On the weekend of August 20, 2011, HP announced a firesale and liquidation of their HP TouchPad tablet, dropping the price from $499.99 to $99. Retailers instantly adopted the new pricing. One such retailer, OnSale, sells its HP TouchPad tablets through Amazon.

Within minutes of the TouchPad price decrease, Amazon accepted more than 100,000 orders for the HP TouchPad for OnSale.  10,000 TouchPads were available in OnSale’s inventory. While 10,000 is an impressive inventory, it was insufficient. The transactional system was not designed to accommodate thousands of orders in a matter of seconds or minutes, and the system required time to send the actual number of orders received to OnSale and receive an “inventory remaining” response.

The design of the OnSale->Amazon->OnSale inventory/transaction system was no match for deal hunters, who flocked to scoop up the cheap TouchPads in minutes, after learning about the deal on Dealighted, Slickdeals, and Anandtech.

3 days later, OnSale canceled orders that it could not fulfill. In response, shoppers whose orders were cancelled, encouraged each other via Slickdeals.net and OnSale’s Facebook page, to write reviews at ResellerRatings. The resultant 1,800 reviews dropped the merchant’s rating from a 9+/10 to a 0.47/10 in a matter of days.

Why the major drop in rating? OnSale had only 29 six-month customer reviews comprising it’s 9+ rating, when along came 1,800 negative reviews. We always encourage merchants to maximize their reviews volume, which insulates them from the impact of one or two reviews and even from a social media onslaught. For instance, Newegg.com has 350 negative reviews, yet manages a stellar 9.8+ rating thanks to their 30,000 positive reviews.

For all intents and purposes, we believe that this was not a deliberate failure. Clearly, no retailer would bring the wrath of thousands of savvy shoppers upon it, deliberately. However, there are a number of important lessons to learn and issues to address, from both the ratings and customer service perspective:

  • Inventory systems should be real time and failing that, a cap should always be in place for every product that you sell. Stating that you have an item in stock, and failing to deliver it, is one of the leading causes of customer dissatisfaction. If you list it on your site, it should be in stock (if not, you should indicate that it is a drop ship item, is out of stock, or indicate the specific lead time). If you sell through Amazon or other channels, ask what can be done to mitigate the risk of suddenly accepting more orders than you can possibly fulfill.
  • We live in a global 24/7 marketplace. Saturday and Sunday are always open for business. If you’re not staffing your web store on the weekend, then at the very least, extensive alerts should be established to inform you of unusual activity and all sales, pricing, and inventory activity.
  • Consumers do not like having orders canceled. When an order is placed for a product that was listed as “in-stock”, the consumer very much believes that the order is a done deal, and any deviation from this, especially in cases where the consumer believes they secured an amazing deal, will result in hurt feelings. Part of what fuels the consumer’s rage when orders are accepted and then canceled, is the multi-day fund hold inherent to authorization transactions with debit cards. If an inventory mistake is made, cancel the order as soon as possible (within hours!), and if practical, issue a coupon code as an apology. Apologizing to shoppers and explaining what really happened (if an honest mistake was made), and ensuring that processes are in place to prevent a reoccurrence, can go a long way.
  • Generating large numbers of authentic reviews can shield you from one time errors, one time public attacks or one time negative reviews. If you have 5,000 reviews, even 500 reviews is unlikely to impact your rating, and consumers are very smart – they will know the difference between a onetime issue and an ongoing pattern of customer service problems. Our checkout exit survey is precisely designed to poll as many customers as possible to maximize volume and statistical accuracy, and 97% of those customers polled with our exit survey leave positive comments (on average).

This issue may have been prevented by defining a maximum quantity cap for the TouchPad to pre-set the limit on the number of orders that may be accepted for the product. However, we’re not privy to the exact specifications of this OnSale->Amazon inventory feedback loop system. If this failure, accepting tens of thousands of orders above and beyond the available inventory, was the result of a design flaw in Amazon’s seller platform being too slow to send realtime sales data to OnSale’s inventory systems and update itself with the remaining product quanity, then this should be a wake up call to redesign the Amazon->seller inventory feedback loop to update on a millisecond by millisecond, not minute by minute, basis, and to alert sellers of this potential operational risk.

ResellerRatings’ rating score is a six month trailing average. Six months from now, the retailer gets a fresh start, since those 1,800 TouchPad related reviews won’t impact the merchant’s rating later. However, OnSale can use our exit survey to request reviews from its extensive customer base to maximize its reviews and rating, assuming overall quality service is provided, long before then.