Good Idea, Chap: Getting Rid of the Penny- a Smooth Move?

Link to podcast:

<< http://www.mixcloud.com/antonipeychev/good-idea-chap-getting-rid-of-the-penny-a-smooth-move/ >>

I walked into an M&S today in the hope that I could simply pop in, get my pack of chewing gum and leave.

As you might probably imagine, I failed rather miserably in attempting to do so through powers which were, naturally, beyond  my control.

That’s right...the infernal 8am queues in London.

When I finally reached the till and handed the pack to the shop assistant, I reached in my pocket and handed her a 50p coin.

She then looked at me inquiringly and said:

'That would be 51p, please.'

At that point, rather surprisingly so, I smiled at her, quite pleasantly, reached in my pocket again and...froze.

As it normally went, I did not, of course, have a penny.

You never did when you needed one.

‘That would be 51p, please.'

I was reminded of the above every fifteen- seconds as I was rummaging through my pockets to find some loose change.

In about two minutes’ time, I gave up and paid for the pack of gum on my debit card.

This whole episode reminded me of a couple of things.

Firstly, it reminded of why I never used cash to pay for anything.

Secondly, it reminded me of how much I...let’s say dislike....items priced 51p, 47p, 34p, etc.

Thirdly, and probably most importantly, it reminded me of how every shop assistant always expected you to have 1p and 2p coins on you.

I mean, I wasn’t a mint, was I now? I was pretty certain that I did not, at the time, look like someone who kept bags of 1p coins in huge supply (for those harsh winter nights).

All of the above made me think of a recent article I read about Canada’s recent decision to do away with the 1p coin so that it can save $ 11mln per year.

Eleven million, I thought- that was almost fifteen million which, in turn, was almost twenty million which was close to fifty million which was not that far from one- hundred million.

One- hundred million pound- worth of savings; can you imagine?

But seriously, I was quite amazed to hear that the mint would save that much per year by simply getting rid of the 1p coin.

Surely, that meant that it produced a LOT of 1p coins each year (and, yet, somehow people never had a penny coin on them when they needed one...ah, well, one of the unsolved mysteries in life, I guess...)

According to the CNN report, it costs 1.6 cents to produce a penny which, in turn, means that producing pennies is not economically viable.

(see << http://edition.cnn.com/2012/03/30/business/canada-penny >>)

The above, however, was not the reason for my wanting to look into the matter in a bit more detail.

What surprised me was that the Canadian government proposed that businesses rounded their prices to the nearest nickel (5p) (see link above).

This begs a question: is the above supposed to be merely advice from the government or will it be imposed as a law of sorts...?

As we all know, it is a well- known marketing strategy for businesses to price their stock at, say, £ 9,99 rather than £ 10 as it instils in the customer the, obviously erroneous, impression that the product they are buying costs £ 9 and not £ 10.

Furthermore, when they pay for the product at the till, most customers do not want their penny back which means that the said penny is, more often than not, counted towards the business’s profit.

Yet, there are quite a few people who still demand their penny back (like me, for instance).

Mainly, because they know its worth (1.66 cents, to be exact).

In the light of the above, then, what would happen to retailers that choose not to follow the government’s proposal to depart from their pricing policies?

When the penny is discontinued, what will they give their customers back; 1p- worth of candy, maybe?

About seven years ago, candy might have well sufficed; in today’s economic downturn, however, most people tend to hold on to every penny they've got.

So, in the end of the day, one wonders whether the Canadian government’s plans to get rid of the penny are not a cunning way of indirect market control.

I guess we’ll have to wait and see; until then, keep a hold of your pennies-  they might cost a lot more than 1.6 cents in ten years’ time.