Kodak mistakenly listed a digital camera for sale at one third of its real price. Several people bought it and received order confirmations. The company then tried to cancel the orders, damaging trust both in itself and the online retailing industry. The lesson? It’s better to absorb the losses from the occasional mistake, rather than the losses from driving customers away.
Eastman Kodak has finally agreed to honor an accidental price cut caused by an error on its website.
Photography giant Eastman Kodak said on Thursday that it would honor a cut-price offer that it accidentally made to UK online consumers. Kodak planned to offer its EasyShare digital camera online for a ‘special offer’ price of GBP300, but accidentally listed it at GBP100. Several people ‘bought’ the camera, and saw a web page confirming the transaction.
However, when Kodak realized its mistake, it canceled all these. Only after unfavorable press coverage (and the threat of legal action from disappointed customers) did Kodak agree to honor the original transactions.
The fiasco will not have a major financial impact on Kodak, although it will do little for the company’s strategy of rebranding itself as an Internet-friendly, digital age provider. However, it is a lesson for the industry. Problems such as Kodak’s risk damaging not just individual firms, but the wider uptake of the online channel in retailing.
One of the key barriers deterring people from buying goods using the Internet is that they do not trust it. Datamonitor has found that 86% of people in the UK are unwilling or strongly unwilling to give out their personal details online. Part of the reason is fear of fraud – people worry hackers might steal their credit card information, or that the company behind the website might not be reputable.
But lack of confirmation can also be a deterrent. People like to know whether they have bought something or not, and a website message may not be concrete enough proof. If retailers claim that online purchasing does not establish a contract, no wonder consumers are unwilling to trust the medium.
Companies who deal online should realize that honoring transactions made by mistake is a better strategy than canceling them. Indeed (at least for relatively low value items), establishing a confirmation process that is clearly legally binding may be a good idea. Otherwise, they risk driving customers and potential customers away from themselves and from the whole online channel.