‘Free’ Retail POS Systems: The Hidden Costs To Look Out For…

Is there such a thing as a 'free lunch'?
min read
Retail Express Team
February 6, 2024
Retail Express Team
February 6, 2024

Table of contents

With lease costs, bills, wages and other overheads to constantly cover, it can be very tempting to look for free or ‘freemium’ software to run your retail operation - especially at the start up stages. In recent years there have been a number of Point of Sale (POS) software systems that have presented these ‘free’ options. However, while the concept of free is always going to be very appealing, there are usually numerous ways that retailers end up ‘paying a price’, either through additional / hidden expenses, or missed business opportunities due to inadequate software features.

We have found that if a retailer is generating $20k turnover or more per month per store, a free POS severely limits their ability to execute the retail practices to sustain profitability and expand further.

There are certainly some retailers that a free POS can make complete sense for. However, this is typically at the very start of their business, for lifestyle/hobbyist retailers turning over less than $20k/month and for certain sectors such as small salons, food trucks, farmers markets stands or cafes.

The benefits of a free POS are very clear - cost. So, in this article, we’ll examine what is not so obvious - the business costs and risks. For most growth-focused retailers carrying physical inventory, we expect that the phrase “there’s no such thing as a free lunch” will quickly ring true.

Free POS Systems Will Have Associated Costs & Fees

When you are presented with a free POS system, a key question you must consider is “how does this software vendor intend to make money?”. Many free POS systems will have terms and conditions that lock you into their own payments processing service (with associated merchant fees), allowing them to recoup their costs of providing the POS software at zero cost. An important step to take here is to research other payments providers and see whether merchant fees are comparative. However, even if they are comparatively low, many retailers would still feel uncomfortable building their business on a POS platform that doesn’t offer them the flexibility to switch / work with multiple payment service providers. Other “tied expenses” used by vendors to generate a return on giving away their POS software include selling high-margin, compatible hardware.

It’s important to realise that a free POS system is usually a gateway for software vendors to acquire new customers and move them up into paid plans. As we’ll cover off in the next two sections, key features and integrations are usually missing from free versions of the software that you’ll end up needing to upgrade to sooner rather than later.

Free POS Systems Have Limited Features & Allowances

With a free POS, you’ll probably only be able to use one register, and monthly transactions will be restricted. Many have a capped allowance at around 1,000 SKUs, while others permit only five or six inventory items.

When it comes to inventory & logistics, CRM, loyalty, marketing and analytics functions, you’ll find a free POS can only handle basic retail practices in these areas, and is more akin to a glorified software based cash register. Your ability to eliminate inventory overstocking and understocking, streamline your fulfilment to the customer, create personalised marketing and shopping experiences and unveil insights that inform profitable decisions will inevitably be impaired. For a small, basic single store that is just starting out this may not be a major concern for the first few months of trading, but if you intend to profitably scale your business then this is probably not the ideal foundation to build on.

Free POS Systems Have Limited Integrations

Most retailers want to take advantage of built-in integrations with their other software platforms for accounting, eCommerce, shipping, CRM, email marketing, and more. However, these are typically limited with free POS systems or are charged as an add-on fee. Constantly jumping back and forth between multiple programs and trying to duplicate data and processes is time-consuming and incredibly inefficient. Retailers that are selling both in-store and online can be particularly challenged when using a free POS as most do not offer any direct integration to the leading eCommerce platforms such as Shopify to synchronise your data and processes between these different channels. This can cause friction in the shopping experience and business inefficiencies because inventory levels, products & pricing and orders are managed in a disconnected way (check out this blog for an overview of these omni-channel challenges).  

Free POS Systems Have Limited Implementation & Support

When it comes to setting up / migrating to a free POS system, expect to this to be entirely self-serve. Accurate organisation of your business data (products, pricing, inventory levels, customers etc), effective system configuration and employee training are critical to a new successful POS project so you’ll most likely need to be prepared to survive without the support of a project manager and guided implementation service.

Free POS plans usually do not come with the option to call customer support, and some don’t even allow you to email with questions. In other words, expect to be left to your own devices. If you can’t find the answer to your problem on a user forum or the vendor’s website, you may not be able to solve it.

Is a Free POS System Right For My Business?

In order to keep pace in the dynamic retail industry, it’s important to have a POS system that equips you with the right tools to fuel growth. The right system is a significant asset in retail and can provide valuable insights to influence business decisions. A free POS system can be a viable option for retailers but typically only for those that meet the following criteria:

  • Monthly turnover per store of less than $20k
  • Willing to operate with no/minimal setup and ongoing support
  • Retail profitability can be maintained with only basic practices in areas such as in-store sales & service, eCommerce, inventory & logistics, loyalty, CRM, marketing and reporting / analytics
  • Basic retail operations such as a small salons, food truck, farmers market stand or cafe

However, for most Australian & New Zealand retailers, a free POS system will tend to quickly show signs of limiting their growth due to limited features, implementation, support and integrations capabilities. Retail Express provides an advanced, affordable cloud POS & Retail Management platform for growth-focused retailers that excels in all of these areas, providing the right foundations to build your business on.

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