For many people, the days of grocery shopping are over. Driving to the store each week, pushing your shopping cart through all the aisles while trying to remember exactly what you need and keeping an eye out for the best deals, is a thing of the past. Nowadays, people can easily punch their shopping list into their phone before getting out of bed on Sunday morning, and a few hours later have the weekly shop showing up at their door. With convenience like this, what exactly is going to keep customers away from grocery delivery apps? Simply put, the cost of these services can be prohibitive. But for many consumers, the true mechanism behind these high costs may remain a sinister mystery.
U.S. grocery prices have risen steadily over the past five years, leading to high prices across the board, with staples such as beef, eggs, and dairy products hitting record highs. Many consumers are struggling with rising food costs, and the use of grocery delivery apps has amplified these effects. There are many reasons behind this, but in most cases, online grocery shoppers spend significantly more than in-store spending. These services come with obvious additional costs, such as subscription fees, delivery fees, and tips for shoppers and delivery drivers, but many of the added costs for users of these apps are actually hidden from consumers. It’s an open secret that products on these apps are often more expensive than in stores, increasing costs for consumers at home, but it’s actually worse than that.
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The changing costs of online grocery shopping
Man in orange shirt delivers a bag of groceries to man with long blond hair – Atstock Productions/Getty Images
In October, New York Governor Kathy Hochul vetoed a bill that would have forced these companies to disclose if the prices they offer consumers online do not match in-store prices. The governor’s argument is that stores with multiple locations will struggle to keep up with changing prices, resulting in some increase in costs for consumers. Her political opponents believe this is just her giving in to lobbyists so that the apps can continue to quietly charge users. While it’s clear that these hidden price increases are a boon to the companies that operate these apps, the true scope of the problem may be larger than we realize. These applications apply more than just a single standard markup across the board, it can be more targeted than that.
An experiment conducted by Groundwork Collaborative, Consumer Reports, and More Perfect Union found that for Instacart customers, the price of the same item in the same store added to the cart at the same time can vary significantly from user to user. For example, the price of 12 Lucerne eggs ranges from $3.99 to $4.79, a 20% variation between customers. The overall impact of this pricing manipulation is estimated to average around 7% for the same shopping cart. Studies estimate this could cost a family up to $1,200 over the course of a year. People often assume that users of these apps have spare money, but data shows that online grocery shopping is not only used by those with a surplus income. These manipulative pricing techniques hurt working families.
Monitor pricing coming to your shopping basket
A man checks a grocery shopping app on his phone with the refrigerator door open – Lajst/Getty Images
It’s no secret that grocers have been taking steps to ensure they can charge the highest possible prices for their products. In 2024, Walmart was met with outrage when it announced it would move to electronic price tags on products, allowing stores to adopt dynamic pricing, such as immediately increasing prices on ice cream and cold drinks on hot days. But even these exploitative practices pale in comparison to the surveillance and AI-driven pricing schemes that may be in place or may already exist.
At the heart of Instacart’s pricing debacle is the AI-driven algorithmic pricing tool. When asked, Instacart insisted that no personal or demographic data was used in these pricing experiments, although the company did state that consumer goods companies using its products may use behavioral data to guide their decisions. The FTC found in January that surveillance pricing — using personal data such as browser history and exact location to adjust prices for consumers — was already in effect across many industries. So while Instacart’s questionable practices are now on full display, they’re likely far from the only company in the grocery industry using such tools.
Large businesses are increasingly able to access your personal data and squeeze as much money out of you with every online transaction, which may help explain the rise in in-store grocery shopping. But Kroger has once again been accused of potentially using facial recognition to adjust prices for consumers, so the issue may soon extend to in-store shopping as well — if it hasn’t already.
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Read the original article on Tasting Table.
