The grocery industry is experiencing profound change thanks to one key technology: artificial intelligence (AI), which already factors largely into shoppers’ buying habits and customer experience. Applications like AI-powered search play an important role in the mechanics of how consumers find the products they need. AI tools also enable both grocers and consumers to benefit from the real-time data pipeline that’s baked into our modern retail experiences.
According to NielsenIQ (NIQ), omnisales (sales across online, in-store, and curbside pick-up) within the grocery sector are on the rise in 2025, largely due to online channels. Sales of Consumer Packaged Goods (CPG) products are growing nearly five times online versus in-store sales. The biggest category for CPG growth, according to NIQ? Food. But aligning grocery inventory with consumer shopping behavior around groceries presents some unique challenges.
Complexities of Managing Grocery Store Inventory
Grocery shopping is nuanced; it’s a category that stands on its own compared with others in retail. Margins are incredibly slim and purchasing tends to be habitual, which requires grocery brands to provide convenience and efficiency across the full shopping experience. Add to this that the nature of grocery products makes managing inventory challenging. Complexities include:
- Perishable inventory: Unlike selling shoes or electronics, grocers deal with items that have a limited shelf life. This requires careful management to avoid waste and inventory optimization to ensure customers get products within sell-by dates.
- Large, diverse catalogs: Grocery stores carry thousands of products with various attributes, making search and discovery challenging.
- Habitual shopping patterns: Consumers buy the same staple items week after week, making it difficult to introduce new products or increase basket value.
- Real-time inventory updates: With quickly changing stock levels, maintaining accurate inventory data is necessary (but difficult). Getting it right helps avoid customer disappointment.
- Seasonal and weather-dependent demand: Factors like sunny weekends can dramatically impact demand for certain products, requiring agile forecasting.
- Omnichannel management: With grocery, retailers must center the buying experience on the shopper versus the shopping channel which requires balancing in-store and digital inventory effectively.
Since AI plays an important role in connecting shoppers to the right products – or matching them with alternatives if a favorite item is out of stock – it can help address these complexities by improving search functionality, personalizing recommendations, and enhancing inventory forecasting.
Benefits of AI-Powered Personalization for Groceries
AI is exceptionally good at connecting consumers to relevant products. In the context of buying groceries, this might look a bit different than other retail categories. While it’s true that shoppers tend to stick to their favorite brand or usual items when stocking up on essentials, AI can break this cycle by introducing shoppers to new brands, complementary items, and substitutions they may not have known about. It can also make searching (and finding) items much simpler online. Here are some ways AI levels up the digital grocery shopping game:
AI Makes Search Easier for Customers
Matching products to customers is essential in grocery, where stores carry vast catalogs with numerous attributes. AI-powered search can help customers find exactly what they need, even if they don’t use precise search terms.
Sergio Iacobucci, Senior Director, Commerce Marketing explains:
AI plays a really important role in helping shoppers find the right products. Search without AI doesn’t do a great job at creating those connections between finding the item that somebody actually needs and connecting them to what’s in stock, or an equivalent item. AI excels at making this type of connection.
Personalized Recommendations Aid in Product Discovery
AI-powered personalization uses massive amounts of data to generate customized product recommendations. In addition to drawing from first-party data like past purchases and customer information, ML algorithms can analyze a customer’s basket and suggest complementary items or premium alternatives.
For example, if a customer adds a pack of tortillas to their online grocery cart, the AI can recommend complementary items such as salsa, shredded cheese, ground beef, and guacamole. This approach not only enhances the shopping experience by helping customers plan a complete Tex-Mex-themed meal but also increases the likelihood of additional sales by highlighting items that naturally pair with their chosen products.
Omnichannel Works Better with AI
Per NIQ data, 86% of CPG dollar sales in the U.S. come from omnichannel shoppers. Consumers may order from your store app and have their groceries delivered. They may use their phone in-store to scan items and bypass checkout. They may also place an order and pick it up at the curb. This omnichannel approach to the weekly chore of grocery shopping makes it particularly important to connect your inventory availability across channels in real time.
Notes Iacobucci, “A real-time data pipeline is extremely important for grocers, given how quickly inventory can come and go in a supermarket.”
AI Supercharges Inventory Management
AI is addressing the unique challenges of perishable goods and fluctuating demand, two inventory headaches that are particularly challenging for grocers. For example, Dollar General is implementing AI-driven ordering technology for produce in 3,000 stores, optimizing stock levels and freshness. “AI can significantly improve forecasting by analyzing past sales data, weather conditions, and seasonal patterns,” explains Iacobucci. “It can predict how much stock you might need, which helps avoid running out of popular items or overstocking perishables.”
Balancing Business Goals with Shopper Experience
Grocery retailers are actively embracing AI-powered personalization to stay competitive. For example, Canadian grocer Loblaw is using personalization as part of a major online shopping initiative. This effort is supported by a team of 700 Loblaw digital employees, focused on driving billions of dollars in ecommerce revenue annually. Loblaw demonstrates how grocers can create more engaging, personalized experiences that cater to individual preferences while effectively managing their operations. Achieving success with AI requires that grocers balance business goals with a laser focus on improving shopper experience. Here’s how.
Practical Tips for Implementing AI in Grocery Stores
- Understand capabilities and limitations: Before implementing AI, it’s important to set realistic expectations about what current AI technologies can and cannot do. For example, AI is great at processing your endless customer data and using it to identify patterns, making predictions, and offering new levels of personalization for shoppers.
- Leverage cyclical trends: Grocery shopping often follows predictable patterns. AI can analyze recurring shopping behavior to optimize inventory management, personalize recommendations, and connect channels for a more consistent shopping experience. The cyclical nature of the grocery sector means that grocers can use AI to better anticipate demand fluctuations and adjust their inventory strategies more accurately.
- Enhance shopper engagement with GenAI: According to Coveo’s 2024 Commerce Industry Report, 72% of consumers expect their experiences to evolve with GenAI. That makes sense. Generative AI offers exciting possibilities for creating rich, personalized content that enhances the grocery shopping experience. For example, using AI to generate recipe ideas based on products in a customer’s cart or search history.
- Prioritize real-time data integration: AI needs accurate, up-to-date data to operate effectively. Make sure your AI system has access to the most current inventory and pricing information so that it can provide accurate product recommendations and help avoid the customer disappointment that comes from out-of-stock items or pricing discrepancies.
The Future of AI in Grocery Shopping
As AI continues to evolve, its impact on grocery shopping will become increasingly profound. Integrating AI into a connected digital and physical (e.g., phygital) grocery buying experience will undoubtedly make that experience more personalized, efficient, and engaging for shoppers while optimizing operations for grocers.
As our own data shows, consumers expect that their experiences will evolve with technology like generative AI. Nearly 40% of respondents to our 2024 Commerce Industry Report said they expect GenAI to provide pre-purchase education on products. Consumer shopping journeys are increasingly phygital with physical and digital channels merging into one connected channel-agnostic journey.
Consumers may prefer starting a product search on Google or a retailer’s website, but they’re also apt to find products on social media and purchase them in-store. Almost all respondents in our Commerce Industry Report prefer to start or end their journey online.
AI will increasingly play a key role in addressing key consumer concerns around issues like sustainability and value. For example, by connecting shoppers to information about product sourcing and environmental impact. This is an important consideration for retailers. In NIQ’s 2024 Consumer Outlook, waste avoidance was a key consumer value, with 29% of respondents eating leftovers more frequently and 56% only buying what they use to avoid waste.
PwC’s 2024 Voice of the Consumer Survey suggests that AI will be instrumental in bridging the trust gap between consumers and retailers, particularly in areas like data protection and personalization. Providing more relevant product recommendations, accurate inventory availability, and a better-connected phygital buying journey helps grocers build trust and solidify relationships with customers.
AI promises to make the weekly chore of grocery shopping much more efficient and enjoyable for customers and much easier to manage for grocers. It provides the agility required to quickly shift stock, enhance product discovery, and make ordering easier.