Online retailer mistakenly prices everything at $49.95, loses $1.6 million in six hours

By on May 24, 2010, 7:02 AM
A sister retailer of shoe megastore Zappos.com confirmed on Friday that a mistake in their price engine had all products on offer capped at $49.95 for about six hours, from midnight to 6am PST. After learning of the mistake the site was taken offline for a brief period and later reestablished with correct pricing information.

What makes the story more interesting is that the online retailer in question, called 6pm.com, will be honoring all transactions in spite of the evident financial losses, which they claim amount to a staggering $1.6 million. Zappos uses customer service as one of its key differentiators and that seems to have paid off well, as it's considered to be the biggest online shoe store with over a billion dollars in sales last year (when it was acquired by a little-known company called Amazon).

Zappos claims a high percentage of its sales come from repeated customers, and that growth is being driven by word of mouth. Recently they have also received a boost from viral marketing and social mediums like Twitter. This last piece might suggest that this could be a marketing ploy, albeit to the tune of over a million dollars that sounds a bit desperate.




User Comments: 13

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Darkshadoe Darkshadoe said:

"Zappos claims a high percentage of its sales come from repeated customers, and that growth is being driven by word of mouth"

You other companies might wanna take note of this. Zappos bit the bullet and took one for the team. They will make back what they lost 10 fold and have even greater customer repeat business than they do now.

EA, Ubisoft....are you listening?

Guest said:

Thats great, i forgot who made that same mistake last year and I ordered a 55 in LCD tv for $128.00, They emailed back late and said it was a mistake and they would not honor it

Tekkaraiden Tekkaraiden said:

On sales of a 1 billion, 1.6 million isn't all that much and besides clothes have a very high markup. Still it's good of them to honor the mistake.

Armanian said:

To the guest above, depending on where you live im presuming that it can be taken to court, and the court can force them to honour their mistake. If i remember correctly there are some laws about this somewhere, as i briefly remember reading about it somewhere, when a number of companies last year made the same mistake.

lchu12 lchu12 said:

Ouch, but even if they didn't honor it...I would understand. If you were the merchant will you do business that you will lose money?

Why go into business if you'll stand to lose money instead of gaining it?

matrix86 matrix86 said:

@lchu12:

while you do make a good point, the company has no right no charge you more after you have already paid. Once you purchase an item and have the receipt, it is yours and no longer belongs to the company. Therefore, they have NO right to change the price. Mistake or not, they are in the wrong. I would fight them if they tried to hold the item. I don't care if I had to be on the phone all day, i'd get the item for what I originally paid for.

The only possible way I can see them getting around this is if you signed something saying that they have the right to change a price after you have already purchased. Otherwise, they have no right to charge that guy any more money after he has already paid.

raybay said:

Interesting if true. Interesting if not true.

They are not going to honor errors totalling $1.6 million, and it will not hurt them much to deny those orders.

A public relations failure is not going to be remembered long. But $1.6 million will be remembered by their banks, owners, and investors.

Guest said:

i have seen t&c before which basically said that when you make a purchase you are offering to pay so much for the item, but it is only accepted by the seller when they despatch the item, so if they dont accept the offer they dont have to send the item and you get your money back....

Guest said:

Nice marketing ploy ... beat ad cost.

Route44 Route44, TechSpot Ambassador, said:

Interesting if true. Interesting if not true.

They are not going to honor errors totalling $1.6 million, and it will not hurt them much to deny those orders.

A public relations failure is not going to be remembered long. But $1.6 million will be remembered by their banks, owners, and investors.

Yep. I don't know of too many individuals let alone business', banks and investors that say "meh" to 1.6 million dollars.

And to think I missed this sale...

gwailo247, TechSpot Chancellor, said:

They did not mention how many transactions they had that day. If we're talking about 200,000 transactions, you're only talking about a loss of 8 bucks per customer. If the company had a billion in sales, 1.6 million really is nothing if you chalk it up to marketing costs.

One way that you can guess this is a ploy is the message on the blog that nobody got fired. No company anywhere would keep a regular level employee who made a mistake that cost them 1.6 million dollars.

Staff
Julio Franco Julio Franco, TechSpot Editor, said:

I'm not sure if specific laws have been passed to address this kind of situations, but it used to be the case that merchants could cancel the orders claiming that customers purposedly purchased at lower prices, knowing that a pricing mistake was being made.

This has happened numerous times to all kinds of online retailers over the years. Some retailers did exactly as above while others like Zappos tried to spin the negative situation into a positive one by fully or at least partially assuming the losses.

Puiu Puiu said:

Marketing blooper or not they sure are getting a lot of attention. They will recover the 1.6 mill in not time.

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