Due to a technical glitch that created a typographical error for a couple of hours on the site two weeks ago, Onsale mistakenly sold--and shipped--a number of 20-packs of Maxtor 17.2-gigabyte hard drives, which normally cost $5198.45, for the price of a single drive. The single drive price is $237.95. The same glitch also affected 20-packs of Maxtor's 8.4-gigabyte drives. Onsale declined to say how many customers took advantage of the glitch.
Onsale's mistake comes two months after another online retailer, Buy.com, made a pricing mistake on a 19-inch monitor and then canceled all orders it received, setting off a firestorm of protest from customers. In that instance, Buy.com was able to stop the orders for the monitors before they were shipped. The company later sold 143 monitors, its stock on hand, at the discounted price.
The glitch also comes as Onsale, which moved to the AtCost wholesale pricing model in January, is attempting to shore up its margins. In its latest earnings report, Onsale reported a greater-than-expected loss of $5.5 million, or 28 cents a share. Analysts expected the company to lose 27 cents a share.
Onsale spokesman Brian Fawkes said the pricing problem arose because the manufacturer labeled the multiple packs of drives with the same identification number as single packs. He said Onsale downloads prices from distributor Tech Data, which in turn gets its information from the manufacturers. Although Onsale double checks the prices, the company sometimes makes mistakes.
"This is not the first time this has happened," Fawkes said. "It happens infrequently, but it does happen."
Fawkes said Onsale was able to cancel a number of orders before shipping the drives, but acknowledged that several customers did receive their orders. He said Onsale had contacted all who ordered the drives to explain the problem and has offered store credit equal to the price of the single drive. Fawkes said that some of the customers who had received the drives had agreed to return them or pay the full price.
"Many of them were receptive and others just got a good deal," Fawkes said.
Questioning whether the company had a legal basis to do so, Fawkes said Onsale would not demand that customers return the drives.
But one customer who decided to keep the drives said Onsale did try to force him to return them. The customer, who asked to remain anonymous, said he received more than five email messages from Onsale, including some that indicated the company would charge him for the full cost of the drives if he did not return them.
The customer said that he would have been more receptive if Onsale had acknowledged its mistake up front and had offered to split the difference with him.
"If this badly affects their business, then maybe they shouldn't be in business," the customer said.
Separately, Onsale CEO Jerry Kaplan filed to sell 100,000 shares of the company's stock, worth about $2.3 million. Alan Fisher, a co-founder and member of the board of directors, filed to sell 200,000 shares, worth some $4.8 million.
In February, Kaplan and Fisher each filed documents to sell 100,000 shares.
Shares of Onsale closed down 0.375 to 25.875 in trading today.