Zappos Eats $1.6 Million In Pricing Snafu

Zappos-owned e-commerce site had a little pricing problem this weekend: A glitch in its system marked down every product in the store to $49.95. By the time the problem was fixed, the store had lost $1.6 million. So, did Zappos cancel the orders or charge the customers the “correct” price for their goods? Nope. The company ate the loss, saying it was “the right thing to do for our customers.”

Zappos CEO Tony Hsieh (pictured) explained the situation on the company blog:

We have a pricing engine that runs and sets prices according to the rules it is given by business owners. Unfortunately, the way to input new rules into the current version of our pricing engine requires near-programmer skills to manipulate, and a few symbols were missed in the coding of a new rule, which resulted in items that were sold exclusively on to have a maximum price of $49.95. (Items that are sold on both and were not affected.)

We already had planned on improving our internal pricing engine so that it will have a much easier-to-use interface for our business owners. We are also planning on adding additional checks and balances to hopefully prevent this type of thing from happening again.

To those of you asking if anybody was fired, the answer is no, nobody was fired – this was a learning experience for all of us. Even though our terms and conditions state that we do not need to fulfill orders that are placed due to pricing mistakes, and even though this mistake cost us over $1.6 million, we felt that the right thing to do for our customers was to eat the loss and fulfill all the orders that had been placed before we discovered the problem.

Interestingly, Zappos’ policies are not shared by its parent company, In March, for example, an Amazon pricing glitch brought the prices of some books down from $125 to as little as $15. The company fixed the bug and canceled any orders that hadn’t been fulfilled. Customers got $25 gift cards instead of their books; not a bad deal, but definitely a different perspective on the idea of “the right thing to do” for customers. Pricing Mistake [ company blog]

Previously: Amazon Offers $25 Gift Card To Disappointed Comics Fans After Epic Price Glitch
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