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A Penny Saved?

April 13, 2012

Canada's move in early April to eliminate its penny led to a few harried statements from staunch Lincoln coin supporters that the U.S. should not follow suit. For consumers, one concern is potential price inflation from the rounding of prices but a retail worry is the end of the $xx.99 or xx.$98 sticker price incentive.

Canada's main reason for getting rid of the coin was the fact that each penny costs the Canadian government 1.6 cents to produce. The government also noted that countries like New Zealand and Australia had eliminated one-cent coins without inflation.

Canadian reports also found at least some consumers and retailers indicated they were glad not to have to bother with arguably worthless change.

Ralph Moyal, president of the Retail Merchants' Association, said dropping the penny might speed up transactions.

"Pennies are unnecessary and no longer have any function," Mr. Moyal told The Associated Press.

However, at least some stores were worried about the impact of pricing strategies. Wendy Butenschoen of Toronto's Essence of Life Organics told CNN, "Something that costs $7.99 looks cheaper than something that's $8."

The consumer concern was inflation as stores possibly just round up prices to the higher amount.

"Our members are not opposed to the proposal as long as the proposed system of rounding is adequately explained to Canadians. That's the sweet spot. We've got to make sure people understand what's going on," Sally Ritchie of Retail Council of Canada, told AP.

The last concern was echoed by a U.S. advocacy group, Americans for Common Cents, in a statement quickly released following Canada's move. The group said, "This increased cost to consumers will be felt in everything from the grocery store to the gas pump."

The group also said Congress has asked the U.S. Mint to explore ways to make the penny cheaper, and stated that each nickel costs 11 cents to make.

While regretfully admitting the Canadian penny had little use outside history buffs, Brian Grant Duff, a Vancouver collector, saw the elimination of the U.S. penny as a more sizeable hurdle. He added, "It's got Lincoln's head on it!"

Discussion Questions:

Discussion Questions: In what ways, if at all, would the elimination of the U.S. penny affect retailers? Should retailers push more aggressively for its elimination?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How aggressively should retailers be pushing for the elimination of the U.S. penny?


The argument about $.99 versus rounding to the next dollar making the item seem more expensive does have some merit. However, there are many other "rounding" issues not mentioned. What happens when the tax on an item or on the total bill is rounded? Will the taxing authorities accept rounding down if it results in less than $.025. What happens to gasoline? Does the meter only record sales in $.05 increments? Can all this be worked through before someone decided the penny goes, though? Yes, but will they?

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Steve Montgomery, President, b2b Solutions, LLC

Come on, man! Let's get rid of the penny in the U.S., too. We can't solve many serious problems, so let's at least help retailers and shoppers make change more easily, not have to fool with counting out pennies, and free up their pockets. I've seen dumber things, but I think these people who run organizations devoted to saving the penny would be better off getting real hobbies, or trying to save an endangered species than wasting their time on this.

Will it cause inflation? I seriously doubt it. Some things will get rounded up, and some things will get rounded down, and it won't make a nickel's worth of difference, so to speak. And, consumers will save money by not having to pay the 9.8% fee when they lug their bucket of coins (mostly pennies) to the Coinstar machine at their supermarket.

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Al McClain, CEO, Founder, RetailWire.com

The elimination of all or any part of the cash monetary system will bring an instant cost of doing business savings to all legitimate companies. Cash businesses and the businesses taking advantage of the tax advantages cash transactions bring will have to find a means to survive. It is from these multimillion dollar businesses that we will see the money flow to lobbyists for the effort against. The goal of eliminating is starting small as with the penny; nevertheless, it is a goal to eliminate all cash.


Probably not much effect. I know many retailers already that round down to the nearest nickel. In Australia and New Zealand, it's gone. As for pricing, no changes need to be made. With taxes, etc, who knows what the final tally will be? It's also time we eliminate the $1 bill and simply use all those coins that were minted and not used. The $5 bill is pretty much useless too and could be replaced with a coin.

David Livingston, Principal, DJL Research

Back in the '60s a candy bar was a nickle, steak was less than $1 per pound, an ice cream cone was 10 cents as was Coke or Pepsi, and I could buy a six-pack of beer for 79 cents. Why are we worried about penny inflation?

I got a better idea. Eliminate the penny AND the nickle. All pricing would then be in multiples of 10 cents. Easier math. Simpler pricing. Less change in my pocket.

It all sounds good.

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Gene Detroyer, Professor, Independent

I can hardly wait to see the penny go! I'm from Canada, and I might even host a 'the penny is dead' party. My couch cushions will be safer. The coin 'holder' in my car might actually become usable. And, best of all, retailers and consumers can get on with some real issues of substance.

We, just like the rest of the world, survived the introduction of the metric system. So we'll have no problem with the penny elimination either. Just think how much less cluttered cash counters will be in all those stores that have the 'need a penny' cup on display!

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Kevin Graff, President, Graff Retail

The elimination of the penny doesn't mean that transactions with pennies in it are also eliminated. If the penny is eliminated it could complicate a retailer's operations in a significant way.

Even if prices would have to be changed to end in .05 cent increments, the total due including state and local taxes could likely add odd cents to the total. This will require a rounding mechanism. The rounding mechanism must first be proposed and then legislated. This could become quite complicated when you consider that sales taxes are controlled by local and state governments. Imagine the nightmare of states having to adapt to this change and then retailers having to adapt to the rounding rules established for each state and local county, town and city.

Now imagine how one determines who receives the benefits of the rounding of these taxes?

While the penny itself seems to have little value to consumers, it is an integral part of our commerce from a state and local taxation perspective. Eliminating the penny sounds like a good idea, but may be nearly impossible in practice to accomplish.

Charles P. Walsh, President, OmniQuest Resources, Inc

Death to the penny! No one will miss it. Why?

First, we round all the time today, we just don't notice. Sales tax in MA (where I live) is 6.25%. If I buy a $2 widget, do I bemoan the inflation because I have to pay $2.13 instead of $2.125? No.

Second, we've gone through this transition before. Anyone remember the U.S. Half-Cent? Nope. Why? Because rounding to the full penny is a non-issue.

I say let's get rid of the penny AND the nickle AND the one dollar bill, and let's use the two extra slots in the change drawer for $1 and $2 coins, and the extra slot in the bills drawer for collecting lint.

Ben Sprecher, Business Development, Google

When I was younger, I used to argue with the cashier giving me a Canadian penny instead of a US penny for change. I'm glad my children do not have to face this issue anymore.

In all seriousness, retailers should push more aggressively for its elimination to promote digital currency. Canada is moving towards a digital currency system called MintChip to replace their penny system.

The digital currency makes it easier to handle smaller transactions and in some cases, allow 3-digit fractionals to be considered in pricing for some retail items.

Ed Dunn, Founder, (Stealth Operation)

What's the difference between 95 and 99 cents? Three correct answers. Nothing to the consumer. Four cents. Thousands of bottom line (taxable) dollars to the business. Do the math. This adds up to several thousand dollars of profit for even the smallest of businesses, if they have a profit. Many would unknowingly be thrown a bigger loss than they already have.

Do not eliminate the penny or nickel. Make them less expensively perhaps, but don't undermine the economy without doing the math.

Sid Raisch, President, Advantage Development System

Just as I thought: insidious Socialism trying to destroy America...even creeping onto our own site!

Seriously though, I think this is really part of a bigger issue: the effort to get rid of cash altogether: you can price @ 3.99 all you want -- or even $3.99632 -- when the transaction is electronic.


I doubt the penny would be missed by many after a year or two. This reminds me of the fuss over Y2K and the supposed worldwide computer meltdown. BTW, we started making half cents in 1793, and stopped in 1857. Perhaps their demise somehow led to the Civil War? As an aside, half cents today are worth anywhere between $36 and $15,000+.

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Warren Thayer, Editorial Director & Co-Founder, Frozen & Refrigerated Buyer

Eliminating the penny would truly help retail today...and expedite unnecessary transactions. Rapid additions and even numbers would be the result.

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Kai Clarke, CEO, American Retail Consultants

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