THE BLOG

Voucher Codes: The Peaks & the Pitfalls

11/08/2013 12:46 BST | Updated 09/10/2013 10:12 BST

As the internet continues its indomitable stomp across the retail landscape, changing the face of high streets and the entire culture of the way we shop, it's a rare breed of retailer that has not added e-tail to its business portfolio.

With e-tail figures rising unabated year on year, many of us simply can't remember a time when the internet wasn't an integral part of the way we shop.

And a major contributor to the rise and rise of e-commerce is the voucher code industry. At the end of 2012, shopping website VoucherCodes.co.uk released figures stating that 67% of UK adults are now going online to find discount vouchers.

Interestingly the growth of the discount code market is not just reserved for those with lower incomes; it appears that all consumers are reluctant to pay full price. According to VoucherCodes.co.uk, two thirds of consumers earning £40,000 to £50,000 a year say they use voucher codes sites and one in five claim to use voucher codes at least once a week.

VoucherCodes.co.uk and other sites like it obviously offer a massive boon for consumers, and the majority of retailers are happy to partake in the discount code game. And a game is very often what it is, with deals not publicised widely and only the most canny of shoppers astute and quick enough to take advantage of some pretty impressive offers.

In the voucher code game, both parties are happy. The consumer walks away knowing that they have not paid full price and the retailer is happy in the knowledge that they have driven up web traffic to their site and, despite the discounted deal, will likely see an improvement to their bottom line.

But, what happens when the game turns a little sour? A scenario recently demonstrated when online electronics retailer, Razer, saw thousands of customers achieve an extremely sweet deal, following the viral spread of an unauthorized coupon code for 90% off any order placed through Razer's online store.

By simply typing in '1234' the rogue coupon code deducted 90% from customers' bills. Needless to say, thousands of orders were placed before Razer could put a stop to the scheme. However, in a move that stunned the electronics world, instead of cancelling these orders, Razer CEO Min-Liang Tan decided to honour the unofficial deal in order to generate goodwill towards the company, which operates a 'customer comes first' policy that may form part of the company's brand protection strategy.

Despite the fact that it was within its legal rights to cancel the orders, Tan commented: "It will likely cost us an insane amount of losses to make good on the orders which will really, really hurt us as we're still a small company. That much said we want to do right by the community." However, there were limits to Razer's generosity, only honouring the 90% discount for one product per customer.

Of course, Razer is hardly the first online retailer to suffer such a problem. Zappos and Play have found themselves in similar predicaments and nearly all of the supermarkets suffer regular monthly pricing glitches; who can forget Tesco's £50 iPad pricing debacle last summer?

As Tesco's refusal to honour the pricing glitch demonstrates, the swift cancellation of any orders placed is usually par for the course in this tricky customer relations scenario. Whether Razer's response is the result of a genuine moral compass or an awareness of the possible marketing advantages of agreeing to honour a deal in such situations is up for debate, but what in fact are the rules when a retailer accidentally advertises goods for a lower price than intended?

Does a retailer have a right to cancel a deal? Isn't the price offered binding? Well, for consumer e-commerce sales it's a grey area that will depend on a number of factors; the nature and the facts of the transaction and, in particular, the retailer's terms and conditions.

A retailer will want to ensure that it is not bound by obvious and unmistakable errors in pricing on its website. Whether or not the retailer can cancel an order will depend on whether a contract has been formed between the parties before the mistake is identified. This will all come down to a well drafted set of website terms and conditions.

Acceptance of a consumer's order should be left as late as possible to allow the retailer a sufficient period of time to check and, if required, cancel the order. However, where the retailer is deemed to have accepted the order and a contract has been formed, the retailer could cancel the order on the grounds of unilateral mistake.

Put simply, unilateral mistake arises where one party makes a mistake and the other knows of the mistake or must be taken to know of the other party's mistake. The courts may set aside a contract for unilateral mistake if the person executing the contract did not intend the transaction to have the effect it did. Unfortunately, the principal does have its limitations and may only be applied in the most clear cut cases.

To avoid any uncertainty, it is important to ensure that, as a retailer, you have a set of terms and conditions clearly setting out the order and acceptance process giving yourself the opportunity to review and cancel orders before they are accepted.

However, should you find yourself offering one of your products for £1 instead of £100, you would be best advised to look not just at the legal rights you may have to cancel those orders but to consider the commercial outcome you desire. The example of Razer clearly demonstrates the significant goodwill and positive advertising that can be generated by honouring a pricing mistake, and the value of this should not be underestimated.