Pricing error costs Zappos $1.6 Million

Lucky bargain shoppers who happened to be on, a sister site of, early Friday morning landed some once-in-a-lifetime deals. A pricing error at the online store, which sells shoes, accessories, bags and electronics, capped the price of almost everything it sells at $49.95 for six hours between midnight and 6 a.m. (PST). By the time realized the issue, Zappos had taken a loss of more than $1.6 million on the items it sold below cost.

The pricing error created some amazing deals on the almost 1,500 shoes, 600 clothing items and hundreds of other items that retail over $200, including a GPS unit worth $2,000. Once the pricing error was discovered, the company took the website offline and Tony Hsieh, CEO of Zappos, tweeted about the mistake: "I guess that means no ice cream for me tonight."

Hsieh also linked to the Zappos blog, which asked customers not to cancel their orders and declared that the company would take the hit for its mistake. "We will be honoring purchases that took place on during our mess up," wrote Aaron Magness, the director of brand marketing and business development, on the company's blog.

While good customer service is par for the course at Zappos, honoring a pricing error, especially one worth $1.6 million, is not a normal occurrence for any online store. Most companies have a clause on their website absolving the company from honoring orders which include price mistakes. In fact,'s own terms of use clearly give the company, "the right to refuse or cancel any orders placed for product listed at the incorrect price."

Zappos' reaction is indeed a rare occurence in the retail world. While the company's regularly generous customer service policy already sets it apart from the competition -- its decision to take a $1.6 million hit to make those customers happy makes it a one-of-a-kind online retailer.
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