An Ingenious Way to Outsmart a Dishonest Employee...

Real Estate Agent with The Eric Steart Group of Long & Foster Real Estate MD 586955

cash register(An intriguing story.  I would love to hear if anyone can confirm this...)

We all know that stores might charge $49.90 for an item instead of $50.00 to make the price seem lower than the actual cost right?  We've all seen cereal priced at $4.95 in the store, automobiles priced at $23,990 and houses priced at $249,900.  The idea here is that the consumer sees the lower price and is left with the impression the item is cheaper than the actual cost.  I was told a story many years ago by a prominent registrar at one of America's top business universities about the origins of this pricing strategy and why it was first implemented and I have often wondered if it was true.  

This is how he said this pricing strategy actually started:5.00

The practice of charging $4.99 instead of $5.00 (or $9.99 instead of $10.00 - you get the picture) was started many years ago by a clever storeowner located somewhere in the northeast I was told, where at the time there was no sales tax on items purchased in the stores.  The store owner discovered he had a dishonest sales clerk working for him, who apparently, was not ringing up some of the store sales on the cash register and was pocketing the cash after a customer left the store.  For example, if the purchase was $5.00, the buyer might hand a five dollar bill to the sales clerk, take their purchase and leave, not expecting any change.  When this would occur, the clerk would not ring up the purchase on the cash register and keep the $5.00 bill on the sneak tip when the boss wasn't looking.  Losses were mounting and the store owner needed a way to prevent the theft and implemented a clever tactic to outsmart his dishonest employee.

4.99To combat the theft at the cash register, the store owner used a tactic of lowering the price on a $5.00 item to $4.99, forcing the sales clerk to give change to the customer when given a $5.00 bill.  The customer would then stand with their hand out and wait for their change, and back then, a penny was worth waiting for.  In order to open the cash register drawer to get the change for the customer, the sales clerk would have to ring up the sale to get change from the drawer, thus keeping the clerk honest and effectively reducing the loss in store revenue due to theft.  The practice caught on locally and eventually it became the norm in many stores.  Eventually the pricing strategy became wide spread, but as time passed, the price was lowered not to prevent theft so much, but to give the appearance that a price was cheaper.

If this is true it was an ingenious way of keeping an employee honest, and even if isn't true , we'll still wait at the counter for a penny to see if the store clerk rings up the sale!

And that's the rest of the story...

Comments (14)

Rita Fong
RE/MAX REAL ESTATE TODAY, Executive Broker 901-488-9590 - Marion, AR
Realtor - Marion Arkansas Homes for Sale

This is an interesting story regardless it is true or not.  We can always learn something from the past and improve it to fit our today's lifestyle. 

Aug 25, 2009 02:57 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Rita - This story goes back as far as the 1930's according to the gentlemen who told it to me.  He is 91 years old today and still living the good life.

Aug 25, 2009 03:03 AM
Sandy Shores FL Realtor®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast

Hi Dan, Interesting story. I hadn't heard this before, but there is some logic to it. Back then, people did wait for their change. Today, often I see people say, "Just keep the change."  A sign of how times have changed, I suppose.

Aug 25, 2009 03:06 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Sandy,  I still stop to pick up pennies on the road.  Not that they are worth anything (that's funny to say), it's just my mother used to pick up pennies and get excited about it, and so when I do it I have fond memories of her.

Yogi Berra said it this way "A nickel's not worth a dime anymore"!!!

Aug 30, 2009 08:03 AM
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Dan, this is pretty funny. If it is true, the store owner was one smart cookie! Does that mean when our clients want that 999 at the end of their price they are trying to keep us honest? I'm just sayin....

Sep 01, 2009 02:01 PM
Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876

Dan - just wanted to pop by and say hi.  I also am impressed with your Blog here on AR.  I can't confirm this story but can tell you I enjoyed reading it.  Either way, true or not, there seems to still be value in the almighty penny eh? 

Sep 07, 2009 06:52 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

I hear what you are saying Andrea!!!

Sep 08, 2009 04:05 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Thanks for stopping by Brad.

The penny still rules!

Sep 08, 2009 04:06 AM
Gary Coles (International Referrals)
Venture Realty International - Las Vegas, NV
Latin America Real Estate

Dan, That is an interesting story. Thanks for sharing it with us.

Oct 08, 2009 10:25 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Sure Gary, Glad you enjoyed it.

Oct 09, 2009 02:16 AM
Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Thanks for sharing this story, Dan...I never would have guessed that the pricing method could have been a result of not-so-honest cashiers! :)


Oct 09, 2009 06:41 PM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Leilani - I wouldn't have thought it either.  It is a fascinating story to me - even if I can't substantiate it.  I love the cleverness of the store owner in the story.

Oct 22, 2009 10:56 PM
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK


Enjoyed the story.

I had never heard this one.

Thanks for sharing.

Oct 31, 2009 12:23 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Judi - If it is true, the store owner was a marketing and sales genius.  A simple work around worked to keep the store sovent, inhibit further theft while helping to keep the employee honest and avoid temptation. 

Oct 31, 2009 01:43 AM