Grocery stores are making over $3M from penny-rounding: UBC student study

Grocery store. File / Global News

Grocery stores are collectively taking in as much as $3.27 million per year thanks to penny-rounding, according to a study published by a UBC third-year economics and math student last month.

Christina Cheung studied the effect of “penny-rounding,” or rounding up prices to the nearest five-cent increments, at grocery stores.

And she did it as a passion project, outside her classwork.

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As part of the study, Cheung looked at grocery prices in three “representative” grocery stores, collecting 18,095 prices in total.

Through rounding, she found that a typical Canadian grocery store collects an estimated $157 in revenue from rounding on cash transactions.

As most prices end with the number nine, she found that penny-rounding works in favour of the store, if the customer is only buying one or two items.

She found that “penny-rounding isn’t going to be zero [impact] at the end of the day.”

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As the date for phasing out the penny approached, the Mint said taxpayers would save as much as $11 million per year, and that it would only affect cash transactions, not purchases made using credit or debt.

Cheung believes the nickel will be eliminated next due to inflation — and that, she said, would exacerbate the problem.

A household penny jar is shown in Montreal, Monday, February 4, 2013.
A household penny jar is shown in Montreal, Monday, February 4, 2013. THE CANADIAN PRESS/Ryan Remiorz

“It’s very likely that when once you remove the nickel the effect is going to increase,” Cheung said. “It’s possible that the effects might snowball over time.”

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Cheung said it would be minimal.

The amount “really accumulates” when a store “gets thousands, if not more than that, transactions per year, and even per day.”

Sylvain Charlebois, a food researcher and professor at Dalhousie University, said there was nothing wrong with the study, but he added that it just didn’t really apply to the way that people shop in grocery stores.

“Her theory would work if everyone would buy one item at a time and the rounding would actually happen on every single item,” Charlebois said.

“In the grocery store, rarely as a consumer would you only buy one item. You would buy 10, 15, 20 items at once and the rounding actually occurs once you equate all of the prices together.”

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Cheung stressed that her research only applies when buying one or two items at a time.

“If you buy one and two items the effect is going to be more prominent,” Cheung said.

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“Whereas three or more items there’s no effects of rounding.”

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