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People took advantage of a pricing error at to order toys at much lower prices, but the online store later told the customers they could pay the correct prices or cancel their orders.

Monday, when the company found out about the apparent glitch that changed the prices of some toys, it sent e-mails to customers to let them know about the problem and let them know that it would be fixed according to the company’s posted pricing policy.

The policy says that if the real price of an item is higher than what Amazon says it is, the company will contact the customer with the real price and ask if they still want to buy the item at the higher price.

But it is not clear what the problem is exactly.

Amazon sent an email on July 31 to Tracy Ann Johnson in Delton, Michigan, saying, “We have more information about the toys you ordered over the weekend.

Due to a mistake on our website, the prices of the toys you ordered were wrong. You will soon get a follow-up e-mail with instructions on how to either finish your order at the new prices or cancel it.” In the email, the company also sent Johnson a $5 gift certificate to to make up for the trouble.

But in an email sent on August 2, Amazon said, “We’ve found out something new about your order, and we need to hear from you before we can move forward. We’re sorry to say that we’ve talked to the suppliers of the following items and found that their prices have gone up.” Johnson ordered a refrigerator play set for $2.49, but told him that the right price was $29.99.

No matter what the problem was, Johnson said she wasn’t happy with Amazon’s answer and has filed a complaint with the Michigan Better Business Bureau. She’s now waiting to see what will happen.

She said, “I did not agree to the price increase, and I did not cancel the order.”

This possible 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., said he was leaving the company after 13 months to become CEO of VerticalNet Inc., a website that serves business-to-business markets (see story).

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said that it could be better for Amazon’s public image to honour the lower prices, depending on how big the problem is.

He said, though, that the company didn’t have to do that.

“There’s no rule that says brick-and-mortar stores have to honour the wrong price when they advertise it,” Wolhandler said. “But they do have to say what’s going on.”

He also said that brick-and-mortar stores buy ads to let customers know about the mistake so that the mistake can be fixed.

An analyst at Forrester Research Inc. in Cambridge, Massachusetts, named David Cooperstein agreed that Amazon didn’t have to honor the lower prices, but that it might be better for its public image if it did.

“If the effect on the bottom line wasn’t too big—say, 50 people ordered at the lower prices—then [honoring those orders] wouldn’t be a huge problem for the company,” Cooperstein said. “It would be good for PR.”

Cooperstein said that Amazon’s mistake in pricing is a sign of a bigger problem.

“This isn’t the first time a website’s prices have been wrong,” he said. “This shows the problem with systems for managing both content and prices. Companies need better workflow management to make sure the prices they post are correct before a customer sees them.”

Wolhandler said that he didn’t think this problem would hurt’s reputation in the future because the company had built such good relationships with its customers up to that point.


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