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.

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


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  1. icon
    Rose M. Welch (profile), 24 May 2010 @ 6:41pm

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

    Not at all. :) What you're assuming is that the human is alert, has all of the correct information for the entire store, and cares.

    When I started working as a teenager, I worked in the jewelry department, then in the home department, of a J.C. Penney's. The sales were what they told us the sales were, based on departments. It was easy for someone to tell someone else the wrong percentage, or for someone to mix up the departments, resulting in alot of price mishaps. I never would have known if my information was wrong, because all of our instructions were vocal, and we had alot of one-day sales.

    In addition, at the beginning of every shift, I had to go find ten random items and look them up in the system (an old DOS-based thing) and write down the item number, description, original price and sale price on a form. This was so someone could correct all of the pricing errors in the computer, that I wouldn't have known about. I would have happily scanned the item and sold it at the price it rang up, or, if the customer could prove that the item was in a sale category or looked like it was in a sale category, for the sale price.

    This store, as every Penney's did, employed at least one person whose sole responsibility was fixing all of the incorrect prices out there, in one small department store. I did notice that the jewelry department had a much smaller amount of pricing errors, but they also had a fraction of the inventory, and a more competent manager. :P

    Further, not only have I been responsible for whole groups of people who made repeated pricing errors, and seen software glitches that created pricing errors, but I see pricing errors happen all the time, in a large variety of stores, especially with sale items.

    Indeed, pricing errors are so common that most stores offer you the opportunity to look at the prices as they ring up your items, so you can alert the clerk when the price is wrong and they haven't noticed. :) I have three kids and shop alot of sales, so I'd say catching a price error is weekly for me, even if it's something as little as a sale item that rang up full price.

    I cannot believe that human beings are anything close to infallible.

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