Why the Box of Cereal in My Cart Might Cost Less Than Yours

Each month, NerdWallet suggests one wallet win to help you feel more confident about your money. This month, we’re going to try to trip up the retailer algorithms that set prices for us behind the scenes.A few weeks ago, I bought a family-sized box of cereal on one of my go-to shopping apps for a sale price of $4.79 — pricier than I'd like, but my toddler loves it, and I'm loyal to the brand. A week later, the price was back to the regular price of $5.29, so I skipped it. The next week, a coupon for that same box of cereal showed up when I logged back in.It’s like the app was tracking my behavior. It’s happening to other Nerds, too.Karen Gaudette Brewer, the head personal finance editor at NerdWallet, noticed prices for groceries in the delivery app she uses in Seattle were creeping up quicker than inflation, so she tested a tried-and-true online shopping tactic: She abandoned her full cart to see if deals would improve. When she returned a few days later, prices had come down across the board. So what's going on?Shopping under surveillanceIn my case, the algorithm running behind the scenes likely found my “price sensitivity level,” or the maximum price I’m willing to pay for a box of cereal, and probably served me up a coupon to pull me (and my dollars) back in. This is called “surveillance pricing” or “personalized pricing,” and it’s happening behind the scenes of apps and loyalty programs. These algorithms control our shopping experience.Derek Kravitz, an investigative reporter at Consumer Reports, describes it this way: Companies use your personal data — everything from your buying behavior, brand preferences, location, time of day, name, and even speed and accuracy of your searches — to set your base price, as well as the promotions and discounts you get. Companies then use this data to calculate a “willingness to pay” score that’s unique to you. This score helps companies decide what price you see before you even add an item to your digital cart. When it happens without your knowledge or consent, Kravitz says it’s predatory. And it's not hypothetical — it's costing consumers real money, every day, without them knowing it. Kravitz explains that retailers apply a promotion or discount to a growing share of their customers, but there’s a segment of shoppers that retailers are leaving out. If you’re in that group (and it’s nearly impossible to know), then you might be paying more than the person next to you in line for the same box of cereal — and that’s definitely not helping your budget.How to shop like you’re invisibleLoyalty programs and membership perks make it hard to fully opt out of the system. But there are ways you can make the algorithms work harder and, in turn, show you a fairer price. Here are a couple ideas you can implement this month. 🛒 Shop in person at stores that skip the sign-upThe easiest way to get around surveillance pricing is to put your phone down and shop in-store. Even better? Shop at retailers like Trader Joe’s or Aldi that don’t require a membership to access sales. Without apps, loyalty programs or membership requirements, they can’t track your purchase history. This month, I’m going to try to do most of my shopping at Aldi. I know it will be tempting to pop into other stores that are closer to home for those inevitable mid-week missing ingredients, but I’m going to challenge myself to make the trek to Aldi or go without. We’ll see if my toddler can live with off-brand cereal.🕜 Mix up your routineI usually plan my meals for the week on Sunday and shop early on Monday morning before my workday starts. But, buying groceries on a different day or time can shift the price. Brewer says she changes the days she orders her groceries to keep the grocery delivery app on its toes.“I always keep a few meals in the freezer in case we’re too swamped with life to cook,” Brewer says. “Now I also keep them in the freezer so that I can wait out any kind of pricing weirdness that could be going on where I shop.”⚖️ Check unit prices before buying in bulk We’re getting a brand new Costco right down the street, which will come in handy as I try to retrain my shopping algorithms. Why? Looking at the unit price has long been a cost-saving strategy among consumer advocates. Warehouses like Costco and Sam’s Club give shoppers a chance to compare the unit price to what they see in traditional grocery stores. And, when warehouses offer a lower unit price, shoppers can buy in bulk to boost their savings. Doing this across brands and sizes is what Kravitz calls “the great equalizer.” Why? Because it tells you the real price, outside of packaging and marketing or retailer promotions.🕵️ Use a VPN to mask your locationThe price you pay is partially determined by your location, and logging in to shop using a virtual private network (VPN) hides your location and disrupts location-based pricing algorithms. The only problem with this method is that most Americans aren’t willing to go to these lengths, Kravitz says. But if you’re tech-savvy and want to subscribe to one, a VPN could be a viable workaround. 🐢 Get comfortable with frictionCompanies count on the fact that shoppers don’t like to wait. Kravitz says one of the most powerful tools consumers have “is going slow, pausing, thinking through things.” I’ve written before about how I’ve tried to slow down my impulse buying, whether it was using a Brick to literally block access to my phone, or by shopping secondhand for my kids, which is cheaper but also more unpredictable because what you want isn’t always there. This month, I can commit to asking myself: Do I really want or need this? Was this cheaper last week? Do I need it now or could I wait for the next sale? Will the retailer send me a coupon if I don’t complete my purchase right away?📣 Let your lawmakers know you want change Some states, like Maryland and Connecticut, are trying to make it harder for companies to use personalized pricing. While these laws aren’t perfect, they are a step toward removing the curtain that has made these practices invisible for shoppers.If you’re following along with us on this monthly financial challenge, start by testing out the tips we shared today over the next few weeks. Want an easy way to see how these small changes add up? The NerdWallet app can help you track spending as you go. We’ll be back again next month to learn how to cut utility bills. And if you missed last month’s edition, take a look back at how to stop the credit card bill spiral.