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The Basics

When that online deal becomes a steal

Online shoppers can sniff out retailers’ mistakes and exploit them within minutes -- snapping up free goods, rebates and gift cards without a twinge of regret.

By Melinda Fulmer

For some online shoppers, the line between a bargain and a steal is getting ever more blurry.

The explosion of deal sites and shopping chat rooms on the Web has allowed shoppers to spread the word to thousands of fellow bargain-hunters when they discover a glitch or loophole that delivers free or heavily discounted merchandise.

"Any mistake (shoppers) can find on a Web site, they will exploit," said Sucharita Mulpuru, an e-commerce analyst with Forrester Research in New York.

Take the coupon mistake shoppers found this past holiday season at Amazon.com: A coupon code posted to several bargain Web sites gave shoppers a $25 discount on every item in their carts, not just the routers and other Netgear brand products it was intended for. The discount, which was only supposed to be used once per customer and only on a $100 Netgear purchase, wound up giving scads of shoppers hundreds of dollars in discounts on digital cameras, camcorders and even sonic toothbrushes.

One shopper who goes by the name of Creasemonkey on the bargain site FatWallet.com wound up with two Calphalon saucepans and a Netgear Ethernet switch for $2 after rebate. And coupons are just one area ripe for abuse. Some shoppers exploit retailers' gift-card policies, using gift cards online and then running out to a brick-and-mortar store to use them again the same day, before the system catches up to the first purchase.

Blink and you'll miss them

Those cashing in on these types of deals say it's like snapping up a mistagged product in the store. But industry analysts say it's a whole new ballgame now, because shoppers can snap up thousands of dollars in free merchandise at all hours of the day and night with no one to recognize them. And unlike buying in a brick-and-mortar store, online shoppers can have multiple identities, with multiple e-mail addresses and credit cards.

"There's a tremendous amount of technology out there, and people know how to use it," said Gary Heck, a Chicago-area technology and marketing consultant who works with retailers on these issues. Indeed, Heck said, while the rest of us scour the Net and our mailbox for coupon codes, many resellers figure out a retailer's algorithms for generating coupon codes and spit out hundreds for their own purchases, or to sell on sites like Craigslist and eBay.

Ironically, it is the biggest retailers who are the most vulnerable and feel more pressure to uphold these questionable deals. Most are hesitant to discuss the online scams perpetrated by their shoppers, either because they are afraid of giving people ideas or because they are embarrassed by how easily they can be ripped off. Moreover, analysts say, they are afraid if they rein in some of the deals, they will alienate their free-spending customers.

Nevertheless, Mulpuru said, the upshot of these online tricks is less lucrative coupons and bargains for all customers. "The offers aren't as rich as they used to be."

The devil in the details

Amazon.com declined to discuss the Netgear deal, other than to say that it cancels orders once it catches those kinds of mistakes. Indeed, on the Netgear promotion, the retailer began canceling new orders a day after the mistake was discovered. But often, analysts say, shoppers can accumulate hundreds or thousands in free merchandise shipped before a retailer discovers the problem. Kansas City, Mo.-based Hallmark Cards, for example, was ripped off last November when it sent out $10 off coupons for any $10 purchase from its floral delivery service. When shoppers found out it could be used anywhere on the site, they charged hundreds of dollars in $10 fancy soap sets, gourmet candy tins and other gifts for which they were never charged a penny.

One shopper bragged about his coup, scoring $700 worth of merchandise for only $16 in shipping. Another customer who took advantage of the deal said it was Hallmark's fault because it "applied the coupon incorrectly."

Hallmark confirmed the incident but declined to talk further about it.

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Some of the biggest targets for these kinds of scams are electronics retailers, because of the hypercompetitive nature of that business. Some shoppers will buy a high-ticket item online, where it is cheaper, and then return it to their local store to make money. "They will get more in store credit than what they paid," Mulpuru said.

Others will take advantage of a store's price-matching policies by making up phony ads to get the store to pay them 110% of the difference. Minnesota-based Best Buy has classified these unprofitable rogue shoppers as "devil customers" and estimates they make up about a fifth of its entire customer base. The company said it is working to tighten its return policies and "close loopholes," which have allowed some customers to get away with so much.

For example, the company has changed some of its rebate systems, so that customers can't return a product for full price if they have gotten a rebate. "There were some transactions going on that we wanted to avoid," said Best Buy spokesman Jay Musolf. And, to make up for some of these costly shenanigans, the company is working even harder to court its "angels," or customers who spend the most and drive the company's profitability. It has also begun tightening its return policy, charging a restocking fee for some expensive items.

Continued: 'Stick-it-to-the-man-itis'

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