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Instacart Finally Tells You When It's Charging You More Than Stores

The timing is ... convenient.

Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

As Instacart, the grocery delivery service, has grown in popularity, one unanswered question has followed: Am I paying more on Instacart than I would if I bought the same food in a store?

Now Instacart says it’s ready to be transparent about that answer. The company has begun indicating whether individual products cost the same as they do in the store that sells it, and if not, how much more Instacart is charging on a percentage basis. The startup also indicates whether a partnering store — say, Whole Foods — is setting the prices on Instacart or whether Instacart itself is.

Shoppers can use Instacart to order groceries from multiple brick-and-mortar grocers in their cities. In Manhattan, for example, Instacart customers can place a single order that includes groceries from Whole Foods, Costco and Fairway. Orders are typically delivered within an hour.

Why radical transparency now? Over time, Instacart has shifted its business model from relying on price markups as a significant revenue stream to inking deals with grocers to give Instacart a cut of sales in exchange for bringing new business to the grocer. A cynic could argue that Instacart is only now deciding to be transparent about pricing because it is marking prices up less often as a result of these deals.

Instacart also may have realized that it needs to eliminate the pricing enigma in order to attract a new group of shoppers to its marketplace who may be turned off by the original pricing strategy. Instacart, which is valued at nearly $2 billion, also continues to face competition from Amazon, Google and older regional delivery services such as Fresh Direct and Peapod.

"One of the reasons that people use Instacart is because a lot of the prices have been the same as in the store and they can just pay a delivery fee," CEO Apoorva Mehta said in an interview. "What we’re doing is making sure that everyone is aware of which stores are like that so they can make more informed decisions themselves."

Mehta said the majority of products on Instacart are now priced the same as they are in stores, though there are exceptions. In Manhattan, for example, Instacart is marking up items from Costco by 15 percent or more, according to a new disclosure on the site. This likely means that Instacart hasn’t yet reached an agreement for Costco to pay Instacart a commission on sales. Mehta would not confirm or deny this assumption.

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