Studying The Science of Retail Since 1979

How The Elimination Of The Canadian Penny Will Affect You At The Point Of Sale Today marks the death of the Canadian penny. Soon to be eliminated at the POS. Born in 1876, at the ripe old age of 137 years old, the iconic Canadian penny with its maple leaves and Queen’s Head has been euthanized by the Canadian government and will eventually fade out of our national identity. Not enough to even buy penny-candy anymore but occasionally worth more than an American penny, we say goodbye to the familiar copper coin. Why? Manufacturing the penny is too expensive apparently. Each penny costs the government 1.6 cents to produce. It is estimated that the government will save approximately $11 million per year in not producing pennies. This may seem like a lot of money on its own, but when compared to a $300 billion annual budget, $11 million seems like a drop in the bucket. When you factor in what it will cost the government to collect and recycle the pennies, they are only expected to net about $4 million a year in savings over the next 6 years. By any definition this is definitely a long-term cost cutting measure that will have little or no impact on the national budget, tax payers or consumers. That’s all fine and dandy, but how will it affect you, the merchant, at the POS? Retail and restaurant merchants have been suspicious – and rightly so – of some of the information being reported in the press about how much will be saved and how easy it will be for them to make the change. The government and the media alike just don’t seem to be able to comprehend the evolving challenge of customer service and POS transactions – very little of their coverage of the issue seems to be relevant to the perspective of the retailer or restaurant owner. So here is what you need to know about the end of the Canadian penny and how it will impact you – the Canadian Merchant. Pennies will be around for a while. The Royal Canadian Mint will stop distributing pennies – stop sending them to Canadian banks – today – on February 4th, 2013. That sounds ominous, but there are 35 billion pennies in circulation. Even if banks start vacuuming them up out of circulation immediately and ship them directly to the Canadian Mint to be destroyed, it’s going to be some time before they don’t exist at the POS. I’m also not certain what the banks will do with the pennies when they receive them. Although the Canadian Mint will not issue pennies to the banks, banks are not required to redeem pennies with the Mint. Merchants are worried that they will go to the bank after February 4th and not be able to get pennies. Bank tellers that I have asked have not known what will happen after February 4th, and I have not seen any documentation of the plans of the 5 major banks regarding the penny, nor is there any requirement in the legislation requiring banks to turn them in to the government. I think that if the banks have the pennies they will issue them. On February 5th I’m going to go to the bank to buy a roll of pennies and we’ll find out. Stay tuned. Should we accept pennies at the POS after February 4th? Absolutely. The penny will be legal tender in Canada indefinitely – a fancy word meaning, forever. Canadians should be very familiar with the government eliminating currency from circulation. Back in 1989 we eliminated the Canadian one dollar bill, and then again in 1996 we eliminated the two dollar bill. It’s now 2013 and we can still can take those bills to the bank and redeem them for a looney or a twoney. Have no fear, the Canadian penny will always be worth a penny at the POS in Canada – period. Should we give out pennies at the POS after February 4th? If you have them to give – sure. Why not? They are and will continue to be legal tender. Your customers can take them to the bank and turn them in for 1 penny worth of value. As long as you can get them and give them, you can use them at the POS. What do we do when there’s no penny to use at the POS? The Canadian government has proposed that retail and restaurant operations should be rounding off to the nearest nickel in a fair, consistent and transparent way at the POS. This leaves lots of room for interpretation. What has been the general consensus is that retail and restaurant operations will round to the nearest nickel – if the transaction ends in 1, 2, 6 or 7 they will round down, and if the transaction ends in 3, 4, 8, or 9 they will round up. You should also round refunds in the same manner. Do we round off all transactions at the POS? No. Only the change due on cash POS transactions is subject to rounding. The penny is and will remain the smallest denomination in currency in Canada; there just won’t be any cash pennies anymore. That means that all transactions paid by cheques, Visa, MasterCard, American Express, Gift Cards and Debit will not need to be rounded. If you’re rounding off electronic payments and cheques – you’re doing it wrong. Should I round off all my prices to the nearest nickel? No. I have heard of people doing this, and it is unlikely to be a good strategy. When tax is calculated on a transaction at the POS the result is random depending on how many items you have in the transaction. Are there some businesses that can modify their pricing to avoid losing pennies? I have no doubt that there are, but those businesses need to consider the ramifications of customer perception of a price change made in concert with the… Read More