Your Instacart order might be 23% more than your neighbor’s

Instacart has quietly been charging different customers different prices for the same groceries at the same store, and the practice could cost shoppers an extra $1,200 annually, according to a study released yesterday. The online grocery giant is experimenting with algorithmic pricing that adjusts costs based on individual customer behavior rather than uniform store pricing.

Consumer Reports and the progressive think tank Groundwork Collaborative conducted the research in September using approximately 200 volunteers to check prices on 20 items across four cities. The volunteers simultaneously selected identical products from the same stores and found price differences in roughly 75 percent of items examined. Major retailers including Costco, Kroger, Safeway and Target were among those where the discrepancies appeared.

How the pricing system works

Instacart uses pricing tools from Eversight, an artificial intelligence company it purchased in 2022, that can create as much as a 23 percent increase in prices for certain customers while generating a 2 percent to 5 percent jump in profit for participating stores, according to Consumer Reports findings.

Experts who spoke with Consumer Reports explained that Instacart was testing customers’ price sensitivity to determine how much extra different shoppers would pay. The practice was confirmed when an email exchange between Instacart and Costco accidentally landed in Consumer Reports’ inbox. The correspondence referred to the algorithmic pricing as smart rounding, revealing the intentional nature of the price variations.

The system essentially replaces the traditional retail principle that yesterday’s price is not today’s price with a new approach where today’s price might not be the same for everyone shopping at the same moment. This represents a fundamental shift in how grocery pricing operates in the digital marketplace.

Why this matters for your wallet

The $1,200 annual figure represents the potential additional cost for households that regularly use Instacart for grocery shopping. The impact varies based on shopping frequency, basket size and the specific items purchased, but the cumulative effect over time can be substantial for loyal customers.

This type of dynamic pricing, which has proliferated in the age of artificial intelligence, can contribute to steeper costs for consumers, according to an academic paper released this year. The technology allows companies to adjust prices in real-time based on demand, inventory levels and individual customer data rather than maintaining consistent pricing across all shoppers.

The practice raises questions about fairness and transparency in e-commerce. While customers expect prices to fluctuate over time based on sales, promotions or supply chain factors, many assume they’re seeing the same prices as other shoppers browsing the same digital aisles at the same moment.

Instacart doubles down on AI

Despite the controversy surrounding algorithmic pricing, Instacart remains committed to expanding its use of artificial intelligence technology. The company and OpenAI just announced a partnership that will allow customers to create recipes in ChatGPT and purchase groceries without leaving the chat interface.

The integration represents another step toward seamless digital shopping experiences, though it also raises additional questions about how pricing algorithms might operate within conversational AI platforms. Customers using ChatGPT to order groceries may have even less visibility into whether they’re receiving competitive prices compared to other shoppers.

The Eversight acquisition in 2022 positioned Instacart to implement sophisticated pricing strategies across its platform. The technology analyzes vast amounts of data including browsing patterns, purchase history, location and timing to calculate optimal prices for individual customers. This capability gives the company significant power to maximize revenue while potentially disadvantaging price-conscious shoppers who lack tools to comparison shop effectively.

The broader implications

Dynamic pricing has become increasingly common across industries as companies adopt artificial intelligence and machine learning technologies. Airlines, hotels and ride-sharing services have used similar approaches for years, but the practice feels particularly jarring in grocery shopping where customers traditionally expect transparent, consistent pricing.

The Consumer Reports study focused specifically on Instacart, but the findings raise questions about whether other grocery delivery platforms employ similar pricing strategies. As more households shift toward online grocery shopping for convenience, understanding how these platforms determine prices becomes increasingly important for budget-conscious families.

The accidentally shared email between Instacart and Costco suggests these arrangements involve coordination between the delivery platform and retailers, meaning stores are aware of and potentially benefit from the variable pricing model. This partnership structure complicates the question of responsibility and accountability when customers discover they paid more than others for identical purchases.

Source: Consumer Reports, Groundwork Collaborative