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
    Rose M. Welch (profile), 24 May 2010 @ 2:11pm

    Re: Re: Re: Re: 1.6 million? Really?

    My physical store has a software system that's similar to many systems, in that it has built-in fail safes. For instance, when each item is entered, the COGS is entered, as well as the retail price and the lowest price that we'd take for it. Anything lower than that lowest price requires an override.

    If similar safeties were built into the Zappos system, this wouldn't have happened. This isn't an isolated incident - the only thing that makes it really news-worthy is Zappos' positive response to it.

    I guess what I'm trying to say is that I sympathize with Zappos, but the fact that it happened in the first place and went on so long is their fault, and absolutely could have been prevented, just as it can be prevented in a brick-and-mortar store when people with sense are paying attention.

    With that in mind, I don't see why their customers should be punished for their regrettable lack of foresight.

    I want to say that in my store, as in many stores, our prices and tags are created by a computer program, so glitches are possible - and have happened before. In both cases, I caught it when I came in. Once it was after a few hours, once it was three days. Neither time did we punish the customers by demanding that they return the jewelry or pay a higher price, even when we still had the jewelry in our custody.

    The second time, the sales associates spent the day busily and happily overriding the system, sure in their knowledge that a certain category was being eliminated and that's why we were offering such deep discounts. :P Once again, we didn't punish the customers, even when we could have.

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