Shopify vs. Square: How to Choose a POS System for Your Business

When choosing which merchant services are right for your business, you want the best of the best. Square POS and Shopify POS are two of the most powerful point of sale platforms on the market. If you’re shopping for a new POS system for your small business, both options are worthy of consideration. But how do you know which one to choose?

Good question.

Let’s establish a baseline for what a small business owner should want in a POS system. Once we have a framework, we’ll compare Shopify vs. Square to see what the distinguishing factors of each POS system are, and which one is better for your small business.

In its most basic form, a point of sale is, literally, the place where sales are made—i.e. a cash register or a checkout page on an ecommerce website. The POS functions through a combination of hardware and software. The software can either run on the hardware for in-person transactions or operate independent of the hardware for virtual transactions.

What distinguishes a POS system from a mere payment processor is that a POS can perform a myriad of other functions related to a transaction. What kind of functions? Well, any POS worth its salt should be able to do the following:

• Process payments: Accepting payment from major credit card networks like Visa, Mastercard, American Express, and Discover is a must. Also keep in mind all the different ways credit card transactions are done. Nowadays, people can pay via swipe, by dipping a chip, or by using a contactless payment method like Apple Pay. To maximize your earnings you’ll want a POS that can process all three. In addition, if you operate an ecommerce store, you’ll need your POS to accept online payments.
• Checkout: Your POS should be able to handle all the logistics around checkout. This includes the delivery of receipts (either physical or digital), tax calculations, shipping options, and the ability to apply tips, discounts, and gift cards.
• Employee management: POS systems should make managing your employees easier through features like time tracking and tip reconciliation.
• Inventory management: By nature of processing the outward flow of your business’s inventory, POS systems should help you keep track of where your inventory stands. The best ones will send reminders when you are running low on inventory and even automate the process of ordering new stock.
• Customer relationship management: POS systems are a repository for valuable customer information. A good POS will leverage that information to build customer relationships.
• Reporting: By analyzing your transaction history, a POS should provide you with valuable insights into your sales performance.
• Integrations: The more applications that integrate with your POS, the more you can extend the functionality of your business.
• Mobile application: Your POS should provide you with a mobile application that allows you to manage your business from anywhere, at any time.

How much will all this cost you? Well, there are three typical expenses when it comes to POS systems: processing fees, software costs, and hardware costs. The processing fee is a small percentage of the payment being processed, plus an additional flat-rate fee (usually for ecommerce transactions). The software fee is a charge for using the POS software. Most—but not all—POS providers will charge this fee.

The hardware fee is what you will pay for buying the hardware from the POS provider that allows you to process payments. This could be something as small as a smartphone plugin or as large as a countertop register. The more hardware options your POS provider offers, the more flexibility you have when it comes to purchasing an option that makes sense for your business.

Now that we know what we are looking for in a POS system, let’s evaluate Shopify vs. Square on these criteria and see which system comes out on top.

Square and Shopify are both payment service providers, meaning they allow a small business owner to accept credit card payments without requiring them to open a separate merchant account.

Instead, the payment service provider aggregates payments from all of their clients into a single merchant account, and then pays each client individually from that account. The benefit here is that you don’t have to operate your own merchant account, saving you an additional expense. The issue is that payment service providers have a tendency to hold funds or terminate accounts if one of their clients fails to meet their terms of service. We recommend familiarizing yourself with Shopify and Square’s terms of service so that this does not happen to your business.

Comparing Square vs. Shopify payment processing, we come across some differences right off the bat. If you sign up for Square POS, you have to use Square as your payment processor. Shopify, on the other hand, will allow you to use a third-party service for an additional fee (ranging from 0.5% to 2% per transaction). Both services can accept payments from all major credit card networks, and provide the hardware you need to take magstripe, chip, and contactless payments. For online payments, Square integrates with a variety of ecommerce platforms, including BigCommerce and WooCommerce. Shopify will charge a fee for using a third-party payment gateway.

Both Shopify and Square can process payments offline, ensuring that your business won’t grind to a halt because the internet is down. However, Square can accept all payments with their “offline mode” and process them the next time you’re connected to the internet. Shopify, on the other hand, can only process cash and custom payment methods offline. In order to process debit, credit, or gift card payments, you’ll need an internet connection. In terms of security, both Shopify and Square payment processing is PCI compliant and features fraud prevention and end-to-end encryption.

Overall, Shopify offers a bit more flexibility than Square in terms of how you want to process payments, if you can stomach the cost.

Source: Square

Now for arguably the most important category: the price of each POS system. Although hardware costs are a one-time hit, here we’re going to look at the continuous cost of using Shopify vs. Square as your POS system and payment processor. Note that payment processing costs differ based on the software plan you sign up for.

Shopify offers five different pricing plans, ranging in cost from $9 per month to $299 per month. Interestingly, there isn’t separate pricing for Shopify’s POS and ecommerce services. Instead, signing up for one gives you access to the other. Let’s look at the particulars of each plan:

• Shopify Lite: With Shopify Lite, subscribers can turn an existing website or Facebook page into an ecommerce store by adding buy buttons. The cost of this plan is $9 per month, with a 2.7% fee on in-person credit card transactions and a 2.9% + $0.30 fee on ecommerce transactions.
• Basic Shopify: This plan costs $29 per month and allows subscribers to set up a Shopify ecommerce store, upload an unlimited number of products, add two staff accounts, and apply discount codes. Credit card processing rates are the same as in the Shopify Lite plan. You’ll also pay an additional 2% fee if you use a payment provider other than Shopify Payments.
• Shopify: For $79 per month, you get everything in the Basic Shopify plan plus unlimited staff accounts, reporting features, the ability to set register shifts, and abandoned cart recovery. Credit card processing rates drop to 2.5% on in-person transactions and 2.6% + $0.30 for ecommerce transactions. You’ll also pay an additional 1% fee if you use a payment provider other than Shopify Payments.
• Advanced Shopify: This plan costs $299 per month and is designed for high-volume merchants. Credit card processing rates are 2.4% for in-person transactions and 2.4% + $0.30 for ecommerce transactions. Subscribers also get more advanced reporting features and better shipping functionality. You’ll also pay an additional 0.5% fee if you use a payment provider other than Shopify Payments.
• Shopify Plus: This is Shopify’s enterprise solution. Pricing is quote-based and varies depending on your business’s needs. Reach out for a free quote.

No need for a complicated price breakdown here because Square POS is 100% free. Yep, that’s right, you can use Square POS for your business at no cost.

If that seems too good to be true, it’s because there are a few caveats. First of all, Square also charges credit card processing fees, which can vary depending on which Square POS hardware you choose. The breakdowns are as follows:

• 2.6% + $0.10 on all in-person credit card transactions taken on Square Readers, Stand, Square Terminal or Register
• 2.9% + $0.30 on all invoices and ecommerce transactions
• 3.5% + $0.15 on all keyed-in or card-on-file transactions (such as recurring payments)

There are also different processing fees if you upgrade to one of Square’s advanced POS services:

We’ve already mentioned Square for Retail, which gives you access to more advanced employee, customer, and inventory management capabilities. If you sign up for Square for Retail, you’ll be charged $0, $60, or $299 per month (depending on the plan you choose). With this plan, your credit card processing fees will be lowered to 2.5% + $0.10 for all in-person transactions. Invoices and ecommerce transactions will incur a 2.9% + $0.30 fee, while keyed-in, card-on-file, and virtual terminal payments will have a 3.5% + $0.15 fee.

Like Retail, Square for Restaurants offers similar functionality, except it also provides your POS with restaurant-friendly features like menu and delivery management. Square for Restaurants costs $0, $60, or $299 per month, depending on the plan you use. Credit card processing rates are 2.6% + $0.10 for in-person transactions. Like Square for Retail, you will also have 2.9% + $0.30 fees for invoices and ecommerce transactions and 3.5% + $0.15 fees for keyed-in, card-on-file, and virtual terminal payments.

Now that we understand some basics and pricing info, let’s continue our Square vs. Shopify comparison by looking at their hardware offerings. Square probably has the more advanced offerings when it comes to hardware. Their main product is the Square Register, a tablet that runs the Square POS app and accepts magstripe, chip, and contactless payments. The register costs $799 outright or can be financed at $39 per month for 24 months.

Square also offers several hardware bundle kits starting at $526 (iPad/tablet sold separately). The kits come with a stand, card reader, receipt printer, printer paper, and sometimes a cash drawer (depending on the bundle). Square sells individual card readers as well: Their mobile magstripe reader comes free when you sign up for Square POS, while chip and contactless card readers cost $49. Other products you can purchase through Square include a barcode scanner and a kitchen printer.

Shopify hardware prices are similar to Square, although they don’t offer a free mobile magstripe reader. Shopify’s chip and contactless card readers cost $49, just like Square—and their chip and swipe reader costs $29. You can also opt for the Shopify Retail Kit, which includes a tap and chip card reader and dock, iPad stand, mounting kit, and dock cable for $229.

When it comes to checkout, Shopify vs. Square is a pretty even comparison. Both POS systems allow you to send customized digital receipts (email, text),  as well as physical receipts.

Comparing Square vs. Shopify in terms of payment, both systems accept discounts, gift cards, split tenders, store credit, and partial payments. As far as tax calculations, Shopify will automatically determine your tax rate based on your business’s location or based on your shipping zones for ecommerce. Square, on the other hand, requires you to input your tax rate information.

Source: Shopify

Both Shopify and Square offer some employee management capabilities with their POS systems. However, if you’re using Shopify, you’ll need to have a standard Shopify or Shopify Advanced plan to access these features, which include creating multiple staff PINS, tracking employee performance, managing register shifts, and more.

Square has two options for employee management capabilities: Team Management and Team Plus. With Team Management, you have access to one set of permissions for time clock, timecard reporting, payroll exports, break tracking, and overtime reporting, all of which is free for all locations.^[1] Team Plus costs $35 per month per location and offers you the features of the free plan plus unlimited sets of permissions, multiple wage rates, and some advanced reporting capabilities. You also have the option of a 30-day free trial before paying for this version.

Inventory management is offered automatically with both Square and Shopify POS systems. With both Square and Shopify, you can manage your entire inventory across all retail locations and channels, track stock counts, and automatically stop selling products when inventory runs out.

Get to know your customers and leverage this information with both Shopify and Square. Both platforms allow you to create customer profiles so you can dive deeper into your customers’ purchase histories, as well as store their payment and contact information. Shopify syncs your customers’ information automatically, and you can use email marketing apps to send updates on sales, promotions, or company news.

Square, on the other hand, enables customers to provide instant feedback, as well as provides a personalized shopping experience and custom digital receipts.

Both Square and Shopify POS systems offer reporting and analytics to help you gain valuable insight into your business. In the Shopify POS dashboard, you can see real-time updates of your sales figures, orders and traffic numbers, and analyze performance by staff, location, and time period.

Square offers many of the same reporting features and delivers daily summaries of your business’s performance in your inbox. All reports generated by both Shopify and Square are downloadable as CSV files.

Source: Shopify

If we’re judging the two POS systems by the sheer number of apps that work with them, Shopify takes the cake. It is probably the most customizable piece of software on the market, boasting an app store with hundreds of options.

That’s not to say that Square doesn’t feature a huge app inventory in their own right. In fact, the Square app marketplace allows you to customize your POS in many of the same ways that the Shopify app store does. Both have a variety of options for everything from accounting and marketing to inventory management and shipping. If there is a specific app that you need to have for your POS, chances are both Square and Shopify can accommodate.

Square and Shopify feature free mobile POS apps that work for iOS and Android devices. Both apps can be used to run mobile payments via a card reader, as well as manage sales, inventory, and employees.

Source: Square

If you’re not satisfied with either Square or Shopify, you may consider Clover POS. This POS system is unique in that they offer four hardware and two software options, so you can create the plan that works best for your business with a combination that is unique to your needs.

Clover isn’t the cheapest option—hardware bundles reach over $1,300—but with several options to choose from, you won’t have to pay for anything you don’t need. Between their two software plans, transaction fees range from 2.3% + $0.10 to 2.7% + $0.10 for in-person transactions, and 3.5% + $0.10 for keyed-in transactions. Similar to Square and Shopify, Clover also includes an app store, reporting, employee management, and gift card capabilities.

With Clover, you can have your system delivered overnight and you can try it for 60 days and then return it if it’s not what you want.

Even QuickBooks, the company known best for their accounting software, has a POS system for business owners. If you’re already a QuickBooks customer using one of their accounting software products, the QuickBooks GoPayment POS will sync nicely with the other services you use.

The QuickBooks POS offers many of the same features as Square and Shopify, like mobile payment processing, basic inventory, card reading and more. The fees are also straightforward, depending on the type of payments you’re processing: It’s 2.4% + $0.25 for magstripe, chip, and contactless payments and 3.4% + $0.25 for other payments like keyed-in payments and camera-scanned payments.

When it comes to picking Shopify vs. Square as the POS system for your small business, there are a lot of moving parts to consider. The way we see it, this is how it breaks down: Square has Shopify beat in terms of price. Although Shopify’s payment processing fees may be lower, you still have to pay a monthly subscription fee, which you don’t have to do with Square. Also, note that you only get Shopify’s low payment processing fees if you agree to use Shopify as your payment processor.

As far as hardware, the Square register may be expensive, but overall Square offers cheaper hardware than you can buy through Shopify. However, one advantage to Shopify is that your subscription also provides you access to Shopify’s ecommerce platform, which has a lot of value for ecommerce merchants.

As far as all the other features (employee/customer/inventory management, checkout, reporting, mobile app, integrations), we’d say the services offered by both POS systems are comparable, so it would really be a matter of personal preference.

To wrap up our Square vs. Shopify comparison, given everything we’ve covered, here is our recommendation: If you are a merchant who sells products online, use Shopify as your POS—you’ll pay more but you’ll be getting an elite ecommerce platform to work with. For everyone else, use Square, because you’ll get the same level of functionality for a much lower cost.

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