So you have a small retail business, and you are ready to invest in a new Point-Of-Sale (POS) system. There is a lot of information available about the many system choices available and what they can do.
It may be a little more difficult, though, to figure out exactly how much your system is going to cost. This is the question we will try to help you answer in this report.
This discussion assumes you are planning to upgrade an existing, older POS system to take advantage of newer technology, or to setup a new system from scratch.
Retail POS System: Cost of Components
The cost of a modern POS system is composed of multiple parts. When evaluating candidate systems you will need to consider all the parts to estimate the total cost.
- The system hardware will include at least one core terminal, either a stationary register or PC or a mobile device. It may also include a variety of auxiliary components such as receipt printers, credit card readers, bar code readers, etc.If you are upgrading an existing system, you may already have some of these components. Hardware costs are usually one-time costs, although there may be ongoing costs for maintenance.
- The system software runs the hardware and may handle a variety of back-office functions such as inventory, employee management, and many others. Software is usually offered on a subscription basis, with monthly or annual payments.
- Credit card payments are usually handled through a third-party payment processor. There is usually a transaction fee based on the amount of the transaction. A typical transaction fee would be $0.30 + 2.5% of the transaction amount. Some vendors, though, offer their own payment processing, and may trade off transaction fees against subscription fees.
Costs Vary for Different Retail POS Systems
Costs for a retail POS system can vary over a wide range. A minimal system from Square, using your existing tablet, is actually free except from transaction fees!
For a full-featured POS though, from companies like Lightspeed or Shopify, you could easily pay thousands, plus hundreds more in monthly subscription and maintenance fees.
The good news: Retail POS systems are highly customizable, so you pay for only what you really need.
The costs for your new or upgraded retail POS system will depend a great deal on the type of system you decide to buy.
Two factors are particularly important: selection of a fixed terminal or mobile terminals, and choice of a cloud-based system or one using an in-house server.
In the past most POS systems were based around fixed terminals with an in-house server. Today the majority of new systems use mobile devices, even if they are kept in a fixed place, and cloud-based software.
Many factors may help to determine the POS system type that is suitable for your specific business. Our purpose is not to recommend the type of system you should use, but to help you analyze the costs associated with each choice.
We will examine the costs that you may encounter for each type of system discussed. This analysis is based on a single terminal, although even small businesses may have a need for more than one payment point. If your business requires multiple terminals, or even includes multiple locations, then many of these costs will need to be scaled up.
The two main choices for your overall system architecture, which determines especially the hardware you need, are fixed terminals or mobile, tablet-based terminals.
A solution based on one or more fixed terminals may be appropriate when all your customers check out at a fixed location, as in many retail businesses. The terminal may be a conventional PC, usually incorporating a touchscreen, or a special purpose terminal supplied by the vendor.
A conventional fixed terminal must be supplemented with other components probably including as a minimum:
- A credit card reader, available from companies like Square or Clover for $75 or less
- A receipt printer, available from Epson, Star and others for about $50-$200
- A cash drawer, available from companies like Logic Control and Posiflex for about $100-$150.
Other specialized components might include bar code readers, kitchen (or bar) printers, scales, etc. These components, important for some types of businesses, could add $500 or more to the cost of each terminal.
A touchscreen monitor on its own can be bought for $200 or less. Conventional PCs can be purchased from many sources for less than $500 each. However, all auxiliary devices will need to be purchased separately.
Special purpose terminals may be more expensive but may also have other devices built-in or available as a package. These systems come bundled with all necessary software and may be priced on a subscription basis.
As an example, NCR Silver offers a complete system with a small but attractive terminal and all other necessary components for $149 per month. A Clover system may be had for under $30 a month, but costs over $1600 up front to get started.
A POS based on mobile terminals is the best choice for businesses such as restaurants where payments are taken at a table or other variable customer locations.
Many retail businesses take payments at fixed locations. However, even if you take payments at a fixed location, the tablet-based approach may be attractive. The tablet can simply be placed in a stand.
These systems normally use a standard tablet as the mobile terminal. In most cases you can use commodity Android or iOS tablets, which can be bought from conventional sources for about $200 to $800. acquire the tablet from conventional sources.
A card reader and probably a receipt printer are also needed as part of the mobile system. Your store may have backup equipment at a fixed location, but most transactions can be completed at any desired location.
Mobile card readers are available for $50 or less. Mobile thermal receipt printers, if wanted, can be had for a similar price. If a tablet-based POS is to be setup on a table rather than hand-held, then a stand will also be required.
A POS system purchased as a whole will, of course, come with all the necessary software. If you buy some of your hardware components separately, then the software needs to be obtained from a POS vendor.
Whether purchased separately or not, the software is usually priced by subscription. Many POS software packages are available for less than $100 per month, but full-featured systems including robust inventory management, employee management, customer loyalty programs, and extensive reporting will cost quite a bit more.
Software purchased with a complete system will of course work with all of the hardware components of that system. If some of your hardware is bought separately, or carried over from your previous system, you will need to be sure it is compatible with your new software.
As noted above there are two fundamental approaches to the software operation for your system:
- Run all of your software in-house, on a computer of your own that acts as a server. The server must also provide storage for all of your records;
- Run your system “in the cloud”, using software and storage provided remotely via the internet.
The main advantage of running on your own server is that you maintain full control of your data. Also, you are not subject to interruptions if there is an internet outage. However, there are several disadvantages:
- You will need a reliable server computer, although in some cases this could be your terminal device.
- You will probably need an in-house network with appropriate security.
- You will need one or more trained employees to maintain your hardware and software and keep your data backed up.
If you don’t already have a suitable server and network, these may be substantial costs.
The server option is generally available only for fixed terminal systems. Mobile systems are almost always designed to be cloud-based.
The great majority of newer POS systems, including almost all mobile systems, are designed to be cloud-based. Most or all software is accessed remotely via the internet. This creates some disadvantages:
- If the internet goes down, the software and data are inaccessible
- Access may be slow during peak periods
- Data may be subject to loss or hacking (but it is probably far more secure than keeping it locally)
- There may be extra costs not found with a local server
In spite of these tradeoffs, cloud-based POS systems have become the system of choice for all but the largest and most tech-savvy users. To mitigate the possible loss of service, many systems have an offline mode that can be used for a short time with limited functionality.
The software costs for cloud-based systems cover a wide range. At the low end is Square, which is basically free, but only works with Square-supplied components. Software from vendors like Lightspeed or Shopify typically start around $100 per month and can run to several hundred if advanced features are added like sophisticated inventory management.
Regardless of the system type, you can count on a few additional costs.
- If your system provides back-office reports you will need a standard inkjet or laser printer for $100 to $400 or so.
- To provide communication among the components in your store you will need a wired or wi-fi network with a good router. Plan on $300-$500 for this network.
- If you are comfortable installing your own system, you may have no cost here. If you want professional installation it could cost $500 or more.
- Your software contract should cover bug fixes and updates, but maintenance on your hardware, whether supplied with your system or not, is an additional cost to keep in mind. This could add a few hundred dollars a year.
Putting it All Together
So, what is the bottom line? Even if we limit discussion to mobile, cloud-based systems there is quite a range:
- The lowest cost “system” you can get, from Square, offers you a mobile app and a basic swipe-only card reader, for free. All you pay is a transaction fee of $0.10 + 2.6%. You will also need to supply the tablet.
- A medium-scale retail system from Shopkeep could cost $800 for a full set of hardware except for the tablet, which again you must supply. Software may run about $75 a month. You may choose your own transaction processor, probably with an average fee close to $0.30 + 2.5% per transaction.
- A full-featured system from Lightspeed provides all the basic hardware (again, except the tablet) for $700. Software with inventory and CRM modules will run about another $200 a month. Here you may also choose your own payment processor.
All of these costs are for a single-terminal system. If your business requires mobile terminals that are actually moved around, you will very likely need two or more. You may need to multiply most of this by the number of terminals required.
None of these costs include the extras mentioned in the previous section, such as a report printer, in-house network, or installation and maintenance fees.
Costs for a system with an in-house server can be much higher and should only be considered if this option is clearly necessary.
The only way to determine your exact costs will be to provide your exact needs to various vendors and request a quote. Hopefully, our review gives you some idea of the approximate costs you can expect, depending on how you envision your new retail POS system.