The point of sale (POS) or point of purchase (POP) is the time and place where a retail transaction is completed. At the point of sale, the merchant calculates the amount owed by the customer, indicates that amount, may prepare an invoice for the customer (which may be a cash register printout), and indicates the options for the customer to make payment. It is also the point at which a customer makes a payment to the merchant in exchange for goods or after provision of a service. After receiving payment, the merchant may issue a receipt for the transaction, which is usually printed but is increasingly being dispensed with or sent electronically.
To calculate the amount owed by a customer, the merchant may use various devices such as weighing scales, barcode scanners, and cash registers. To make a payment, payment terminals, touch screens, and other hardware and software options are available.
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. POS terminal software may also include features for additional functionality, such as inventory management, CRM, financials, or warehousing.
Businesses are increasingly adopting POS systems, and one of the most obvious and compelling reasons is that a POS system does away with the need for price tags. Selling prices are linked to the product code of an item when adding stock, so the cashier merely needs to scan this code to process a sale. If there is a price change, this can also be easily done through the inventory window. Other advantages include the ability to implement various types of discounts, a loyalty scheme for customers, and more efficient stock control.
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, hide 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.
Early electronic cash registers (ECR) were controlled with proprietary software and were limited in function and communication 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 (and forerunner to the Intel 8088 processor used in the original IBM Personal Computer). 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 featuring a touchscreen interface 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.
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 1993, IBM adopted FlexOS 2.32 as the basis of their IBM 4690 OS in their 469x series of POS terminals. This was developed up to 2014 when it was sold to Toshiba, who continued to support it up to at least 2017.
As far as computers are concerned, off-the-shelf versions are usually newer and hence more powerful than proprietary POS terminals. Custom modifications are added as needed. Other products, like touchscreen tablets and laptops, are readily available in the market. And they are also more portable than traditional POS terminals. The only advantage of the latter has is because they are typically built to withstand rough handling and spillages; a benefit for food & beverage 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.
Reliability depends not wholly on the developer but at times on the compatibility between a database and an OS version. For example, the widely used MS Access database system had a compatibility issue when Windows XP machines were updated to a newer Windows OS. Microsoft immediately offered no solution. Some businesses were severely disrupted in the process, and many downgraded back to Windows XP for a quick resolution. Other companies utilized community support, for a registry tweak solution has been found for this.
POS systems are one of the most complex software systems available because of the features that are required by different end-users. Many POS systems are software suites that include sale, inventory, stock counting, vendor ordering, customer loyalty and reporting modules. Sometimes purchase ordering, stock transferring, quotation issuing, barcode creating, bookkeeping or even accounting capabilities are included. Furthermore, each of these modules is interlinked if they are to serve their practical purpose and maximize their usability.
For instance, the sale window is immediately updated on a new member entry through the membership window because of this interlinking. Similarly, when a sale transaction is made, any purchase by a member is on record for the membership window to report providing information like payment type, goods purchased, date of purchase and points accumulated. Comprehensive analysis performed by a POS machine may need to process several qualities about a single product, like selling price, balance, average cost, quantity sold, description and department. Highly complex programming is involved (and possibly considerable computer resources) to generate such extensive analyses.
POS systems are designed not only to serve the retail, wholesale and hospitality industries as historically is the case. Nowadays POS systems are also used in goods and property leasing businesses, equipment repair shops, healthcare management, ticketing offices such as cinemas and sports facilities and many other operations where capabilities such as the following are required: processing monetary transactions, allocation and scheduling of facilities, keeping record and scheduling services rendered to customers, tracking of goods and processes (repair or manufacture), invoicing and tracking of debts and outstanding payments.
Different customers have different expectations within each trade. The reporting functionality alone is subject to so many demands, especially from those in the retail/wholesale industry. To cite special requirements, some business's goods may include perishables and hence the inventory system must be capable of prompting the admin and cashier on expiring or expired products. Some retail businesses require the system to store credit for their customers, credit which can be used subsequently to pay for goods. A few companies even expect the POS system to behave like a full-fledged inventory management system, including the ability to provide even FIFO (First In First Out) and LIFO (Last In First Out), reports of their goods for accounting and tax purposes.
In the hospitality industry, POS system capabilities can also diverge significantly. For instance, while a restaurant is typically concerned about how the sale window functions, whether it has functionality such as for creating item buttons, for various discounts, for adding a service charge, for holding of receipts, for queuing, for table service as well as for takeaways, merging and splitting of a receipt, these capabilities may yet be insufficient for a spa or slimming center which would require in addition a scheduling window with historical records of customers' attendance and their special requirements.
It may be said that a POS system can be made to serve different things to different end-users depending on their unique business processes. Quite often an off-the-shelf POS system is inadequate for customers; some customization is required, and this is why a POS system can become very complex. The complexity of a mature POS system even extends to remote networking or interlinking between remote outlets and the HQ such that updating both ways is possible. Some POS systems even offer the linking of web-based orders to their sale window. Even when local networking is only required (as in the case of a high-traffic supermarket), there is the ever-present challenge for the developer to keep most if not all of their POS stations running. This puts high demand not just on software coding but also designing the whole system covering how individual stations and the network work together, and special consideration for the performance capability and usage of databases. Due to such complexity, bugs and errors encountered in POS systems are frequent.
With regards to databases, POS systems are very demanding on their performance because of numerous submissions and retrievals of data - required for correct sequencing the receipt number, checking up on various discounts, membership, calculating subtotal, so forth - just to process a single sale transaction. The immediacy required of the system on the sale window such as may be observed at a checkout counter in a supermarket also cannot be compromised. This places much stress on individual enterprise databases if there are just several tens of thousands of sale records in the database. Enterprise database Ms SQL, for example, has been known to freeze up (including the OS) entirely for many minutes under such conditions showing a "Timeout Expired" error message. Even a lighter database like Ms Access will slow to a crawl over time if the problem of database bloating is not foreseen and managed by the system automatically. Therefore, the need to do extensive testing, debugging and improvisation of solutions to preempt failure of a database before commercialization further complicates the development.
POS system accuracy is demanding, given that monetary transactions are involved continuously not only via the sale window but also at the backend through the receiving and inputting of goods into the inventory. Calculations required are not always straightforward. There may be many discounts and deals that are unique to specific products, and the POS machine must quickly process the differences and the effect on pricing. There is much complexity in the programming of such operations, especially when no error in calculation can be allowed.
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 is performed, be capable of multiple outlet functionality, control of stocks from HQ, doubling as an invoicing system, just to name some.
It is clear that POS system is a term that implies a wide range of capabilities depending on the end-user requirements. POS system review websites cannot be expected to cover most let alone all the features; in fact, unless one is a developer himself, it is unrealistic to expect the reviewer to know all the nuts and bolts of a POS system. For instance, a POS system might work smoothly on a test database during the review but not when the database grows significantly in size over months of usage. And this is only one among many hidden critical functionality issues of a POS system. GOODS
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:
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.
The design of the sale window is the most important one for the user. This user interface is highly critical when compared to those in other software packages such as word editors or spreadsheet programs where speed of navigation is not so crucial for business performance.
For businesses at prime locations where real estate comes at a premium, it can be common to see a queue of customers. The faster a sale is completed the shorter the queue and hence the more room available in a store for customers to shop around and employees to do their work. High-traffic operations like such as grocery outlets and cafes need to process sales quickly at the sales counter so the UI flow is often designed with as few popups or other interruptions to ensure the operator isn't distracted and the transaction can be processed as quickly as possible.
Although improving the ergonomics is possible, a clean, fast-paced look may come at the expense of sacrificing functions that are often wanted by end-users such as discounts, access to commission earned screens, membership and loyalty schemes can involve looking at a different function of the POS to ensure the point of sale screen contains only what a cashier needs at their disposal to serve customers.
The advent of cloud computing has 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 readers using a built-in camera and as payment terminals using built-in NFC technology or an external payment card reader. A number of POS companies built their software specifically to be cloud-based. Other businesses who launched pre-2000s have since adapted their software to evolving technology.
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.
Depending on the POS vendor and the terms of contract, compared to traditional on-premises POS installation, the software is more likely to be continually updated by the developer with more useful features and better performance in terms of computer resources at the remote server and in terms of lesser bugs and errors.
Other 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. 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 there are developers all over the world creating software applications for cloud based POS. Cloud based POS systems are often described[by whom?] as future proof as new applications are constantly being conceived and built.
A number of noted emerging cloud-based POS systems came on the scene less than a decade or even half a decade back. These systems are usually designed for restaurants, small and medium-sized retail operations with fairly simple sale processes as can be culled from POS system review sites. It appears from such software reviews that enterprise-level cloud-based POS systems are currently lacking in the market. "Enterprise-level" here means that the inventory should be capable of handling a large number of records, such as required by grocery stores and supermarkets. It can also mean that the system--software and cloud server--must be capable of generating reports such as analytics of sale against inventory for both a single and multiple outlets that are interlinked for administration by the headquarters of the business operation.
POS vendors of such cloud based systems should also have a strong contingency plan for the breakdown of their remote server such as represented by failover server support. However, sometimes even a major data center can fail completely, such as in a fire. On-premises installations are therefore sometimes seen alongside cloud-based implementation to preempt such incidents, especially for businesses with very high traffic. However the on-premises installations may not have the most up-to-date inventory and membership information.
For such contingency, a more innovative though highly complex approach for the developer is to have a trimmed down version of the POS system installed on the cashier computer at the outlet. On a daily basis the latest inventory and membership information from the remote server is automatically updated into the local database. Thus should the remote server fail, the cashier can switch over to the local sale window without disrupting sales. When the remote server is restored and the cashier switches over to the cloud system, the locally processed sale records are then automatically submitted to the remote system, thus maintaining the integrity of the remote database.
Although cloud-based POS systems save the end-user startup cost and technical challenges in maintaining an otherwise on-premises installation, there is a risk that should the cloud-based vendor close down it may result in more immediate termination of services for the end-user compared to the case of a traditional full on-premises POS system where it can still run without the vendor.
Another consideration is that a cloud-based POS system actually exposes business data to service providers - the hosting service company and the POS vendor which have access to both the application and database. The importance of securing critical business information such as supplier names, top selling items, customer relationship processes cannot be underestimated given that sometimes the few key success factors or trade secrets of a business are actually accessible through the POS system. This security and privacy concern is an ongoing issue in cloud computing.
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.
Despite the more advanced technology of a POS system as compared to a simple cash register, the POS system is still as vulnerable to employee theft through the sale window. A dishonest cashier at a retail outlet can collude with a friend who pretends to be just another customer. During checkout, the cashier can bypass scanning certain items or enter a lower quantity for some items thus profiting thereby from the "free" goods.
The ability of a POS system to void a closed sale receipt for refund purpose without needing a password from an authorized superior also represents a security loophole. Even a function to issue a receipt with a negative amount which can be useful under certain circumstances, can be exploited by a cashier to easily lift money from the cash drawer.
In order to prevent such employee theft, it is crucial for a POS system to provide an admin window for the boss or administrator to generate and inspect a daily list of sale receipts, especially pertaining to the frequency of cancelled receipts before completion, refunded receipts and negative receipts. This is one effective way to alert the company to any suspicious activity - such as a high number of cancelled sales by a certain cashier - that may be going on and to take monitoring action.
To further deter employee theft, the sale counter should also be equipped with a closed-circuit television camera pointed at the POS system to monitor and record all the activities.
At the backend, price and other changes like discounts to inventory items through the administration module should also be secured with passwords provided only to trusted administrators. Any changes made should also be logged and capable of being subsequently retrieved for inspection.
The sale records and inventory are highly important to the business because they provide very useful information to the company in terms of customer preferences, customer membership particulars, what are the top selling products, who are the vendors and what margins the company is getting from them, the company monthly total revenue and cost, just to name some.
It is therefore important that reports on these matters generated at the administrative backend be restricted only to trusted personnel. The database from which these reports are generated should also be secured via passwords or via encryption of data stored in the database so as to prevent them from being copied or tampered with.
Despite all such precautions and more, the POS system can never be entirely watertight in security from internal misuse if a clever but dishonest employee knows how to exploit many of its otherwise useful capabilities.
News reports on POS system hacking show that hackers are more interested in stealing credit card information than anything else. The ease and advantage offered by the ability of a POS system to integrate credit card processing thus have a downside. In 2011, hackers were able to steal credit card data from 80,000 customers because Subway's security and POS configuration standards for PCI Compliance - which governs credit card and debit card payment systems security - were "directly and blatantly disregarded" by Subway franchisees.
In June 2016, several hundred of Wendy's fast food restaurants had their POS systems hacked by an illegally installed malware. The report goes on to say that "the number of franchise restaurants impacted by these cybersecurity attacks is now expected to be considerably higher than the 300 restaurants already implicated" and that the "hackers made hundreds of thousands of fraudulent purchases on credit and debit cards issued by various financial institutions after breaching Wendy's computer systems late last year".
Again this exploits by hackers could only be made possible because payment cards were processed through the POS system allowing the malware to either intercept card data during processing or steal and transmit unencrypted card data that is stored in the system database.
In April 2017, security researchers identified critical vulnerabilities in point of sale systems developed by SAP and Oracle  and commented, "POS systems are plagued by vulnerabilities, and incidents occurred because their security drawbacks came under the spotlight."  If successfully exploited, these vulnerabilities provide a perpetrator with access to every legitimate function of the system, such as changing prices, remotely start and stop terminals. To illustrate the attack vector, the researchers used the example of hacking POS to change the price of a MacBook to $1.  The security issues were reported to the vendor, and a patch was released soon after the notification. Oracle confirmed security bug affects over 300,000 Oracle POS Systems
In some countries, credit and debit cards are only processed via payment terminals. Thus one may see quite a number of such terminals for different cards cluttering up a sale counter. This inconvenience is however offset by the fact that credit and debit card data is far less vulnerable to hackers, unlike when payment cards are processed through the POS system where security is contingent upon the actions taken by end-users and developers.
With the launch of mobile payment particularly Android Pay and Apple Pay both in 2015, it is expected that because of its greater convenience coupled with good security features, this would eventually eclipse other types of payment services - including the use of payment terminals. However, for mobile payment to go fully mainstream, mobile devices like smartphones that are NFC-enabled must first become universal. This would be a matter of several years from the time of this writing (2017) as more and more models of new smartphones are expected to become NFC-enabled for such a purpose. For instance, iPhone 6 is fully NFC-enabled for mobile payment while iPhone 5 and older models are not. The aforesaid disastrous security risks connected with processing payment card usage through a POS system would then be greatly diminished.
Manage research, learning and skills at NCR Works. Create an account using LinkedIn to manage and organize your omni-channel knowledge. NCR Works is like a shopping cart for information -- helping you to save, discuss and share.