Instacart’s AI-Powered ‘Smart Rounding’ Pricing Tests: A Cause for Concern?
Consumer Reports has recently shed light on Instacart’s use of AI-powered dynamic pricing experiments. These tests have resulted in customers being charged different prices for identical grocery items. The investigation uncovered price differences of up to 23% for the same products, potentially costing families an additional $1,200 annually.
The study, conducted in collaboration with Groundwork Collaborative, tested shopping baskets across major retailers. These included:
- Costco
- Kroger
- Safeway
- Target
At a Safeway in Seattle, the price for the same 20-item basket ranged from $114 to $124 depending on the customer. Approximately three-quarters of the tested products showed price variations, with differences ranging from 7 cents to $2.56 per item.
Instacart’s pricing technology is powered by Eversight, an AI company it acquired in 2022. In an accidentally forwarded email, Costco revealed that Instacart refers to this practice as “smart rounding.” The company claims this strategy helps retailers “improve price perception and drive incremental sales,” generating millions in additional revenue for grocery partners.
Instacart confirmed the findings but stated that only 10 retail partners use its pricing tools. However, Consumer Reports is urging the Federal Trade Commission to investigate these practices as potentially unfair pricing discrimination.
Source: Consumer Reports