Top News

EDITORIAL: Penny for your thoughts

This is a good time of year for shoppers to be counting their pennies. But some are taking it to an academic level.

It wouldnt be the first time someone wondered, after the scrapping of the one-cent piece in 2013, whether rounding out prices would benefit merchants or consumers. Many mused on that from the beginning.

But a study by a University of British Columbia economics and mathematics student suggests grocers across Canada are the winners. Its not exactly big time, but Christina Cheung in her paper determines the value at an extra $3.27 million raked in by grocers across the country, courtesy of rounding up to the nearest multiple of five cents versus rounding down.

The way it works, as most know, is that a price ending in, for example, .98 or .99, gets rounded up to the dollar, while .96 or .97 costs you .95.

Cheung calculates the average store gains about $157 per year, coming out on the winning side with a consumer potentially losing up to two cents per purchase.

Still, its the principle that counts, and according to Cheungs findings the stores benefit more often.

But not everyone agrees. In his response, Karl Littler, vice president of public affairs for the Retail Council of Canada, says the penny rounding works out pretty much 50-50, and that the study doesnt take into account, for example, the impact of taxes on the total.

Its hard to argue with the spread charts, documentation and economic analysis, but common sense would question the studys result.

In addition to Littlers points, the analysis also could not conceivably account for the number of goods purchased in a given shopping excursion. If an item costs, for example, 59 cents, then a cash purchase will mean forking out 60 cents. Buy three of them though, it comes to $1.77, and you have to pay $1.75, saving two cents.

Apply that to a shopping trip that might mean picking up 20 or 30 items, and you can expect a pretty random result as to what the total will be: ending in an 8 or 9 versus a 6 or 7 ­– or a 5 or a 0, neutral in the give or take department.

Then theres the changing reality of how most people pay, and cash does tend to be falling out of favour, being replaced by debit or credit card. In that case, a $107.98 purchase costs exactly that, no rounding required.

While Chuengs results are interesting, and she says the study was done for the love of numbers, not to demonize the retail industry, we can also take Littler at his word that theres no nefarious plan to reap pennies from customers.

At any rate, we dont hear a groundswell begging for resuscitation of the one-cent piece.

But this entire argument might one day be as passé as the penny. No sooner had its demise been complete than some experts were calling for the end of the nickel. Some suggested more efficient coinage would be 10-, 20- and 50-cent pieces. It would certainly be easier to figure out change. Then if prices just ended in multiples of 10, everyones even.

Recent Stories