Instacart tried to replace “Yesterday’s price is not today’s price” with “Today’s price might not be the same price for everyone.” The online grocery giant is experimenting with algorithmic pricing that can cost shoppers an extra $1,200 per year, a study released yesterday found.
The methodology: In September, Consumer Reports and the progressive think tank Groundwork Collaborative used ~200 volunteers to check prices on 20 items in four cities. The volunteers simultaneously chose the same product from the same store and found price differences in ~75% of items. Costco, Kroger, Safeway, and Target were among the retailers included.
The price is not right for everyone
- Instacart uses pricing tools from Eversight, an AI company it purchased in 2022, that can create as much as a 23% increase in prices for customers and 2%–5% jump in profit for stores, according to CR.
- Experts told CR that Instacart was testing customers’ price sensitivity. This was confirmed when an email between Instacart and Costco that called the practice “smart rounding” was accidentally sent to CR by Costco.
Shop of horrors: This type of dynamic pricing, which has proliferated in the age of AI, can contribute to steeper costs, according to an academic paper released this year. And Instacart is all in on AI: The company and OpenAI just announced a partnership that will allow customers to cook up recipes in ChatGPT and pay for groceries without leaving the chat interface.—DL
This report was originally published by Morning Brew.
