A point-of-sale (POS) system is the heart of any retail business. It describes the combination of software and hardware that powers all aspects of your retail operations.
A POS system unifies sales, customer, and inventory data from any sales channel. It gives you one point of reference, combining multiple functions within a single system to reduce operating costs and improve efficiency. For example, Shopify POS delivers a 22% better total cost of ownership compared to relative to the market set surveyed by EY.
Without one, you’ll struggle to process digital payments, ring up orders quickly, and track inventory. It also becomes much harder to personalize the retail experience at scale.
But, navigating the POS system setup process can be daunting, especially if you’re new to the technology. This guide shares how to configure a POS system, with use cases and examples to speed up the POS implementation process.
Components of a POS system
A POS system encompasses two distinct components: hardware and software.
Hardware
POS hardware is physical equipment that allows you to manage aspects of your retail store from the POS system. You can ring up orders, take payments, and scan products with hardware compatible with your system.
Here’s what the typical POS hardware stack looks like:
- POS terminals
- Touch-screen monitor
- Barcode scanner
- Receipt printer
- Cash drawer
- Card reader
Software
POS software is the operating system that powers your hardware. Retail associates use it to process transactions, locate products, view inventory levels, reference customer data, and generate sales reports from the POS device.
Some POS software is exclusive to the POS vendor’s hardware. However, Shopify has a POS app that is compatible with most smartphones. You can even process payments using Tap to Pay, bypassing the need for a traditional cash register and using your existing device as a small business POS system.
Setting up a POS system
Setting up a new POS system is no small feat. But, using a POS system that unifies customer, order, and sales data across multiple channels is much easier.
Shopify, for example, is built for retailers who sell online and in person. It pulls inventory data from one centralized inventory management system, and merges customer data to create unified profiles that give you a 360-view of your customers.
The best part? Shopify POS is up to 20% faster to implement than other providers, allowing retailers to launch stores quickly with minimal disruption:
- Log in to your Shopify admin and install the Shopify POS app. Before you start using Shopify POS, you need to set up the Shopify POS app and update the Point of Sale settings in your Shopify admin.
- Set up locations: This lets you manage inventory effectively across multiple locations and customize the POS interface by store. You can do this in your Shopify admin under Settings > Locations. Repeat this process for every retail store you operate.
- Configure payment methods: Activate Shopify Payments in the POS app to accept credit card, contactless, and digital wallet payments from in-store shoppers. You can also benefit from discounted payment processing fees using Shopify Payments instead of third-party payment processors.
- Connect hardware: If you have any POS hardware (like card readers or barcode scanners), connect them to your Shopify POS app. Find the Settings icon in the POS interface, choose “Set up hardware”, and follow the instructions on the screen.
- Test your setup: Before going live, run a test transaction to ensure your POS solution works smoothly. The easiest approach is to make a discount code that only charges you $0.01 for an order. Ring up the order, apply the discount, and pay for it. Confirm that the payment goes through and your hardware is functioning as intended. Just remember to update the inventory quantity after the test order.
How to use your POS system
Sell anywhere
Omnichannel customers spend 1.5x more than single-channel shoppers. The logistics of managing these omnichannel sales becomes much easier when you’re working from a unified POS system.
Shopify, for example, has the following features to offer omnichannel purchasing experiences:
- Alternative fulfillment options. Fulfillment options like buy online, pick up in-store (BOPIS), ship-to-home, and local delivery let shoppers switch between online and offline channels within a single transaction.
- Omnichannel returns. Let customers return online-bought items in-store (and vice versa) with a unified POS system that combines sales and customer data inside one centralized dashboard.
- Email carts. Influence in-store shoppers to buy even if they leave your store empty-handed. Add the products they were interested in into your POS cart, then email it to the customer. They can check out at home with a personalized checkout link.
- Product QR codes. Store visitors can point their camera to a product’s QR code to locate the product page on your online store. This is great for busy shopping seasons when you don’t have enough sales associates on hand, or for shy customers who prefer to shop on their own.
“Shopify is unlocking rapid international expansion for us,” says Rohit Nathany, chief digital officer at Mejuri. “With Shopify, we can fulfill online orders from that store, which will drastically cut down delivery times, costs, and result in happier customers. It’s a win-win.”

Manage inventory
Inventory management is a thorn in many retailers’ side. You need enough stock on hand to sell to customers and prevent stockouts. Yet, holding too much inventory inflates carrying costs and increases the likelihood of dead stock.
A POS system solves this issue by giving real-time inventory reports. You’ll be able to:
- Automatically update inventory quantities when you record a sale on the POS system
- See exactly how many quantities of each SKU you’re holding
- Spot slow-selling and fast-moving products to make smarter restocking decisions
- Get notified when a specific SKU drops below a predetermined threshold
- Create purchase orders for vendors or suppliers
Plus, you can skip the manual cycle counts when you have compatible hardware (such as barcode scanners). Point the scanner at a product tag and have the quantities automatically updated in your POS system.
Offbeat Bikes is just one retailer that’s moved to Shopify after a disjointed inventory management system. “I had to use a third-party software to sync inventories between the Squarespace website and Square POS, which was complicated to manage,” owner Mandalyn Renicker says. “Even then, I still had to manually count inventory levels because we kept running into errors on both systems.”
Mandalyn migrated to Shopify POS in a bid to streamline inventory management and improve the customer experience. It paid off: Offbeat Bikes’ retail team now saves over four hours per month on inventory management.
Manage staff
It’s impossible to operate a retail store single-handedly. Whether you’ve hired sales associates, visual merchandisers, or store managers, your POS system can help you manage staff and stick to labor budgets.
Shopify’s POS system lets you:
- Attribute sales to staff members if you’re offering a commission
- Assign custom roles to staff with the correct permission levels
- Let retail staff clock in and out of their shift
- Give staff a unique PIN to sign in to the POS system and bolster security
- Require manager approval for specific actions
- Integrate staff reports with accounting software and payroll apps like Gousto for timely payouts
Say, for example, that you’re training new retail sales associates to use the POS device. You don’t want to give this person full unlimited access to your POS systems. Instead, use Shopify’s “Training” role. Without manager approval, it will limit their ability to process sales transactions, update inventory quantities, and change the POS system settings.

Complete sales
The retail experience lives and dies at the checkout. Long lines can deter shoppers from buying items in their carts. The quicker you can ring up an order and process a customer’s payment, the better.
Modern POS systems have a wealth of features that make this possible. For example:
- Barcode scanners add products to the POS checkout when scanned
- Discount codes apply manually or automatically, depending on the cart contents
- Tax rules automatically calculate your tax liability and charge customers accordingly
- Giving customers the choice between an email or paper receipt
- Accepting tips for customers to show their appreciation
What happens when customers return products they’ve bought online or in-store? Shopify’s POS system can handle it. Initiate a return, issue store credit, or send a refund to their original payment method from the POS system.
Clothing retailer RUDSAK, for example, transitioned from Microsoft Dynamics 365 to Shopify POS to elevate its omnichannel experience. It got access to a unified customer base and the ability to offer seamless shopping options, resulting in a 50% faster in-store transaction time than pre-migration.
Accept payments
Cash payments are on the decline. Digital transactions, like those made with a contactless card or digital wallet, now account for half of all US retail sales.
A POS system lets you process these electronic payments without the need for third-party payment gateways. Once you configure Shopify Payments for POS, you can:
- Accept multiple payment methods: credit and debit cards, contactless, digital wallets, and even interest-free payments with Shop Pay Installments
- Benefit from competitive payment processing fees to reduce POS system costs
- Issue refunds to the customer’s original payment method, regardless of where they bought it
- Trigger automatic payout to your business bank account
- Manage and reconcile chargebacks
Don’t worry if you don’t have POS hardware, such as a card reader or payment terminal, to accept payments in-store. Shopify’s Tap to Pay feature turns your smartphone into a card reader. Shoppers can tap their contactless card on your device to pay for in-store purchases.

Organize products
Your product assortment grows as your retail business does. This presents its own set of challenges. Sales associates might struggle to locate products on your POS system when ringing up customer orders. It can also be difficult to uncover inventory levels when the product listing is tricky to find.
Shopify’s POS system lets you add unlimited products and variants, each with its own SKU, weight, and inventory quantities.
From there, you can categorize each product to make it easier to locate in the POS:
- Type: a fashion retailer could tag items by material, such as “cotton” or “polyester”
- Season: a sporting goods brand might group products by winter or summer sports
- Promotion: a home furnishings brand could group products with free shipping
Manage customers
Your POS system is the perfect assistant for retail associates who are encouraged to personalize the shopping experience.
Instead of having your team remember every last detail about the people who visit your store, they can reference the unified customer profile on Shopify POS. This profile combines every piece of data you have on the shopper, including:
- Their birthday
- Retail stores they’ve visited
- Products they’ve bought
- Conversations they’ve had with sales associates
- Email campaigns they’ve opened
- Loyalty points they’ve earned
- Products they’ve returned
- Their customer lifetime value
“With Shopify, we can easily look up a customer’s previous orders and make our in-store service feel like a natural extension of what they experience online,” says Gosia Piatek, founder and creative director at Kowtow.
Say your retail associate approaches a customer browsing a hockey stick collection. The retail associate asks for the customer’s name and pulls up their customer profile on the POS device.
What you find is interesting. It’s the customer’s birthday this month. They have 500 loyalty points to redeem. Last time they were in-store, they talked with your colleague about their upcoming hockey competition. They're semi-pro and play for the local team.
The sales associate uses this information to personalize their experience. Instead of promoting entry-level hockey sticks, they upsell a more expensive item—one that’s also used by hockey players on their opposing team. As an extra nudge to buy, you remind them of their loyalty points (equivalent to $50 in-store credit), and throw in a free protective case as a birthday gift.
Generate sales reports
Regular monitoring is the only way to know whether your store is improving. This applies to every aspect of business operations, from foot traffic and sales to product performance and inventory reporting.
Unlike manual reporting, you don’t have to waste time conducting inventory counts or tallying up sales. Your POS system keeps a record of all transactions and generates reports based on data it has collected.
Here’s what those POS reports might look like:
- Sales reports. Track metrics such as average order value (AOV), conversion rate, and net sales. These are useful benchmarks to spot sales trends and monitor the effectiveness of marketing campaigns. For example, you might see that sales decline when the weather is bad. Counteract this with a “rainy day” promotion that gives shoppers a 10% discount on in-store purchases.
- Product and inventory reports. What are your top-selling products? Which contributes the least revenue to your store? Aside from answering these top-level questions, POS product reports help make smarter marketing decisions. For example, if people tend to buy two products together, can you convert them into a bundle?
- Customer reports. Monitor your success at retaining customers by tracking metrics like returning customer rate, purchasing frequency, and lifetime value. Again, this is useful to track marketing effectiveness. Metrics that trend upwards indicate that your post-purchase campaigns drive customers back.

Market to your customers
The best POS systems aren’t just machines to ring up orders, take payments, and view reports—they also let you market to your customers without a disjointed tool stack of marketing apps that sit in isolation.
Shopify, for example, lets you do the following tasks once you’ve set up the POS system:
- Capture email addresses at checkout for future retargeting—a feature that’s already helping Shopify retailers increase retail transactions by 5.5%
- Send an automated email that encourages customers to leave a review
- Create and redeem discount codes for online and in-store purchases
- Apply and redeem rewards through your POS loyalty program
- Upsell or cross-sell products via email based on their purchase history
What’s especially great about these marketing tools is that they pull data from your unified customer profile.
If someone visits your store and buys a scented candle, for example, you might enroll them in an automated email sequence that cross-sells oil diffusers and room fragrances made with the same scent. They purchase one of these products from your online store.
When they do so, they’re removed from the original sequence. They’re moved to another email automation that drives them back in-store to redeem loyalty points they earned on their online order.
Customize your POS UI
Every retailer uses their POS system in a slightly different way. One brand might be heavily into discounting, whereas others have a vast product catalog that spans multiple categories.
POS UI extensions let you customize the interface to complete tasks more efficiently. Using the same example, the retailer that leans into discounts might add a tile to the Shopify Smart Grid. This lets sales associates locate the discount with ease.
However, retailers with a wide product assortment might customize the Smart Grid to display product categories. POS users can tap the category to locate the product instead of barcode scanners.
What’s unique about Shopify is that retailers can create UI extensions not just for native POS functions but also for any integrated tool, such as:
- Loyalty apps
- Staff management apps
- Inventory management apps
- Product bundling apps
- Pickup and delivery scheduling apps
Say you’re an omnichannel retailer that accepts BOPIS orders. Customers who purchase online can choose their pickup slot through the Zapiet app. By adding this app to your POS interface, retail associates can click the tile and see upcoming orders, so they can prepare them before the customer arrives.
“With POS UI extensions, we're now able to integrate information natively,” says Kevin Harwood, CTO at Tecovas. “So that's going to create a better customer experience without them even knowing that it was enabled by POS UI extensions. But it's a memorable retail moment for customers and I think it'll drive more brand affinity for that experience moving forward.”
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Sell more with Shopify POS
Setting up the right POS system is a tedious process. But it's worth it once you’ve found the right one for your retail business. Retailers using Shopify POS have reported an average 8.9% increase in gross merchandise volume (GMV), thanks to its unified customer data and omnichannel capabilities.
Shopify’s POS has features that let you do what you do best: sell. From smart inventory management capabilities to omnichannel selling and unified customer profiles, it’s never been easier to set up a POS system that works with your existing commerce tool stack.
How to use POS System FAQ
How do you use POS step by step?
To use a retail POS system, log into your account on the POS hardware. Add items to the cart and ask the customer how they want to pay. Process their payment and provide them with a receipt to complete the transaction. For more information about how to use Shopify POS, visit the help center.
How does a POS work?
A POS system unifies your sales, customer, and inventory data into a centralized platform. It lets you ring up orders, reference customer data, check inventory levels, process payments, run marketing campaigns, and manage retail staff.
How do you do a POS transaction?
To process an order on a POS system, locate the products a customer has in their cart by clicking it from your product catalog or scanning the barcode on the label. Once all items have been added, tell the customer their order total and ask for their preferred payment method. Process the payment and provide the customer with a receipt.
How do you use a POS machine for the first time?
Follow these steps to use a POS machine for the first time:
- Choose a POS vendor.
- Buy compatible hardware (e.g., receipt printers or cash drawers).
- Connect your device to WiFi.
- Download the vendor’s POS software.
- Connect hardware to the POS device.
- Configure payment methods.
- Add product information.
- Run a test order.