Instacart’s artificial intelligence-enabled pricing may be increasing the cost of your groceries by as much as $1,200 a year, according to a new study published on Monday.
Instacart is an online grocery delivery and pickup service that allows customers to order groceries from local stores by using its technology platform, via app or its website, and then fulfills those orders through a personal shopper.
The investigation from Consumer Reports and Groundwork Collaborative, a progressive policy group, found that some identical products were priced differently from one customer to the next—sometimes by as much as 23%. One company executive reportedly called the tactic “smart rounding” in an email between Instacart and Costco that Consumer Reports says was inadvertently sent to the magazine by Costco.
The findings are based on data from 200 volunteers who checked prices on 20 items, in four cities, and found a difference in about 75% of those items in some of the biggest grocery and big-box retailers, including Costco, Kroger, Safeway, Sprouts Farmers Market, Albertsons, and Target. (Prices for the same products varied from as little as 7 cents to $2.56 per item.)
Instacart, which previously disclosed its pricing experiments in corporate marketing and investor materials, said its shoppers are not aware that they’re involved in an experiment, but said the resulting price differences are small and “negligible.”
“These tests are not dynamic pricing—prices never change in real time, including in response to supply and demand,” an Instagram spokesperson told Fast Company. “The tests are never based on personal or behavioral characteristics—they are completely randomized.”
Instacart said the stores control the prices, and they work closely with them to align online and in-store pricing, wherever possible.
“Each retailer’s pricing policy is displayed on their Instacart storefront, so customers always know when prices may differ from in-store and can easily compare prices across retailers before checkout,” the spokesperson added. “Just as retailers have long tested prices in their physical stores to better understand consumer preferences, a subset of only 10 retail partners—ones that already apply markups—do the same online via Instacart. These limited, short-term, and randomized tests help retail partners learn what matters most to consumers and how to keep essential items affordable.”
As a result, a customer may see slightly lower prices on family staples such as milk or bread, and slightly higher prices on less price-sensitive products like craft beverages or specialty snacks, Instacart said.