Did they really lose $1.6M, or is that the 'value' (ie. full retail price) of the items in question minus the price they were sold at?
Most shopping businesses are savvy enough to include E&OE (Errors and Omissions Excepted) somewhere in there terms and conditions.
If a business decides to honour a mistake like this, it's because they've weighed up the cost to them and good publicity versus annoying the customers. Or... they might even be making a profit from the deal, regardless of the error. After all, you can't buy publicity like the viral publicity of 'hey, check out this site, they've made a mistake and you can get a handbag at a silly price!'