Instacart may be jacking up your grocery prices using AI, study shows—a practice called ‘smart rounding’

Instacart is testing AI-driven, algorithmic pricing that a Consumer Reports/Groundwork Collaborative study found can lead to price disparities on roughly 75% of items and potentially cost shoppers up to $1,200 per year; ~200 volunteers checked 20 items across four cities at retailers including Costco, Kroger, Safeway and Target. Consumer Reports says the pricing tools from Eversight (acquired by Instacart in 2022) can raise prices for some customers by as much as 23% while boosting store profits 2–5%, and an internal email from Costco labeled the practice “smart rounding,” suggesting the tests were probing price sensitivity. The findings highlight how AI-enabled dynamic pricing can materially increase consumer costs and pose reputational and regulatory risk as Instacart accelerates its AI strategy, including a new OpenAI/ChatGPT integration for in-chat grocery shopping.

Analysis

A Consumer Reports and Groundwork Collaborative study in September used roughly 200 volunteers to simultaneously price-check 20 items across four cities and found price differences in about 75% of items for the same product from the same store, with retailers sampled including Costco, Kroger, Safeway and Target. The study and an accidentally shared Costco email indicate Instacart has been testing algorithmic “smart rounding” pricing using Eversight tools it acquired in 2022, a practice CR says can raise prices for some customers by as much as 23% and potentially add up to $1,200 per household annually. CR estimates the same tools can lift store profits by roughly 2%–5%, which creates a clear merchant revenue incentive even as it elevates consumer cost and reputational exposure. The development coincides with Instacart’s broader AI push, including a new OpenAI/ChatGPT integration, increasing the scale and visibility of dynamic pricing and thereby amplifying regulatory and public scrutiny that could drive volatility, most directly for CART and indirectly for partner retailers.

Key Decisions for Investors

• For Instacart (CART) exposure be cautious: consider reducing position size or layering hedges ahead of potential regulatory scrutiny and reputational fallout given the moderately negative sentiment and direct linkage to consumer price increases
• For retailers (COST, KR, TGT) monitor incremental margin disclosure and same-store traffic metrics closely: a 2%–5% profit lift may justify selective overweight only if companies provide transparency on pass-through pricing and show no material customer churn
• Watch near-term catalysts — company disclosures, regulatory inquiries, and consumer complaints — as triggers to re-evaluate positions quickly, since scaling dynamic pricing can prompt fast policy or legal responses
• Consider selective exposure to AI pricing vendors and SaaS providers that benefit from merchant demand but require validating recurring revenue and contractual strength before adding exposure