrated with property management software.
Newer, more sophisticated, systems are getting away from the central database "file server" type system and going to what is called a "cluster database". This eliminates any crashing or system downtime that can be associated with the back office file server. This technology allows 100% of the information to not only be stored, but also pulled from the local terminal, thus eliminating the need to rely on a separate server for the system to operate.
Tablet POS systems popular for retail solutions are now available for the restaurant industry. Initially these systems were not sophisticated and many of the early systems did not support a remote printer in the kitchen. Tablet systems today are being used in all types of restaurants including table service operations. Most tablet systems upload all information to the Internet so managers and owners can view reports from anywhere with a password and Internet connection. Smartphone Internet access has made alerts and reports from the POS very accessible. Tablets have helped create the Mobile POS system, and Mobile POS applications also include payments, loyalty, online ordering, table side ordering by staff and table top ordering by customers. Mobile POS (AKA mPOS) is growing quickly with new developers entering the market almost on a daily basis. An updated list of developers is maintained and available for downloading at no charge.
POS systems are often designed for a variety of clients, and can be programmed by the end users to suit their needs. Some large clients write their own specifications for vendors to implement. In some cases, POS systems are sold and supported by third-party distributors, while in other cases they are sold and supported directly by the vendor.
The selection of a restaurant POS system is critical to the restaurant's daily operation and is a major investment that the restaurant's management and staff must live with for many years. The restaurant POS system interfaces with all phases of the restaurant operation and with everyone that is involved with the restaurant including guests, suppliers, employees, managers and owners. The selection of a restaurant POS system is a complex process that should be undertaken by the restaurant owner and not delegated to an employee. The purchase process can be summarized into three steps: Design, Compare and Negotiate. The Design step requires research to determine which restaurant POS features are needed for the restaurant operation. With this information the restaurant owner or manager can Compare various restaurant POS solutions to determine which POS systems meet their requirements. The final step is to Negotiate the price, payment terms, included training, initial warranty and ongoing support costs.
POS systems record sales for business and tax purposes. Illegal software dubbed "zappers" can be used on POS devices to falsify these records with a view to evading the payment of taxes.
- ISO 8583
- Point of sale companies category
- Point of sale display
- Payment terminal
- Self checkout
- Standard Interchange Language
- Back-office Software
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