Hidden markups, missed sales on Instacart leave customers feeling 'ripped off'
Biggest price difference: $4 butter in store sold for $8 on Instacart
While many Canadian consumers likely know to expect delivery and service fees when ordering groceries on Instacart, what they may not know is they could be paying as much as $2.50 more per item in hidden markups — and some retailers say that Instacart is keeping all of it.
A Marketplace investigation into groceries being sold on Instacart from Loblaws, Costco and Walmart found that shoppers at Loblaws and Costco are paying about 10 per cent more per grocery item beyond the itemized delivery and service fees, as well as missing out on advertised in-store specials and sales at Loblaws.
With a valuation of $39 billion, the third-party delivery app — which allows users to hire a "shopper" to pick up their groceries at a variety of stores — has seen delivery sales grow over the pandemic.
But what's less clear is just how much consumers — some of whom live with disabilities and depend on Instacart for access to food — are paying for that convenience.
To find out, Marketplace compared the costs of purchasing identical grocery orders at each store on both the Instacart app and in-store. While the prices at Walmart were the same in store as they were on the Instacart app, Marketplace producers discovered substantial hidden markups at Costco and Loblaws.
While every Costco grocery item the team looked at was marked up, the only grocery item that didn't have a hidden markup at Loblaws were the cucumbers.
In one example, Marketplace paid $12.99 in store at Loblaws for President's Choice Blue Menu lean Italian beef meatballs; on Instacart, the price was $15.35 — a markup of $2.36.
"I'm thinking that that's 'tief.' That's the Caribbean word for being ripped off, so I'm very surprised and I feel misled," said Joanne Dominico, a mother and small-business owner who helped Marketplace with the test.
In total, Marketplace paid $74.16 more for the same order of 20 items through Instacart than when purchasing inside Loblaws; the in-store total was $ 242.49, while on Instacart the receipt for the identical items totalled $316.65.
But while $46.17 of those fees can be attributed to the company's itemized service and delivery fees, taxes and a default five per cent tip, the markups on grocery and sale items — which totalled an additional $27.40 — were not disclosed on Instacart's receipt.
In one instance, Marketplace paid $4.01 more for a block of butter that was promoted as an in-store sale at Loblaws, but cost $8 on the app.
"I could have bought a whole new chunk of butter for $4," said Dominico.
WATCH | Why was this butter $4 in store and $8 on Instacart?
Loblaws does not offer in-store sales and promotions on Instacart.
While shopping at Costco on Instacart, Marketplace found similar hidden markups. In one example, the team paid $2.50 more on Instacart for Kirkland Signature Organic lean ground beef, which was priced at $25.99 in store but $28.49 on Instacart.
Instacart says it notifies customers 'prices vary relative to store prices'
In emails, Costco and Loblaws told Marketplace that while they set the prices, Instacart keeps all of the profit from pricing differences, in addition to the delivery and service fees.
While Instacart confirmed that the retailers are responsible for setting the prices, it did not respond to questions about who receives the money from the markups.
In an email, the company said that "where there are item markups by a particular retailer, we notify customers that prices vary relative to store prices, so they can make clear and informed purchasing decisions."
But not everyone finds that notification to be clear enough.
The extra fees are acknowledged in the Instacart app through a small pricing disclaimer, but customers have told Marketplace it can be easy to miss, and they don't know how much more they are paying for each item.
'I didn't see any mention of the higher prices'
Erin Matthews reached out to Marketplace after ordering groceries through Real Canadian Superstore (a Loblaws company) on Instacart. Matthews had broken her ankle and needed groceries delivered to her Calgary home.
Her Instacart shopper accidentally left the in-store receipt with the shopping; the in-store bill was for $177, but Matthews had paid $226 on Instacart. After determining service and delivery fees, tax and tip, Matthews was surprised to find almost $30 unaccounted for.
"I was so angry," Matthews said. "I didn't see any mention of the higher prices online. When I called Instacart, they told me that the shopper shouldn't have left the receipt in the bag."
Dominco, who helped with Marketplace's test, wants to see Instacart be more transparent with its pricing.
"Just let me know and then I can make the choice. But when I don't know, that's when I feel disappointed," she said.
'We call it the disability tax'
The extra fees may be surprising for some of those who rely on Instacart for their regular grocery deliveries, but even more so for people with disabilities, who frequently rely on the service to meet their essential day-to-day needs.
"I mean for us … it's an essential service and, you know … we have to pay through the nose to use it. So it's not really fair," said Martin Courcelles, a frequent Instacart user who is blind.
Courcelles and his wife, Erin, who uses a wheelchair, appreciate the convenience of the service, but are frustrated by Instacart's fees and markups.
"We call it the disability tax," he said.
Higher prices might also place the service out of reach for more vulnerable clients, Courcelles worries, especially in light of a harsh economic climate amid COVID-19.
"A lot of people with disabilities aren't working these days. And this might be the only way that they can get food in the house," he said. "And for them, you know, all these extra costs, it builds up after a while, right, and some might not be able to afford it."
It's a sentiment shared by officials at the Centre for Independent Living in Toronto (CILT), who also note that many people with disabilities are living in poverty and at higher risk of contracting COVID-19.
"For some folks, their only option is grocery delivery through an app, but the high fees can reduce their food budget, and this means less food on their table," said the CILT in a statement.
"With food prices set to rise in 2022, yet more disabled Canadians will become more food insecure if there's no reduction in delivery app prices or a discounted option of some kind."
Sylvain Charlebois, the senior director of the Agri-Food Analytics Lab at Dalhousie University and a professor studying food security, says that as the food delivery market continues to grow, companies like Instacart will have to look at making their services more accessible to those who have no choice but to order their food online.
Charlebois says for those living with physical or intellectual disabilities, or people who need to quarantine, "service charges are simply a regressive tax."
"As we learn to live with viruses and other unfortunate public health challenges, access to online food delivery services can be an asset only if they don't penalize those who have no other option, temporarily or permanently."
No price break for those with disabilities
Currently, Instacart does not offer reduced delivery prices for those living with disabilities, but the company says it does offer a dedicated phone line for clients who have disabilities and need more assistance.
Charlebois thinks a reduction in fees for people with disabilities or mobility issues is long overdue.
"Just on the basis of compassion, absolutely. I think it should have been done by now," he said.
With the food delivery market poised to reach $20 billion in Canada by 2025, the time to act is now, says Charlebois.
"I think it's the right time to have that conversation as the market grows," he said. "If you don't figure this one out, a lot of people will be in big trouble."
Walmart, on the other hand, charges only in-store prices on the Instacart app and allows consumers on the app to take advantage of in-store sales for about the same fees as ordering through Walmart directly. Customers can look for stores that display "in-store pricing" or "everyday store prices" on Instacart to shop for groceries without hidden markups. But they should check the fine print, as not every retailer offers advertised in-store sales or promotional prices on Instacart.
Instacart says that "when possible" it works with companies to ensure the prices on the app are the same as in the store and that customers can review their pricing policy for more details, adding that in North America more than half of Instacart retailers offer same as in-store pricing through Instacart.
Costco and Loblaws say that customers who order directly from them will get a better deal.
Costco's SameDay Service, powered by Instacart, has no added delivery or service fees. However, there are markups on grocery items. Costco says customers can take advantage of in-store sales and discounts on Instacart as well as through Costco's SameDay Service.
Loblaws customers can use PC Express where available and receive in-store pricing and sales, and orders can be picked up for a small fee or delivered for $9.95.
As for hidden fees, Instacart maintains that it's clear about the possibility of price differences in the app, and says it's working to add more features to make grocery shopping more affordable for everyone by implementing features like reduced fees and free delivery on orders placed 24 hours in advance.
In the meantime, shoppers like Courcelles who depend on Instacart will have no choice but to pay a premium.
"During winter, it's pretty much the only service that we can use to get food into the house," he said. "It's the only option we have at this point."
Clarifications
- Costco provided this additional information after publication: “Whether or not a discount is shown on the Instacart site, Costco will apply any in-store discount that affects any item the Instacart shopper purchases regardless of whether or not the discount is shown on the Instacart site.”Jan 07, 2022 2:05 PM ET
