What is a POS system in layman's terms?

A Point Of Sale, or even more importantly, a Point of Service system, is a computer that is used instead of the old fashioned cash register. It’s a personal computer (PC) connected to a receipt printer, cash drawer, credit/debit card reader and bar code scanner.

What can a POS system accomplish?

A good POS system achieves two goals. First, it makes the entire process of paying for an item simple and fast. This is achieved by scanning the item with the bar code scanner, (instead of keying in long numbers), getting the customer’s phone number (so you can tie each sale to an individual client) and totalling the purchase and accepting payment easily (the credit/debit card reader automatically dials the bank and gets approval in seconds). Furthermore, if the customer wants to "multiple tender", which means pay part of the bill with cash and part with a credit card, the task can be accomplished quickly and easily. A good POS system will also allow you to suspend a transaction which is invaluable for those times when a customer forgets their wallet in the car or has to run to the back of the store for something they forgot while two or three customers are waiting to check out. With transaction suspense, you can simply touch one key, take care of the other customers in line and when the first customer returns, retrieve the transaction and complete it without re-entering all the items.

The second goal of a POS system is to keep track of what your customers are buying. A good system will give you reports on what’s selling, at what times of the day or week, to which type of customer and by which sales people. Sales information by price point tells you what your customer will spend within a classification. Sales by vendor reports tell you which vendors are performing. The more information you can capture, the more efficiently you can control your business and your buying.

Why do I need a POS system?

Ten years ago it was probably possible to run a retail store without a computer. Today, it’s impossible. Your competition is using the POS information to better serve their customers and if you delay they will be using it to better serve your customers!

What's available on the market and how do I choose the system that's right for my store?

At last count, there were over 300 POS products on the market and this number grows almost daily. Choosing the right system amongst all these choices is not easy. I would suggest the following criteria for selecting a good system.

1. Is the system used by at least 5,000 other gift stores? You don’t want to be the guinea pig for a new system. You must to ensure you’re dealing with an experienced company that has sold the technology to other retailers, particularly gift retailers.
2. Will the company give you the names and phone numbers of at least 10 other gift stores that are using the software so you can call a fellow retailer No one will give you the real story about software or hardware except a fellow retailer. Make the call.

How much can I expect to pay?

The average price for a one-register store including all hardware, software, training, installation etc., is around $15,000. You can spend less, but you will get what you pay for. This is your future of your business, don’t try to cut corners. Buy good hardware that has on-site warranties, good training and lots of help. That $15,000 investment over five years is only $3,000 per year depreciated.

I'm not good with computers, how will I ever learn to work a POS system?

Computers are still not as easy as cars to use. That fact has changed only slightly in the past 10 years. It will require you to learn a new skill. Is it that difficult? The answer is yes if you try to do it by yourself. The answer is no if you buy from a good company that offers training and instruction.

Do I need a different system for computerised inventory and for a customer database, or can I use the same one?

Only one is necessary. As a matter of fact, all of my comments up to now on POS system really meant a fully integrated system including inventory, purchase order and customer database controls. The good systems are fully integrated and one of the most important components is the customer database program which allows you to identify which customers purchased what items. These databases tie every SKU to a customer’s name and allow powerful queries/questions to be performed. A customer database can be used in limitless ways. For example, it can list all the customers who purchased a certain type of product, and send them an offering on a related item. Or it can send your 100 best gross margin customers a nice gift at Christmas, and send your lowest 50 gross margin customers a pre-clearance sale notice, as you know that sale merchandise appeals to them.

How does a POS system assist me with my buying?

It will tell you what you sold last year/season, which is a tremendous help when planning for the coming year. A good computer system can allow you to look at inventory on a daily basis, identify what items are not selling and focus attention on problem areas, identify hot items and confirm that there is enough stock on hand and on order to meet the demand. You will soon discover, however, that you will also need an additional piece of software called a spreadsheet (Lotus or Excel) to prepare your open-to-buy budgets.

Won't it be a lot of work to SKU all my products?

Yes it will. There is no way around it. If you sell by the SKU you have to buy by the SKU and make sure that every item in your store has a bar code. The good news is that many suppliers are starting to put UPC bar codes on their products and this saves us money by not having to put them on ourselves.

If my sales are only $200,000, is a POS system right for me?

If you want to stay at $200,000, then no you don’t need a POS system, just a funeral director who will wait a few years for you to arrive. Just kidding! Even at current sales of $200,000 the $3,000 a year investment that I talked about earlier is only one and a half percent of your sales. This percentage is what most retailers spend on technology today.

What if my staff doesn't want to learn how to use the system?

Convince them that it will not only make the store better for customers, but will also make them more effective in serving customers.

How much will it cost me to train them?

Depends on the system and the person. Figure at least $500 per employee for basic training and up to $2,000 for complete full system training. Most of your employees will only need the basics and you can implement a ‘train the trainer’ format where you go and get the training and then give it to your staff. Also, look for companies that have good software manuals. This reduces training costs.

Can a POS system track internal theft?

It can track theft and inform you of how much you’re losing, but it can’t tell you who’s doing it. Only a video camera can do that. You also have to be careful of human error which can cause what appears to be theft, but are actually bookkeeping errors. For example, if you receive 36 items that are supposed to sell for $45 each and a price label falls off and it’s sold for $40, the system will report a $5 shrink. Human error accounts for over half of most stores’ shrinkage.

Are all POS systems the same? Can a system designed for a clothing store work in a gift store?

No, one size does not fit all. It’s best to go with a software company that specialises in gift stores. The main reason is not that the clothing software won’t work for you (it probably will as clothing software is amongst the most complex due to size and colour issues) but rather that any new developments in the software will not be built around gift shop needs. You’ve heard the old cliché, "There is strength in numbers". This is especially true in software. The main customer base will be heard long before the few gift stores.

Good luck. If you need more information, check out my Web site www.dionco.com for links to software companies and the latest technology information.