A Week of E-Commerce SNAFUs

Amazon.com was faced this week with severe criticism over featuring books on its site which were paid-for placements posing as editorial picks. A New York Times article revealed that publishers paid $10,000 (US$) per book to be featured on Amazon.com’s home page. While paid-for placements of products are commonplace, the issue was one of ethics in informing readers that moneys were paid, rather than the books being selected based on editorial merit.

Amazon.com’s PR machine kicked into high gear yesterday, announcing that the online bookseller would implement new “Disclosure Standards,” which clarify to consumers which book promotions are based on editorial merit, and which are paid-for promotions.

According to Amazon.com, distinguishing between advertisements and editorial picks is “breaking with standard industry practice.” The company’s CEO Jeff Bezos said, “We believe we’re the first retailer to list this information for customers, and we hope it will start a trend.”

* * *Buy.com stepped into the spotlight this week after the online auction site mistakenly under-priced the Hitachi SuperScan 753 PC monitor for $164.50, whereas it normally sells for $588. According to reports, the company will honor orders placed for the mistaken lower price, thereby taking a loss of approximately $60,000 (US$).

When chalking up the loss to a marketing and publicity expense, Buy.com will probably emerge ahead of the game, establishing a name as an honest company that keeps its word. Reportedly, traffic to their site increased dramatically as the news broke, and presumably the site will have acquired some goodwill in the process.

* * *E*Trade, the online discount stock brokerage, was hit with a class action lawsuit as a result of its site “going down” for three days last week. The plaintiff, a California woman, alleged that potentially “millions” of dollars were lost by online traders as a result of the technical failure of E*Trade’s site. This illustrates the need for e-commerce sites to place strongly worded agreements as part of their customer registration process, protecting the companies against liability due to technical failure.

The larger question is whether such failure should have been foreseen by the company and whether companies like E*Trade are legally negligent if they fail to provide sufficient backup hardware and software. Anyway, what is considered “sufficient” backup in an e-commerce environment where both hardware and software are widely acknowledged to be flaky in the first place? There are certainly no easy answers to these questions, other than presuming that companies like E*Trade, which derive their revenue online, would be smart enough to install systems that are reliable enough to keep business proceeding as usual, even under major technical stress.

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