Can you trust you're getting the same grocery prices as someone else?

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Stephen Massaha. And Waylon, I have a confession. I love grocery shopping. Me too. It's like my weekend activity. I mean, it's so fun. I mean, it's the place where you could like buy crispy chili flakes and like a light bulb. There's like aisle after aisle fresh fruit. And I love a bakery section. Yes. And every purchase of, you know, a croissant or a box of ice cream bars, provides the store with data. Data that's used to figure out how much to stock and how much to charge. Most of this data gathering is pretty passive. You know, you weigh your lettuce, scan your card, and bam, new data.

0:53But recently, some grocery stores took that a step further. They gather data by charging some customers more than others. On today's show, how much can you really trust you're getting the same price tag as someone else? We look at research on how grocers charge different customers different amounts for the same items on the shopping platform Instacart. And we ask what this could tell us about the future of the prices we all pay.

1:26Think of Instacart like DoorDash, but for the supermarket. It lets shoppers buy groceries from the comfort of their home, either for pickup or delivery. And like DoorDash, the prices are often set by the store, not Instacart, sometimes at a markup. In December, there was new research released on that pricing. It came from a few different consumer advocacy groups, including Consumer Reports and the Groundwork Collaborative. That last group is run by Lindsay Owens, who was a senior policy advisor for Senator Elizabeth Warren. Okay, so I got to ask, are you an in-store shopper, delivery, or curbside?

1:59Oh, man, I'm all three. I'm a mix. But above all else, my amazing spouse, Jay does most of the grocery shopping. Lindsay and the team wanted to look into Instacart because a few years ago, the shopping platform acquired the company Eversight, and Eversight uses AI to test prices. The researchers wanted to know if that was costing consumers money. We wanted to understand how much it could be adding up to for American families who purchase their groceries this way. So the researchers gathered together more than 400 shoppers for their own experiment. Folks were willing to take the time to log on to a Zoom call where we asked them each to fire up the Instacart app and put the exact same items in their grocery cart.

2:49Crucially, these shoppers were all ordering from the same physical store. What we found is across all of the shoppers in our sample and all of the items in our sample, 75 % of the items were offered at different prices to different people. Like a box of Corn Flakes was$2.99 for one shopper and$3.69 for another. That's a 23 % jump from the same store. And to be clear, this is not the price you get going to these stores. The price differences were happening on Instacart. Instacart responded and said it did not let stores target customers based on demographics. And the researchers did not find any evidence to contradict that.

3:31Instead, who got charged what appeared to be random? The researchers said shoppers seemed to be assigned to different groups, and some groups ended up paying more. We find that this Instacart tax, if you will, could add up to$1 ,200 for a household over the course of a year. Instacart called that number outrageous and said it was unfair to extrapolate a yearly cost based on a short-term randomized study. Lindsay said that some of the shoppers who were in the experiment felt these price differences were unfair and they would never use Instacart again. They felt like it was really deceptive. You know, no one told me that if I signed on to purchase my groceries in Instacart that I would be a lab rat and that I might end up paying a heck of a lot more than the person sitting next to me.

4:15In December, after the report was published, Instacart said it was ending price testing immediately. We reached out and a spokesperson for Instacart said they understand they fell short of customer expectations and shoppers should not have to question the prices they see on their platform. But this got us thinking about how prices seem to be more in flux lately. We've heard a lot about things like price discrimination and price testing. So to help understand what was happening here and the difference between all these phrases, We called up Brian Albrecht. He is the chief economist at the International Center for Law and Economics.

4:51And Brian was not outraged by this report. Absolutely not outraged. One, I don't think prices moving around is a scary thing. It's something that retailers do all the time with sales and coupons and whatnot. Charging different customers different amounts based on their habits or demographics is called price discrimination. And Brian thinks price discrimination can actually benefit shoppers. At the end of the day, what it means is you're going to be able to charge lower prices to some people and higher prices to others. OK, and people seem to think that's only about the higher prices. But often what we see is it's about the lower prices.

5:28If you give sales to seniors or to college students, again, it's about giving a lower price. Or, you know, if I swipe my loyalty card at the grocery store and they know that I buy this brand of contact lens solution and that brand of cookies, then I might get a coupon for that. That gives me a discount on that thing next time. Yeah, it's like tracking with your phone, but like on your keychain, I've been around for like 30 years. Exactly. Now, price discrimination is not what Instacart let grocers do. Instead, Instacart said this was price testing. And that is what we have evidence that Instacart has done, A-B testing.

6:03Price testing just means figuring out what's the best price. And the A-B testing version of that is where companies put different options in front of customers to see how they respond. Right. So this would be like, Stephen, let's say we're both shopping for Parmesan cheese on Instacart from the same store. I get price A, five bucks. You get price B, six bucks. This is what grocers were doing on Instacart. What that allows you to do as a company is to see kind of where you can charge and how many consumers are you going to lose if you raise prices. But on the flip side, it tells you how many consumers could you gain if you lowered prices.

6:40Brian does not think what happened on Instacart is all that different from how shopping typically works. Sometimes you win and get a sale and pay less. Sometimes you pay more. That's just part of the market process of firms trying to figure out how much they can charge, consumers trying to figure out how cheap a deal can they get. And all of this is just the mess of markets every day. But Lindsay Owens, who again helped with the research into Instacart, does not think it's fair to minimize this as standard business practice. There are very few people other than economists who come down on the no big deal side of the ledger.

7:13The reason that so many people are shocked by this is because this is anything but how grocery shopping has worked in this country for decades. Lindsay believes this is part of a shift away from the standard pricing we've gotten used to in modern shopping. Instead, she believes this is a step toward that same tech and data being used to serve up customers a personalized price in a way that goes way beyond coupons or senior discounts. We haven't priced in this way really since we stopped tackling. And I think if the plan is for companies to sort of reinstate person-level pricing, my guess is most Americans would not be OK with that.

7:57and policymakers will have to move swiftly to, you know, to remedy that. Yeah, she's talking about a return to haggling. But like, instead of haggling with your words, it's based on your actions and your shopping habits. Yeah, imagine that future where you had to like play coy, like taking my eggs in and out of the online shopping cart, playing hard to get so it would give me a lower price. You know, I feel like I already do this. Sometimes I'll be shopping. No, seriously, not on, not for groceries, but for other stuff like, I don't know, a sweater or something. Maybe you put something in the cart and then you take it out and then I leave the site and I see if they chase after me with a coupon.

8:31I have been chased after with a coupon like that. So some of this is already here. But, you know, for Instacart, that future is still a ways off. A company spokesperson said that Instacart has no plans to base prices on individual shopping habits. This episode was produced by Angel Carreras with engineering by Jimmy Keighley. It was fact-checked by Ciro Juarez with editing by Julia Ritchie. Cake and Cannon edits the show, and The Indicator is a production of NPR.