Best Buy's Black Friday Fiasco: When Were Bosses Told?

Best Buy's Black Friday disaster, when it took and confirmed Black Friday orders in November and then waited until a few days before Christmas to cancel those orders, is a huge deal precisely because it strikes at the very heart of E-Commerce fears. Namely, a consumer needs to feel confident that once an order is paid for, the product will absolutely be arriving shortly.

Although Best Buy has yet to spell out how this happened, the most likely scenario is that it was the so-called perfect storm of bad timing and possibly a quantity typo. Susan Busch, senior director of public relations at Best Buy, said many of the specific problems behind this incident are not yet clear, because the company is still working on its internal investigation. But what is known is that the problem involved a lot of people ordering some of the most deeply discounted Black Friday specials quickly and that "there was a delay" in processing to allow for the chain to "catch up on the orders."

Many of those products were very limited, given the steep discounts. Best Buy's suppliers, the manufacturers, "would only give us so many" at that price, Busch said.

Among the critical details that are not yet explicit are specific timing. When did Best Buy senior management understand the problem? How much of a delay happened while employees desperately tried to find the—unknown to them at that point—non-existent merchandise? In a $50 billion chain, news can travel upstream very slowly. When the news is bad, it travels upstream even more slowly.

That timing issue is essential. Had Best Buy learned of this sooner, it might have had time to work with manufacturers and have the purchased items delivered in time for Christmas. Worst-case scenario, it could have notified customers much sooner, giving them more time to replace the gifts.

The items at issue were popular electronics (games, cameras, laptops, etc.) and were highly discounted. Some have challenged the suggestion that Best Buy couldn't get any more of those products, given that other chains were ordering and selling them, too. But the Best Buy orders reflected special discount arrangements with suppliers, so the shortage wasn't about, for example, a PlayStation 3. It was about the very small number of PlayStation 3s that Best Buy's supplier was willing to provide at that price.

(Related story: "Best Buy's Black Friday Cancellations Were "Bait-and-Switch Breach Of Contracts")

The next element is the nature of the Best Buy inventory system. The system enables some people to place in their carts more items than are available, on the assumption that not all cart purchases will be consummated. When enough of an item are actually purchased, then the system is supposed to remove that item from that which is available. Clearly, something glitched there.

One possible explanation is a typo in the quantity of the items the supplier was providing to Best Buy.One possible explanation is a typo in the quantity of the items the supplier was providing to Best Buy. Unlike a typo in the price of an item—which could be flagged either by software or by a supervisor who thinks that 58 cents for a laptop seems low—an error in the input of quantity might not raise any red flags. And if the error makes the number higher and the typical quantity of this discounted special deal is particularly small, it might really not be obvious to anyone.

On top of that, have this all happen during an extremely busy Black Friday. The orders are processed and sent to fulfillment. When fulfillment can't find the items to complete those orders, the department is likely told to set them aside and fill the orders that it can fill. That mess will be cleaned up later, a supervisor might say.

It might take quite some time before fulfillment finally suspects something strange is going on and someone calls purchasing to verify the numbers. Once the problem is discovered, there might be insufficient time to fix it.

But things get complicated at this point. What Best Buy did was to not only refund those orders but send giftcards to those customers—giftcards worth as much as the original purchase.

Here's the confusion: Best Buy seems to be saying that it could have gotten more product, but not at the promised price. For double the price (well, almost double, given that a $400 Best Buy giftcard certainly costs Best Buy a lot less than $400), why didn't the retailer invest that money and purchase the original items for those customers?

Best Buy stresses that this incident impacted fewer than one percent of its E-Commerce customers, so why not spend the money to make the problem go away?

One Best Buy spokesperson even told a reporter for a consumer daily that the chain says right on its Web site that it has the right to cancel any orders at any time for any reason. That's a dangerous message to send to prospective customers.

The very next day, Best Buy issued a news release touting more special online deals and—we couldn't make this up—included the following quote attributed to Best Buy Chief Marketing Officer Barry Judge: "In these final days of holiday shopping, Best Buy brings peace of mind to customers searching for the perfect gift at a great value." Last minute explanation-less gift cancellations are hardly the stuff of customer peace of mind.