hit with pricing glitch

Shoppers took advantage of a pricing glitch at and ordered toys at far lower prices, but the online retailer later informed the customers that they could pay the correct prices or cancel their orders.

Monday, after becoming aware of the apparent glitch, which affected the price of some toys, the company sent e-mails to consumers alerting them to the problem, saying it would be handled according to its posted pricing policy. The policy states that if an item's correct price is higher than Amazon's stated price, the company will contact customers with the correct price and ask them whether they want to purchase the item at the higher price. didn't return telephone calls for comment.

However, the exact nature of the problem is unclear.

In a July 31 e-mail to Tracy Ann Johnson in Delton, Mich., Amazon said, "We have new information about your toy order from this past weekend. . . .Due to an error on our Web site, the toys you ordered were incorrectly priced. You will be receiving a follow-up e-mail shortly with instructions on how to either complete your order with the corrected prices or cancel your order." In the e-mail, the company also gave Johnson a $5 gift certificate for her inconvenience.

But in its follow-up e-mail on Aug. 2 Amazon said, "We have new information about your order and need to hear from you before proceeding. We are sorry to report that we have contacted the respective suppliers, and the prices of the following items have increased . . ." One of the items was a refrigerator play set that Johnson ordered for $2.49, but said the correct price was $29.99.

Whatever the problem, Johnson said she isn't happy with Amazon's response and has filed a complaint with the Michigan Better Business Bureau. And now she's waiting to see what happens.

"I have not approved the price increase, nor have I canceled the order," she said.

This potential public relations problem came a week after the Seattle-based company reported a second-quarter loss of $89 million (see story) and its president and chief operating officer , Joseph Galli Jr., announced he was leaving after 13 months at the company to become CEO of VerticalNet Inc., a Web site that serves business-to-business markets (see story).

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said depending on the magnitude of the problem, it could be a better public relations move for Amazon to honor the lower prices.

However, he said, the company wasn't required to do so.

"When [bricks and mortar] companies misadvertise, there's no requirement for them to honor [the incorrect price]," Wolhandler said. "But they do have to be up front about it."

He added that to correct such mistakes, brick-and-mortar retailers buy ads to notify consumers of the error.

David Cooperstein, an analyst at Forrester Research Inc. in Cambridge, Mass., agreed that although Amazon didn't have to honor the lower prices, it might be better -- from a public relations standpoint -- if it did.

"If the impact on the bottom line wasn't too great -- say 50 people ordered at the lower prices -- then it wouldn't be wildly disruptive to the company to [honor those orders]," Cooperstein said. "It would be a PR benefit."

Cooperstein said Amazon's pricing error points to a more widespread problem.

"This isn't the first time there have been pricing glitches at [a Web site]," he said. "This [highlights] the problem of content management and pricing management systems. Companies have to have better workflow management to make sure that the prices that are posted are the right prices before a shopper [sees them]."

As to how consumers will view in the future, Wolhandler said that because the company had developed such good relationships with its customers to date, he didn't think this problem would damage the company's reputation.

Copyright © 2000 IDG Communications, Inc.

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