By Sharon Zhang
This article was originally published by Truthout
In an experiment, investigators found that the same grocery basket at a Seattle store cost between $114 and $124.
A new investigation has revealed that grocery delivery service Instacart is using a covert, AI-powered dynamic pricing scheme to charge customers different prices for the same items — potentially costing households over $1,000 more a year.
Groundwork Collaborative, Consumer Reports, and More Perfect Union collaborated on an experiment with 437 shoppers across four U.S. locations, representing several different markets: Seattle, Washington, D.C., North Canton, Ohio, and Saint Paul, Minnesota. For the experiment, shoppers chose the “pickup” rather than “delivery” option.
The average difference between prices on items with changing costs was 13 percent, while some items varied up to 23 percent in their price tags.
Using simultaneous tests on the Instacart app, the investigation found that three-quarters of grocery items tested were subject to seemingly “dynamic” prices; a dozen eggs, for instance, from a Washington, D.C. Safeway had five different prices ranging from $3.99 to $4.79, a 20 percent price increase. A box of cornflakes from the same store was priced between $2.99 and $3.69, with a 23 percent increase.
The experiment found that these price differences added up. The same basket at a Safeway in Seattle cost some shoppers $114.34, others $119.85, and others $123.93 — an 8 percent increase from the lowest to the highest cost.
On average, baskets varied by 7 percent in cost. This means that these price increases could be costing an average household of four an extra $1,200 a year.
“Instacart is quietly running pricing experiments on millions of shoppers during the worst grocery affordability crisis in a generation,” said Lindsay Owens, executive director of Groundwork Collaborative, in a statement. “They have turned the simple act of buying groceries into a high-tech game of pricing roulette.”
An Instacart spokesperson acknowledged the price changes, per the New York Times, and said that they are conducted with the “goal of helping retail partners understand consumer preferences and identify categories where they should invest in lower prices.” The spokesperson said that it is stores, not Instacart, that set prices.
A representative from Target, one of the stores tested in the report, however, said it “is not affiliated with Instacart and is not responsible for prices on the Instacart platform.”
The investigation points out that these dynamic pricing schemes — referring to a business tactic of surging prices based on factors like demand — are advertised on Instacart’s website for retailers. These schemes use factors like whether someone is a repeat customer, their proximity to competitor stores, and their behavior outside of the app to allow companies to “target offers.” Other factors, like the customer’s demographics or the weather, can also play a part.
Behind the practice is an AI-powered “revenue optimization” by a company called Eversight, which Instacart acquired in 2022. According to the web page, with Eversight, retailers see a 1 to 3 percent revenue increase, and a 2 to 5 percent profit increase. This program has had an influence on $80 billion worth of revenue, the web page boasts.
“End shoppers are not aware that they’re in an experiment,” providing the AI program with crucial data, the website says.
Dynamic pricing and other related pricing schemes have faced scrutiny from lawmakers, who have introduced various pieces of legislation seeking to combat grocery-related price gouging. Lawmakers have raised concern that retailers are using such tactics in stores as well, with Kroger and Walmart landing in hot water recently over reports that they are considering using surveillance technology like facial recognition to change prices for customers.
This article was originally published by Truthout and is licensed under Creative Commons (CC BY-NC-ND 4.0). Please maintain all links and credits in accordance with our republishing guidelines.
