Zappos Admits Pricing Mistake Cost It $1.6 Million; But Is Upfront About Taking The Hit Itself

from the such-is-life dept

For many years we’ve seen stories of companies making pricing mistakes at e-commerce stores. The news of those mistakes tends to spread very quickly, with lots of people piling on to order something for way less than it cost. Inevitably, the company realizes the mistake, and usually contacts everyone who ordered to let them know the order won’t be fulfilled because it was a mistake. I actually have no problem with this, though some people think it’s horribly evil. Either way, what seems to almost always happen is that the negative publicity that follows leads the company to change its mind and honor the original price. Sometimes, it actually takes a lawsuit to make that happen.

However, this weekend, it looks like Zappos had a pretty massive pricing glitch on its sister site 6pm.com. It lasted a few hours. But what’s different this time is that once Zappos fixed things, it immediately decided that it would still honor the wrong prices, even though the mistakes would end up costing the company (now owned by Amazon) $1.6 million. Now, between Amazon and Zappos, the two companies have a ton of money, and continue making a lot of money every day. But, no matter what, a $1.6 million pricing error is still a big deal. Big enough that you would think that the company could potentially withstand any sort of PR hit to trying to not honor those prices (perhaps offering up some sort of gift certificate or benefit to those impacted, instead). However, for a company that bases its entire reputation on bending over backwards to make customers happy, it appears they quickly decided that it was best for their overall reputation to just eat the $1.6 million, and keep (or even boost) that customer service reputation.

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Companies: zappos

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Comments on “Zappos Admits Pricing Mistake Cost It $1.6 Million; But Is Upfront About Taking The Hit Itself”

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31 Comments
Anonymous Coward says:

It speaks well of a company with a reputation of putting its customers “first”. This has always been one of the halmarks of Mordstroms (it has been a long standing rumor that many years ago it accepted the return of an automobile tire) and some of the outdoor outfitters such as L.L. Bean. Locally, we have a supermarket named “Publix” that squarely falls within the category of customer “first, last, and always”.

If only this was the rule and not the exception.

kirillian (profile) says:

Re: Re: Re:

Yes, but customer service also breeds loyalty, a rather intangible, but extremely lucrative characteristic. It’s a decision that has to be made. I know, growing up in Texas, some businesses just plain go out of business if the customer service isn’t up to par (there are good examples of those that don’t…but anecdotal experience tells me they are the exception)…

Rose M. Welch (profile) says:

1.6 million? Really?

I actually have no problem with this, though some people think it’s horribly evil.

I’ve never seen anyone call it ‘horribly evil’ or the like. I have seen people who look at it from the view of the consumer, who may have to wait a week or more for the refund they’ll be getting instead of the item that they ordered. Your statement makes it sound as though everyone who disagrees is horribly unreasonable, which isn’t the case.

Indeed, when I managed a jewelry store, our policy was to stand by our pricing, even when there were errors, regardless of whether or not we were responsible for those errors. In other words, the buck stopped with us.

I don’t take the view that doing otherwise is ‘horrible evil’, but it is bad business.

…even though the mistakes would end up costing the company (now owned by Amazon) $1.6 million…

Exactly how did they ‘lose’ 1.6 million dollars? Did they ‘lose’ it the way that the producers of The Hurt Locker ‘lost’ millions of dollars to illegal downloads?

It seems reasonable to assume that 1.6 million is the number of dollars that the items would have cost if purchased at full price, or that it’s the number of dollars that Zappos, Et Al would have made if the items were purchased at full price, or some other version of the old ‘lost sales’ argument.

The true number of dollars lost would be the cost of the items, minus the amount paid, which would be $49.95 in this case. I haven’t seen any sort of information that leads me to believe that Zappos is using this number, as opposed to an inflated one intended to garner sympathy and publicity for what was simple good business.

chadsford says:

“I’ve never seen anyone call it ‘horribly evil’ or the like”

You would have if this story was about how Zappos didn’t honor the mistaken price. In fact I remember a story not too long ago where this happened and the comments were filled with people who were crying foul.

“Indeed, when I managed a jewelry store, our policy was to stand by our pricing”

Brick-and-mortar stores are a different story. You might get a handful of sales before someone realizes the mistake and corrects the price. And at that its usually that someone forgot to take the sale price tag off an item that is no longer on sale. But in an online situation where the transactions are processed by computers and not a sales person, a simple typo could lead to thousands of orders at unreasonably discounted prices before anyone gets wise to whats happening.

Costa Rica Real Estate (profile) says:

Mixed approach

1.6m is a lot of money. I would approach this a bit differently if I was Zappos (or a company that cannot financially afford this kind of blunder).

I would send a nice polite email to all people who took advantage of the wrong price saying something along these lines: “Hey, we made an honest mistake and mispriced it, bla-bla. We kindly ask you to click here to cancel your order, but there is no obligation, bla-bla. We would greatly appreciate it if you help us out and cancel it. It is totally our fault and if you would like to keep your order, we will honor the price.”

I bet you that by being humble and appealing to the sense of decency will work and a big percentage of people will feel ashamed and cancel the order. I would go out on a limb and say it would be 70-80% and majority of people are decent and see themselves that way.

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