Shopify vs. Square: Which Is Right for Your Business?

Matthew Speiser

Matthew is a staff writer at Fundera. He strives to take complex products and services and break them down to help small business owners make better decisions.
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Square POS and Shopify POS are two of the most powerful 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 pit Shopify vs. Square to see what the distinguishing factors of each POS system are, and which one is better for your small business.

What to Look for in a POS System

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 POSs: 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 and Square on these criteria and see who comes out on top.

shopify vs. square

Shopify vs. Square: Payment Processing

Shopify and Square 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 (TOS). We recommend familiarizing yourself with Shopify and Square’s TOS so that this does not happen to your business.

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 payment 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 systems can process payments offline, ensuring that your business won’t grind to a halt because the internet is down. In terms of security, Shopify and Square payment processing is PCI compliant and features fraud prevention and end-to-end encryption.

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

Shopify vs. Square: Checkout

When it comes to checkout, Shopify and Square are pretty even. Both POS systems allow you to send customized digital receipts as well as physical receipts. However, Square also allows you to send receipts via text, which Shopify does not.

In terms of payment, Shopify POS and Square POS both 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.

shopify vs. squareSource: Shopify

Shopify vs. Square: Employee Management

Both Shopify and Square require you to purchase upgrades to access employee management features in your POS. With Shopify’s upgrade, Shopify for Retail, you can assign staff PINs to log into the system, track employee performance, manage register shifts, and more.

Square’s equivalent service is called Square for Retail. This upgrade provides many of the same features as Shopify’s, plus the ability to set custom permissions, manage timecards, and oversee commissions and tip reconciliations. If you don’t want to sign up for Square for Retail but want these employee management functions, Square allows you to subscribe to its employee management software for a $5 monthly fee.

Shopify vs. Square: Inventory Management

This is another function that you need the Retail package to really take advantage of. With both Square and Shopify for Retail, you can manage your entire inventory across all retail locations and channels, track stock counts, and automatically stop selling products when inventory runs out. Each POS also makes it easy to assign wholesale pricing, buy-one get-one sales, loyalty programs, and more.

Shopify vs. Square: Customer Relationship Management

Shopify for Retail creates customer profiles based on your customers’ contact information, order history, and shopping habits. With that information, it allows you to create email marketing campaigns. Square for Retail offers much of the same. Both also provide integrations with email marketing software like MailChimp.

An added benefit of Square for Retail is the option to solicit feedback from customers. Shopify, on the other hand, synchronizes your online and retail customers, allowing you to manage them all in one place.

Shopify vs. Square: Reporting

Both POS systems offer reporting and analytics to help you gain valuable insight into your business (without having to sign up for the Retail package). 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. Square also provides a mobile app specifically for data analysis.

shopify vs. square

Source: Shopify

Shopify vs. Square: Integrations

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 over 1,500 options.

That’s not to say that Square doesn’t feature a huge app inventory in its 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.

Shopify vs. Square: Mobile App

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.

shopify vs. squareSource: Square

Shopify vs. Square: Hardware

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 tablet costs $999 outright or can be financed at $49 per month for $24 months.

Square also offers several hardware bundle kits starting at $535 (iPad/tablet sold separately). The kits come with a stand, card reader, receipt printer, and cash drawer. 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 kitchen printer.

Shopify bundles are similar to Square, although they will cost you a little bit more. A stand, receipt printer, cash drawer, and card reader bundle (iPad/tablet sold separate) starts at $656. Individual chip and magstripe readers cost $29, and swipe/chip/contactless payment readers cost $149. Note that you also get a free mobile magstripe reader when you sign up for Shopify POS.

Shopify vs. Square: Price

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 or Square as your POS system and payment processor. Note that payment processing costs differ based on the software plan you sign up for.

Shopify Price

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. There is also the Shopify for Retail upgrade available to customers. 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.
  • 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.
  • 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% + $.30 for ecommerce transactions. Subscribers also get more advanced reporting features and better shipping functionality.
  • 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.

Regardless of which plan you choose, you should know about the costs of Shopify for Retail. This upgrade is designed for retail merchants who sell in multiple locations as well as online. The plan costs $49 per month on top of your software subscription and provides some of the aforementioned employee, customer, and inventory management functions.

Square Price

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. The breakdowns are as follows:

  • 2.75% on all in-person credit card transactions
  • 2.9% on all ecommerce transactions
  • 3.5% + $0.30 on all keyed in or card on file transactions (such as recurring payments)

However, if you purchase a Square Register, your in-person credit card processing fees will be lowered to 2.5% + $0.10. There are also lower processing fees if you upgrade to one of Square’s advanced POS services:

Square for Retail

We’ve already mentioned Square for Retail. It’s similar to Shopify for Retail in that you get more advanced employee, customer, and inventory management capabilities. If you sign up for Square for Retail, you’ll be charged $60 per month, plus $20 for every additional register you use Square for Retail on. With this plan your credit card processing fees will be lowered to 2.5% + $0.10 for all in-person transactions.

Square for Restaurants

Square for Restaurants is very similar to Retail, except it provides your POS with restaurant-friendly features like menu and delivery management. Credit card processing rates are 2.6% + $0.10 for in-person transactions.

Shopify vs. Square: Which Is Better for Your Business?

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. Both services require you to pay extra for the Retail package, but Shopify’s fee is being added on top of what you are already paying for your subscription. The 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 it up, 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.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Matthew Speiser

Matthew is a staff writer at Fundera. He strives to take complex products and services and break them down to help small business owners make better decisions.

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