nearest nickel vs. nearest quarter
Here at Open Produce, we have some faith in our customers. We trust that you know that there is no difference between $5.99 and $6.00. So instead of trying to fool you into thinking something is cheaper than it is, we usually price things to the nearest quarter, and we include tax in the price. If corn chips are labelled $3, you can pay us $3 and take your corn chips.
But this “nearest quarter” regime has begun to show us some problems, especially among the lower-priced items where a jump of 25Â¢ is a large percentage of the price. For instance, imagine that we buy salsa for $2.00 and sell it to you for $3.00. A year goes by, and because of inflation or increased production or distribution costs or whatever, our distributor bumps the price up by 3%, to $2.06. That might not seem like a big deal — only 6Â¢ — but we sell a lot of volume. With gross sales of about $900,000 per year, a 3% bump in wholesale price with no adjustment in retail price would cost us $27,000 a year.
So we’d like to make a modest adjustment to the price of the salsa. To keep our original margin, we’d want to price it at $3.09. But if we are restricted to pricing things to the nearest quarter, we’d have to keep it at $3.00, or make the big jump to $3.25. This is the problem we have been facing over the last few years. We’ve been trying to make the average retail price rise along with the average wholesale price, by making some items jump more than they should and holding others back at their original retail price even though their wholesale price has gone up. All in the name of having prices at the nearest quarter.
This is complicated, confusing, hard to execute correctly, and hardly transparent. If the price of producing and distributing salsa goes up a little bit, you should pay a little bit more; you shouldn’t pay twice as much more an an unrelated product like popcorn.
So we’ve decided to drop the “nearest quarter” thing, for most things under $10. Don’t worry: we hate pennies as much as you do, so we’re going to price everything to the nearest 5Â¢. Salsa that was $3.00 and should become $3.09 will become $3.10 instead. Some prices will go up, and some will go down. And, of course, tax will still be included in the price.
In addition, we’re going to try to keep grab-and-go items like drinks, Clif bars, and candy rounded to the nearest quarter, so it’s easy to pay in cash quickly. And with most produce, we’ve already been going to the nearest nickel, so you won’t see much of a change there. But for most of our dry and refrigerated goods, over the next few months you can expect to see a lot more prices that look like $5.45 and $2.15. We’re not trying to fool you — we’re trying to give everything the fairest and best price we can.