Amazon Apologizes for Pricing Blunder

E-tail giant Amazon.com (Nasdaq: AMZN) issued a formal apology Wednesday for price testing it conducted earlier in the month that caused customers to be quoted different prices for the same DVD.

Although several news reports indicated that Amazon was altering the prices based on demographics, the Seattle, Washington-based e-tailer denied those claims, saying, "These reports were incorrect and were not based on the facts." The company added that it was simply trying to determine how much sales are affected by lower prices.

"We've never tested and we never will test prices based on customer demographics," said Amazon founder and CEO Jeff Bezos. "What we did was a random price test, and even that was a mistake because it created uncertainty for customers rather than simplifying their lives."

Consumer Outrage

Amazon shoppers were outraged when they first discovered that they were quoted different prices for the same DVD.

Savvy shoppers began experimenting to see exactly how much variance there was in Amazon's pricing. What they found, and what Amazon later confirmed, was that customers were given random discounts of between 20 and 40 percent on 68 DVDs.

Although the difference in pricing mostly amounted to only a few dollars (US$), the disparities on some DVD purchases were significant. Buyers of "The X-Files: The Complete Second Season" paid prices ranging from $89.99 to $104.99 for the DVD collection that has a list price of $149.98.

Price tests conducted by the E-Commerce Times during Amazon's pricing experiment resulted in discounts of 30 to 40 percent. During one online session, the price for the DVD "Mission Impossible" was $17.99, a 40 percent discount. Several hours later, the price had risen to $20.99, a 30 percent discount.

Amazon Backs Down

Consumer outrage over Amazon's seemingly deceptive pricing policies caused the company to back down and admit they had made a mistake.

Amazon also agreed to give any consumers who had purchased the 68 DVDs in question during the five-day testing period the lowest price possible. The company said that it has refunded an average of $3.10 to 6,896 customers as a result of the new policy.

Further tests were not ruled out, but the company said it would automatically give customers who purchased a test item the lowest price at the conclusion of the testing period.