Instacart uses algorithm to engage in 'dynamic pricing,' charging customers different prices for the same items: report

A new study has found that the food delivery service Instacart has been using an algorithm that charges different prices for different customers for the same items in the same stores without informing them. Surge pricing has been going on for years in ride share apps, but this new iteration sees different consumers paying different prices for food items based on the app's algorithm.

Research by Groundwork Collaborative examined pricing at Target and Safeway locations and highlighted several examples. At a Target store in North Canton, Ohio, Instacart charged a customer $2.99 for Skippy Creamy Peanut Butter on a day in September, while other users paid up to $3.59 for the same jar from the same location. At a Safeway in Seattle, Instacart users were charged five different prices for turkey, with the prices varying by 23 percent.

The study found that this has been happening at Target and Safeway stores in several cities after reviewing 437 shoppers who ordered groceries through the app for in-store pickup. The practice is known as “dynamic pricing,” a concept that has been controversial since Uber and Lyft began raising prices for rides when demand was high, such as during rainstorms. Airlines use a similar approach, raising ticket prices when many shoppers visit their sites at once, a system called “surveillance pricing.”

Groundwork concluded that Instacart’s pricing system could cause users to spend an extra $1,200 per year on groceries. The study found that nearly three-quarters of the items surveyed were sold at different prices on the app. In a statement to the New York Post, Instacart said its price “tests” are not based on characteristics of shoppers and that the prices are not “dynamic” because they do not change in real time.

The study found significant price differences by user but said it did not uncover evidence that the app was relying on personal information, though it noted that Instacart likely has the ability to factor in demographics such as age, household income, and whether a customer is new or returning. Instacart stated that its “tests” are intended to help retailers “learn what matters most to consumers.”

“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,” a spokesperson told The New York Post.