Retailers Left Scrambling as Penny Production Ends

Now that the United States no longer makes pennies, there's a scramble among gas stations, fast-food chains and big-box stores to adjust prices and round cash transactions, and it could potentially eat into their profits. Pennies are drying up faster than retailers anticipated following President Donald Trump's decision earlier this year to halt production of the one-cent coin. Retail groups recently told Reuters that they're frustrated by the lack of guidance from the Trump administration and lawmakers, forcing them to round down to avoid angering customers and violating laws in some states — potentially costing high-volume businesses significant money.

“Any merchant that accepts cash is grappling with this,” said Dylan Jeon, senior director of government relations with the National Retail Federation (NRF).

Total Retail's Take: The push by merchants to cashless transactions has been in motion for a couple of years at this point, however, that movement is likely to accelerate as the penny is phased out in the U.S. According to the NRF, what will be most helpful to retailers in the near term is clarity from the federal government on rounding practices — whether they can round up or down on transaction totals or change. Complicating matters is that some states have consumer protection laws that require retailers to provide exact change on cash transactions, creating legal uncertainty as pennies disappear from circulation.

While there figures to be some initial challenges for retailers associated with the phaseout of the penny, including rounding issues that could hurt profits (rounding down) or anger customers (rounding up) as well as adjustments to point-of-sale systems, in the long run it could be a good thing for merchants. The removal of the penny from circulation could be the impetus for investing in additional non-cash payment options as well as simplifying cash handling for retail employees.