How Retailers Have Outsmarted Themselves

I just got back from a bowling alley bar, where much to my satisfaction, I placed 48th in the nation in the NTN Buzztime Sports Trivia Challenge. Although I would be happy to just play sports trivia without buying anything, the business wouldn't take kindly to that, so I ordered a Diet Pepsi (for myself) and a red slushi (for my wife). The total bill came to three dollars, and I left a fifty cent tip. I believe I got my money's worth, but just as importantly, it was exceedingly simple to conduct the transaction. I think that the American tavern is one of the last places where you can easily make cash payments, without the hassle figuring out what coins you have to pay, or worrying about getting a heavy load of coins in return. (Other places that come to mind are barber shops and concession stands).

It is ironic that as inflation makes the value of the penny and the nickel moot, we are increasingly likely to have to deal in pennies and nickels when making purchases. Twice a week I buy lunch at a college coffee shop. As far as I know, the shop is run by the school, and is not affiliated with a large chain. However, they price their items as if they were a big-time retailer; I usually get their lunch special for $3.99 and am often awkwardly handed a penny in change (or sometimes a dollar and a penny). When I was a kid, comic books were a dollar. Now they are priced at $2.99. Granted, sales tax makes it difficult for certain items to end up as a round dollar, but I would just as soon pay three bucks for a comic book, toss in a nickel for tax, and be done with it. Now, anytime I buy more than two comic books at a time, I just throw it on my credit card to avoid hassle (so not only would I be willing to toss in an extra couple cents if comics were jacked up by one cent each, I'd probably help the retailer save a few pennies on credit card transactions as well).

We have become so inured to the practice of items being priced at $5.99 instead of $6, or $119 instead of $120, that we overlook how utterly insulting it is. It is absolutely no secret that this practice is psychological manipulation, but nobody seems to mind.

But I think just as retailers gleefully exploit the irrationalities of their customer base, they might actually be harming themselves. I don't think I'm alone in using my credit card as an alternative to confusing cash transactions. And though I don't think there are a lot of people who consciously choose to use plastic because an item is irregularly priced, I do think that the inconvenience of making cash transactions contributes to a subtle unconscious desire to eschew paper and coins altogether and charge items.

But one may ask how this is necessarily bad for a retailer. After all, credit cards are beneficial to merchants, right? Well, obviously the existence of credit may allow consumers to spend more than they otherwise would, but the overall shift to a cashless society isn't necessarily good to brick and mortar sellers. Once someone is conditioned away from the somewhat primal practice of making a physical exchange for a good or service, the less likely they will feel the need to make purchases in person. Instead they will turn to e-commerce (and auction sites which ironically mostly deal in whole dollars).

But at least those failed business owners and unemployed market researchers will still be able to drown their sorrows at the bar.