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 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.

Filed Under: customer service, losses, pricing
Companies: zappos

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  1. icon
    Mike Masnick (profile), 24 May 2010 @ 10:29am

    Re: 1.6 million? Really?

    I've never seen anyone call it 'horribly evil' or the like

    In some of the past threads on this topic, people got pretty heated with people feeling entitled to the lower price, and accusing me of helping big companies try to pull "bait-and-switch" scams.

    Your statement makes it sound as though everyone who disagrees is horribly unreasonable, which isn't the case.

    Certainly didn't mean to imply that everyone who disagreed felt that way. But there are some people who are quite vocal on this.

    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.

    Sure, and that's a perfectly reasonable policy to take. But, as others have noted, you're much more likely to catch that quickly at a store. In the online world, where news and transactions can spread in a split-second, thousands of people can get in on a "deal" before anyone notices.

    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?

    That's a fair point. I had actually assumed from the text that he was literally talking about the cost of goods sold, minus the false retail price. I did not think he meant the difference between the false retail price and the accurate retail price. However, if it's true that it's the latter, then, you are right and the $1.6 million could be a lot lower.

    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.

    Indeed. Again, I had assumed he based this on COGS rather than correct retail price, but you could be right.

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