Protecting yourself against online pricing errors: an e-tailers guide
Last week fashion and home wares retailer Next became the latest high street name to hit the headlines as the result of an online pricing error. Next mistakenly listed a pair of sofas worth £1,198 on its website for just £98. This pricing error remained live on Next’s website for nearly 6 hours before being removed. During this time a large number of customers placed orders for the sofas with many receiving confirmation emails detailing estimated delivery dates. Other customers report that the purchase price and delivery charges were debited from their bank accounts.
Next sought advice from Trading Standards as to whether or not it was bound to honour the orders. Luckily for Next Trading Standards confirmed that the orders could be cancelled. Next’s ability to cancel the orders (and thereby avoid a sizeable loss) came down to a provision regarding the contract formation process within its terms and conditions. This serves as a timely reminder of the importance of using properly drafted terms and conditions when offering goods for sale online. In particular, retailers diversifying from traditional physical sales into e-commerce for the first time should remember that e-commerce is a totally distinct sales process with a different contract formation process – simply loading your existing terms and conditions onto a website will not provide the protection you are looking for in the e-commerce context.
To help you ensure that your business guard against the risk of online pricing errors, here are our top tips for e-tailers:
- Check your terms and conditions to ensure that they clearly set out the correct contract formation process. Your terms should provide that the customer’s order is an offer which is only accepted by you upon dispatch of the goods. It is not until this point that a binding contract will be formed. Your terms should make it clear that no action taken by you prior to dispatch (including sending confirmation e-mails or debiting money from the customer’s account) will amount to deemed acceptance of the customer’s offer.
- Review your ordering process and ensure that this accurately reflects the contract formation provisions outlined in your terms and conditions. In particular, if you use confirmation e-mails, double check that the wording on them is appropriate and that a statement is included indicating that the customer’s offer is not accepted and that no binding contract is formed until you dispatch the goods.
- Ensure that your terms and conditions will be binding on your customers. Ensure that your terms and condition are brought to the customer’s attention before the order is placed and that the customer is required to take some positive action to indicate acceptance of them (such as clicking on an “I Accept” button).
- Have the content of your terms and conditions reviewed by a solicitor. Any provisions which fall foul of consumer protection legislation will be unenforceable.
- Check and then check again all new prices and discount offers as they are added to the site. Remember that prevention is easier than cure.
- Think customer service. In the event that a pricing error does occur and it becomes necessary to cancel orders, ensure that you give careful consideration to how this should be dealt with dealt with to minimise any negative impact this may have on your business.
Taking the simple steps outlined above can save you significant direct financial loss in the event of a pricing error and prevent the ongoing damage that can result from the associated loss of reputation. The difference made by having the correct provisions in place as well an appropriate customer care strategy if things do go wrong is clearly demonstrated by a look at some other recent cases of on-line pricing error:
The Good
In 2006 Thresher’s managed to turn an online pricing glitch into a marketing triumph. A discount voucher intended only for Thresher’s suppliers was mistakenly made available to all internet users, prompting an unprecedented rush of orders. Rather than refusing to accept vouchers submitted by non-suppliers, Thresher’s took the decision to honour the offer. Thanks to the huge number of orders placed Threshers was still able to make a profit (albeit at a reduced margin) and the glowing press coverage that it received in the wake of the incident generated huge goodwill for the company and firmly established it’s reputation for customer care.
The Bad
In 2002 Kodak famously misstated the price of a digital camera on its website, putting a £329 camera on for sale at just £100. Word of the error spread rapidly across internet chat sites and it is thought that approximately 2,000 orders were placed before Kodak became aware of the error and removed it. Despite having no clear legal basis for doing so Kodak initially refused to fulfil the orders which resulted in a number of disgruntled customers taking legal action. Kodak eventually conceded defeat and honoured the sales at the reduced price, not only taking a significant hit on this product but suffering weeks of bad publicity as the matter was widely reported in the press.
And the ugly
In 2003 Amazon listed a Hewlett Packard iPAQ handheld computer at a price of £7.32 instead of the intended retail price of £275. Amazon stood firm and refused to honour the many orders that poured in. Whilst Amazon was entirely within its legal rights to do this under its terms and conditions, the matter was picked up by the press and Amazon was widely criticised by both the press and the online blogging community for the poor standards of customer care that it demonstrated in dealing with the matter.
For advice in relation to e-commerce issues please contact Kitty Rosser on 01603 281141.
Kitty Rosser Published on 2012-01-25 13:52:32
