What can you learn from Zappos.com’s $1.6 Million Mistake

If you are not standing by your core values at the time of crisis and instead take a myopic view of the situation you will miss out on building a long-term, thriving business. Just look at what Zappos, the popular shoe site, went through on May 23, 2010. It lost $1.6 Million dollars within matter of hours. But it’s what it did afterward that is the real story.
For those who don’t know Zappos; it is an online web site that sells shoes. In the process it has built a Billion dollar business!! It has done this by focusing on core tenets of providing exceptional customer service at any cost. Amazon.com just bought the company last month for $928 million.
So what happened?

Zappos.com’s sister web site 6pm.com apparently ran into technical glitch because of which everything on the web site was priced at $49.99; including the items that sell for thousands of dollars otherwise!! After they realized the mistake they shut down the site and corrected prices. However, the damage was already done. Many customers had already bought number of items at $49.99.
The story doesn’t stop there. They honored all the sales that had already occurred prior to realizing the mistake and in the process incurring loss of $1.6 million. Aaron Magness from Zappos.com stated on the blog, “While we’re sure this was a great deal for customers, it was inadvertent, and we took a big loss selling so many items so far under cost. However, it was our mistake. We will be honoring all purchases that took place on 6pm.com during our mess up.”
So what can be learned from this incident? While it is painful for any business to take a loss in the short-term from a mistake (even if it is yours); you have to stick to your core values and take the loss. It will pay off eventually and you can more than make up for it in the future. That is what happened to Zappos. The amount of publicity they received from the incident brought more customers and generated additional sales. If you are running a small business and your employee quotes a wrong price or makes a mistake; go ahead and honor it. Don’t argue with your customer. Just think about what he is going to do after he leaves your premise. Most likely he is going to tell his friends and encourage them to give you the business.
Another lesson to learn is that the media can play a big role in helping or hurting your business. In these days of Facebook and Twitter word-of-mouth will spread the news quickly – both good as well as bad. Read our story on how one college student brought towing company to its knees using Facebook. You have to learn to leverage public and customer relations in a fashion that will bring in more business; while at the same time mitigate fallout from negative publicity. We will show you how this can be done in future posts.
Do you have any stories you could share with the readers? Let us know in the comments.