Essential components of POS system cost when calculating POS pricing

We’d like to introduce and clarify some information to ensure we’re on the same page in the next parts.

POS hardware costs are often separate from software costs

POS systems contain hardware and software but it doesn’t mean that these two components come from the same providers. You can buy hardware from one supplier and software from another. Or you may buy each component in hardware/software from multiple suppliers.

Even if you buy both POS hardware and software from one supplier, they also have different pricing plans for each. Some can give you a free trial for software if you buy hardware devices from them. In most cases, you should break down hardware cost and software cost in your budget.

The total cost of ownership

Investopedia defines the total cost of ownership (TCO) as the purchase price of an asset plus the operation costs. It means you should look at both the short-term and long-term prices of an item before purchase. 

For example, maintenance and updates belong to POS software costs besides the license. In this case, the total cost of ownership equals the software license plus maintenance fees over time. 

Technology products such as POS software are constantly developed to meet the changing needs of the business. As business owners, you should always consider the TCO right from the beginning of a POS purchase. Remember that, the lower the TCO, the better the value in the long run.

Hardware is the prerequisite of POS system cost. We need physical devices to host and run POS software. The first and foremost question for you to answer is which POS type you will adopt. 

If you’ve just started your business and need mobility, you can use a mobile POS such as an iPad POS. If you want a more stable and robust POS system to operate huge inventory volumes, a web POS is a good option.

After choosing an appropriate system, you’ll need to buy the necessary hardware. It’s now your hardware budget turns on. Depending on your business size (the number of stores, products/services, employees), your business purposes (either you want to sell online, in-store, or go omnichannel), you’ll figure out what exact hardware and how much is enough.

For your convenience, we’d like to summarize the popular hardware components to build a complete POS system:

• Tablets
• Monitors
• Customer-facing displays
• Card readers
• Cash drawers
• Barcode scanners
• Receipt printers
• Self-service kiosks
• Scales

Buying hardware can be considered a permanent purchase. But don’t forget to add an amount of money for maintenance and/or upgrade as it’s a part of TCO in your POS system price.

Another important thing to notice is that your POS hardware should integrate well with POS software. It will help you save money for hardware and software integration later.

If you can’t afford to buy a full hardware package, let consider buying the must-have components and leasing the others. 

Some providers offer proprietary hardware along with their software like Square, Clover. But you should notice that the price for hardware and software is normally separate.

Let’s wrap up key factors to define your hardware costs:

• Type of POS system
• The number of hardware components
• Fees for maintenance, updates, upgrades

We now come to the essential and more complicated element of the POS system cost because it has more TCO components. Key factors to calculate software pricing include:

• POS software features
• Other TCO factors cover:
  • Fees for software and hardware integration
  • Payment processing costs
  • Fees for update/upgrade, scalability
  • Training & support fees

POS software features

This refers to the license to use POS features provided by software companies and the main contribution to POS software cost. 

The number and quality of features you want will decide the budget. The most prominent features of POS software include:

• Procurement
• Inventory management 
• Sales management 
• Order management
• Employee management
• Customer loyalty programs (eg: store credits, reward points)
• Marketing activities (eg: gift cards)
• Reporting & analytics

Reward Points program on Magestore POS

Nowadays, POS software becomes more and more powerful to satisfy the increasing demands of businesses. But you don’t have to always follow the trends to avoid overspending. Besides, you should consider the customization fee as well. As sometimes, you’ll need to ask your software providers to customize the solutions to fit your needs.

Furthermore, the number of stores and user accounts also make up for software prices. The more stores and user account access, the more money you need to pay.  

About billing contracts, there are various types such as monthly subscription, annual subscription, one-time payment. If you want to try a new POS feature, you can go with monthly billing. If you want to save money, let’s go with annual billing. And if you wish to save much more money, a one-time payment is a great choice.

While many cloud-based POS software providers charge you based on the number of stores or user accounts, there’re companies that both give you access to use unlimited stores and user accounts and apply a one-time-payment policy such as Magestore POS solution.

Other TCO factors

Software and hardware integration

In many cases, when your software isn’t compatible properly with your current hardware, you’ll need to spend an extra budget to integrate them. Also, if you buy different software components from various vendors, you will have to integrate the new software into the existing modules. 

Our advice is that you should buy a complete software package from one provider. Or choose the highly compatible POS software which can work well with the system and other 3rd-party addons to avoid system conflicts.

Payment processing costs

Many POS providers offer a low start rate for POS systems. But they charge some percent of your sales transactions as a part of their pricing structure. Let’s see the case of Shopify. 

Buyers of Shopify POS will subscribe to at least one of Shopify’s plans. Then, they need to pay per processing transaction. In Shopify POS Lite: the in-person credit card rate starts at 2.4% + 0¢ USD. Shopify POS Pro requires buyers $89 per month for one location, then plus 2.4% + 0¢ USD for in-person credit card rate as in Lite plan. (Please note that the pricing plans may change in the future. You should have a double-check for accuracy.)

In this case, you have to consider your sales volumes to select a suitable pricing plan. The more sales you generate, the more processing fees you need to pay.

Fees for software update/upgrade and scalability

If you’re using cloud-based software that charges monthly fees, you can expect regular updates from your software vendors, often including in your monthly charges.

But if you’re using a one-time-payment software that you paid for the whole solution before, then you might expect to pay for the upgrades in the future. If your software providers offer a free upgrade or maintenance, then it will be a huge advantage.

Training & support fees

Both you and your staff have to understand the POS clearly to use it smoothly. Thus, training is necessary. Some vendors require a fee for that as a part of the POS system cost. If the training doesn’t take much time and effort, then it doesn’t matter. 

Apart from training, support is also another TCO factor in POS software pricing. Software vendors offer support in hours or support packages or premium support with response times within 30 minutes and 24/7 availability.

Different POS software providers offer plenty of features at different prices. We recommend you keep reading this article: Best retail POS system of 2021 for thorough understanding.

POS system cost greatly depends on your business size, needs, and purposes. You don’t have to own all modern features or most advanced devices to run your business. Choosing a good-fit point of sale system is our #1 advice to all customers. Let’s talk with our experts to make a plan for your POS pricing. Spend your money wisely.