What Is a Point of Purchase?

A point of purchase (POP) is a place where a sales transaction occurs. On a macro level, a point of purchase may be a mall, market or city. On a micro-level, retailers consider a point of purchase to be the location of checkout, which can be in-store or online. It is also known as the point of sale (POS).

Point of Purchase Explained

In recent years, the point of purchase for products and services has been an area of focus for marketers. Points of purchase may be real, as in the case of a "brick and mortar" store, or virtual, as in the case of an electronic retailer that sells goods and services online. At the point of purchase, the merchant typically creates an invoice or sales order. After receiving payment, the seller creates a receipt that is given to the buyer. Such receipts have traditionally been printed but, increasingly, receipts are being delivered electronically.

POS Systems

POS systems frequently use hardware or software tailored to the particular industry or business. Although some small retailers use off-the-shelf cash registers to calculate payment amounts and issue receipts, most POS systems are computer-based, digital and incorporate other devices or peripherals such as printers, bar code scanners, scales and touch screens. In some cases, customers perform the duties that were previously performed only by check-out clerks such as scanning bar codes, weighing items that are sold by weight, operating POS terminals by tapping their fingers against touch screens and making payments by swiping their credit cards or inserting cash into machines.

In addition, POS software is increasingly used for accounting, warehousing and management functions. Software may be used to manage inventory, alerting warehouses when shelves run low or creating purchase orders that are automatically sent to suppliers. POS software may assist management in deterring theft and employee fraud. It may be integrated with a business's accounting system to enter the day's sales directly into the company's books.

POS Innovation

Modern POS systems are commonly programmable or allow enhancement with third-party software programs. These systems can be tailored to meet specific needs. For example, many retailers use POS systems to manage membership programs that award points to frequent buyers and issue discounts on future purchases.

Cloud-based POS systems are increasingly in use, particularly for large online merchants, to track and process numerous purchases. Cloud-based systems can greatly reduce the upfront costs of implementing a POS system for many businesses. 

Customers can also interact directly with POS systems, particularly in the hospitality industry. This is often referred to as location-based technology. At many restaurants, customers can view menus and place orders on terminals located at tables. In hotels, customers use similar terminals to place orders for room service or pay hotel bills.

Fast Facts

  • A point of purchase (POP) or point of sale (POS) is the moment a transaction occurs between a seller and a buyer.
  • A POP may occur in-person or online, with receipts generated either in print or electronically.
  • POS systems are commonly programmable or allow enhancement with third-party software programs.
  • Cloud-based POS systems are becoming increasingly popular among merchants.
  • POS systems are interactive, particularly in the hospitality industry, and allow customers to place orders and reservations, and pay bills electronically.