Monday, April 20, 2009

Secret of the 99 Cents Only Store

How much does stuff cost at the 99 Cents Only Store? It sounds like asking who's buried in Grant's Tomb. Oh, sure, inflation is constantly assailing the business model. The 99 Cents Only chain dates to 1982. What was 99 cents then would be worth over $2 now. In 2008 the company it bit the bullet and raised its top price to $99.99. For President Jeff Gold, it was almost like a death in the family. "The number 99 is a magic number — deviating from that is something we absolutely are not taking lightly," Gold was quoted. "I find significant discomfort emotionally about considering making the change."
Nevertheless, the vast majority of items the store sells still do cost under a dollar — but perhaps not so much under a dollar as you might think. This recent sales receipt shows that the items are priced, not at 99 cents but at $0.9999. That's four significant digits to the right of the decimal point. (Picture the meeting where this was floated. "Jeff, I thought it was crazy, too, then I asked myself: why leave money on the table?" Was there a debate over how many 9's were seemly? Would $0.99999999 be pushing it?)

As far as I can tell, those two extra 9s are an unadvertised special. The store has not changed its signage to read 99.99 Cents Only. (I guess it's like Motel 6, which originally charged $6 for a room but retains the original name.) It's not clear from the above how the store accomplishes the rounding. In this case, the buyer paid a de facto price of $1.00 for the $0.9999 items. Suppose someone bought a hundred such items. Would she be charged $99.99 plus tax? Or does the register immediately round every $0.9999 to $1.00?

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