Canada's retail sector is facing a settlement shock triggered by the gradual disappearance of the penny. As the one-cent coin is phased out, textile retailers—especially small fabric stores, home textile markets, and garment wholesalers that still rely heavily on cash—are confronting a practical dilemma: when a customer buys a piece of fabric priced at CAD 9.98 with cash, how should the cashier give change?
Background
The Canadian government stopped minting new pennies several years ago, and existing coins are being gradually withdrawn through the banking system. However, the penny has not been legally demonetized, creating a 'change vacuum' at the retail level. Retailers can no longer obtain new pennies from banks, yet they are still required to settle cash transactions with exact amounts. According to the Retail Council of Canada (RCC), approximately 85% of cash transactions nationwide have already shifted to electronic payments, but the textile retail sector still has a large number of small stores and farmers' market stalls that rely on cash—these are the businesses hardest hit by the penny problem.
Industry groups are actively pushing for legislation known as the 'Uniform Rounding Act.' The core of this bill is to allow merchants to round cash transaction totals to the nearest 5 or 10 cents, while electronic payments remain exact. Pilot programs have been launched in parts of Quebec and Ontario, but a national standard has yet to be established. The Textile Circle editorial team notes that this policy gap is directly squeezing the profit margins of small textile merchants.
Industry Impact
For textile retailers, the penny issue may seem trivial, but it has significant implications for pricing logic. An internal survey by the Canadian Textile Retail Association (CTRA) shows that over 60% of respondent stores are forced to absorb the penny difference themselves due to the lack of uniform rounding rules—losing an average of CAD 0.02 per cash transaction. While small per transaction, for a small home textile store with an average of 200 cash transactions per day, the annual loss could reach CAD 1,460, equivalent to 3%–5% of its net profit.
More importantly, pricing strategies need to be restructured. Textile stores have traditionally used price endings like '0.99' or '0.98' to attract customers, but with the penny's phase-out, such prices either get rounded up to the nearest dollar (causing customers to overpay) or are voluntarily rounded down by merchants (causing profit loss). The RCC recommends that merchants switch to pricing ending in 5 or 10 cents, but fabric suppliers' wholesale prices are still quoted in pennies, creating a misalignment in price transmission along the supply chain.
From the procurement side, Canadian textile importers—especially those sourcing from China's Keqiao and Shengze fabric hubs—find that CAD-denominated orders face similar rounding issues during settlement. With the penny's withdrawal, banking systems tend to round small foreign exchange settlements, resulting in discrepancies of 0.1%–0.3% between the actual payment and the invoice amount. Although the percentage is small, considering the textile industry's average profit margin of only 5%–8%, this deviation can significantly impact small importers' cash flow.