Instacart’s AI may raise grocery prices by up to 23%
The price of groceries delivered through the artificial intelligence (AI)- powered platform Instacart may differ significantly among customers, resulting in a cost swing of approximately $1,200 per year.
An investigation by consumer advocacy groups Consumer Reports and Groundwork Collaborative suggests that many shoppers in the United States who get deliveries through Instacart are unwittingly part of widespread AI-enabled experiments.
In these experiments, identical products are priced differently for different customers, with some shoppers being charged up to 23% more than others.
The AI pricing system was found to affect orders from several of the nation’s biggest grocery retailers, including Costco, Kroger, and Target.
Every shopper is a guinea pig
The investigation is based on simultaneous online shopping sessions with 437 volunteers, who either shopped on Instacart for identical baskets of 18 to 20 goods from the same retailers or went to brick-and-mortar stores in Washington, DC.
The shoppers placed the items in their virtual shopping carts and recorded the prices by taking screenshots, but did not purchase the goods.
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After investigators evaluated approximately 200 screenshots with no errors, they found that every shopper had unknowingly participated in Instacart’s pricing experiments.
Instacart offered most shoppers the same basket at five different prices, ranging from $114.34 to $123.93.
While there were no variations for some products, the price for others ranged from as little as 7 cents to $2.56 per item.
Some items were found to vary dramatically in price. For example, the difference between the lowest and highest Skippy peanut butter price offered for shoppers was 23.4%.
The investigators say the average price variations observed could translate into a cost swing of about $1,200 per year, based on how much the typical household of four spends on groceries ordered through Instacart.
The risk of “surveillance pricing”
Instacart confirmed that the findings accurately reflect its pricing experiments and strategies, which the company says affect only a small portion of its retail partners and have a limited impact on consumer pocketbooks.
“These limited, short-term, and randomized tests help retail partners learn what matters most to consumers and how to keep essential items affordable,” Instacart’s statement reads.
Meanwhile, experts warn that algorithmic pricing combined with AI and large amounts of US consumers' data could evolve into a strategy called “surveillance pricing,” which involves using personal characteristics, behaviors, and shopping history to set individualized prices.
The findings come when grocery prices in the US hit record highs this year.
About half of all Americans report that the cost of groceries is a significant source of stress in their lives, according to a survey by the Associated Press-NORC Center for Public Affairs Research.
Instacart, however, isn’t the only company charging consumers different prices for identical items. Algorithmic pricing, based on real-time supply and demand, is a common practice in the travel industry, including hotels and air tickets.
Uber is another notable example, as the platform calculates the cost of a ride based on factors such as time, traffic, and demand, among others.
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