Online retailer Amazon is often cited as an inspiration to others, at least from a technology point of view. For example, in interviews with ComputerworldUK, Ocado’s CTO Paul Clarke said that the online food retailer was ‘on an Amazon-like journey’, while online luxury fashion retailer Net-a-Porter’s CIO Hugh Fahy said that it’s hard to beat Amazon’s fulfillment processes. However, Amazon is now witnessing the downsides of having such highly automated and efficient processes, after an hour-long pricing glitch on Friday evening turned into losses of thousands of pounds for a number of its third-party sellers.

In this case, the software pricing error lies not with Amazon, but with a third-party application from Derry-based firm RepricerExpress that promises to help retailers increase their sales on Amazon by automatically repricing listings “faster than your competitors”. But rather than earning RepricerExpress subscribers a profit, the software glitch priced a wide range of unlikely items - from mattresses to Playstation4 (PS4) computer games - at just 1p.

The retailers who were affected were those who have signed up (and paid for) the ‘Fulfilment by Amazon’ (FBA) service, which allows them to store their goods in an Amazon warehouse and lets Amazon take care of picking, packing and shipping orders. Normally, this would allow smaller retailers to benefit from Amazon’s large and highly efficient logistics network, but last week they experienced first-hand the disadvantages of being part of such a well-run and automated supply chain system.

RepricerExpress apology

RepricerExpress’s CEO has acknowledged the fault - without giving any details of why the error occurred - and apologised to the affected retailers, many of whom are small, independent retailers.

“We experienced a problem with RepricerExpress on Friday evening which caused incorrect pricing to be sent to Amazon. We managed to get the problem resolved so that any new prices going to Amazon were correct within about an hour of the problem reported. It took a further few hours to get incorrect prices reverted to their original prices where possible,” said CEO Brendan Doherty.

“I would like to take this opportunity to apologise to our customers for this issue. We will continue to investigate the cause and to put measures in place to prevent it from happening again. One of the things all sellers can do to prevent this issue from happening again is to ensure that they do not de-activate the pricing alerts facility provided by Amazon, which caters for potential repricing errors.”

Doherty also said that Amazon has assured RepricerExpress that seller accounts will not be penalised for the issue, but notably does not say what redress RepricerExpress will provide for its customers.

In a statement to ComputerworldUK, Amazon said: “We responded quickly and were able to cancel the vast majority of orders placed on these affected items immediately and no costs or fees will be incurred by sellers for these cancelled orders.

“We are now reviewing the small number of orders that were processed and will be reaching out to any affected sellers directly.”

However, it is not known how many orders were sent out under the inaccurate pricing, and the retailer has declined to specify what compensation, if any, it plans to provide to sellers hit by the glitch.

The benefits of small print

Normally, retailers with robust terms and conditions will be able to protect themselves against pricing errors thanks to contract law, which makes a distinction between “confirmation” and “acceptance” of an order.

In legal terms, a contract between a buyer and seller is only binding when an offer has been made and the seller has accepted the offer. The sales process up until this acceptance is called an 'invitation to treat', which legally is not an offer, but rather an indication of the buyer's willingness to negotiate.

This is why Tesco did not have to honour the sale of Apple iPads for just £50 due to a pricing glitch on its website a few years ago, for example. And Amazon does indeed have the appropriate details in its terms and conditions:

“When you place an order to purchase a product from Amazon, we will send you an email confirming receipt of your order and containing the details of your order (the “Order Confirmation Email”). The Order Confirmation Email is acknowledgment that we have received your order, and does not confirm acceptance of your offer to buy the product(s) ordered. We only accept your offer, and conclude the contract of sale for a product ordered by you, when we dispatch the product to you and send email confirmation to you that we’ve dispatched the product to you (the “Dispatch Confirmation Email”).”

It also has small print that addresses mispricing glitches:

“Despite our best efforts, a small number of the items in our catalogue may be mispriced. We will verify pricing when processing your order and before we take payment. If we have made a mistake and a product’s correct price is higher than the price on the website, we may either contact you before dispatch to request whether you want to buy the product at the correct price or cancel your order.”

However, it seems that Amazon’s automated systems worked so fast that it was marking items as dispatched, therefore accepting - in the legal sense - the sales contracts formed with the orders.

“Because of the automated processes, Amazon eager to get everything out for Christmas and it was a Friday night, which probably compounded it, they’ve ended up with contracts being formed,” said Samantha Livesey, partner at law firm Pinsent Masons.

Livesey believes that despite not being at fault over the actual software glitch, Amazon may choose to reimburse their retailer customers as a gesture of goodwill, and for branding purposes.

Unrealistic expectations

She also suggested that the retailers could say that individuals made the purchases knowing that the item could not really cost just 1p.

“There would be some argument for retailers that there was not an intention to create a contract [from the buyer] because they can’t expect it to be fulfilled.” 

Nonetheless, Livesey believes that it would not be too much to expect retailers to have insurance to cover them in such an event.

“It would be interesting to see if any of the retailers have insurance to cover this. It isn’t unforeseeable that it would happen,” she said.

While a Facebook group has been set up by affected retailers with the aim of taking legal action over the pricing glitch, one retailer hopes instead to appeal to the kindness of human nature during this season of goodwill.

“As we are a small, independent retailer, this glitch has hit us quite severely,” said Go2Games.

“With this in mind, we are appealing to all buyers for their understanding during this time, and with humble sincerity, would request the return of any goods which have been purchased during the time of this Amazon glitch.”

Image credit © iStock/AdrianHancu