The biggest online grocery challenges and how to solve them

Rising costs, high expectations and fierce competition. Discover how smart solutions are helping online grocers solve these challenges and win customer loyalty.

AI is transforming digital shopping experiences, making them more personalized, convenient and efficient than ever. For online grocery retailers, this shift comes at a pivotal moment. In the EU, 75% of people aged 16 to 74 shop online, while 42% of Americans spend $51 to $100 on online groceries (Chicory, 2023). The online grocery market itself is expected to grow from $186.6 billion in 2023 to $341.5 billion by 2027 (Oberlo). This is a massive opportunity but one that brings clear challenges.

To stay ahead, grocery brands are racing to integrate AI, streamline operations and deliver seamless customer experiences. But success depends on understanding the key online grocery challenges retailers face today and the opportunities they present.

Let’s dive in.

Challenge 1: adapting to rapidly evolving consumer expectations

The European online grocery market, projected to reach $422.1 billion by 2032 (imarc, 2024), faces growing pressure to meet consumer expectations. Today’s shoppers want more than just online convenience; they expect a seamless, personalized experience that mirrors other digital services.

Key expectations include:

• Ordering large shopping carts, like a full week’s groceries, instead of individual items.
• Reordering the same products from their favorite brands.
• Incorporating dietary preferences or intolerances seamlessly into search.
• Finding everything they need quickly without friction.

Solution: AI-driven product discovery and personalization

AI-powered product discovery helps online grocery retailers tackle these challenges by acting as a compass for onsite search. It guides shoppers straight to the products they need, refining search results for maximum relevance and speed — a critical feature when managing large grocery lists.

A key piece of product discovery is AI personalization, which uses a shopper’s history, like previous clicks and purchases, to suggest items that are highly relevant. This creates a shopping experience that feels tailor-made, boosting conversions by an average of 20%. More importantly, it builds trust and loyalty, keeping customers coming back for more.

Leading on-demand beverage retailer Flaschenpost has already embraced AI product discovery and personalization. Explore their impressive results in the case study.

Challenge 2: balancing high operational costs with efficient delivery systems

Online grocery retailers face growing operational costs, from complex warehousing to the logistics of delivery. These challenges aren’t just internal. They directly impact customer satisfaction and retention.

Consumers expect fast, reliable delivery without added costs. Meeting these expectations while controlling expenses requires a careful balance. An efficient delivery system ensures the shopping experience ends on a positive note, encouraging customers to return.

Solution: AI optimization with the Predictive Basket

The Predictive Basket uses advanced neural networks to anticipate customer needs by analyzing individual buying habits, shop trends and seasonal factors. It delivers personalized product suggestions that help customers fill their carts faster and more efficiently.

This tool is especially useful for shoppers who frequently reorder the same products. By recognizing buying patterns, it highlights repeat purchases while avoiding irrelevant suggestions. For example, if a customer buys milk weekly but only needs shampoo once a month, the Predictive Basket focuses on essentials like milk without over-promoting less frequent items.

Beyond enhancing the shopping experience, the Predictive Basket also supports inventory management. It provides precise demand forecasts based on real customer interactions, helping retailers optimize stock, reduce waste and improve operational efficiency.
 
Watch how Austrian food wholesales KASTNER uses the Predictive Basket to streamline operations and meet customer needs seamlessly.

Challenge 3: building and sustaining customer loyalty in a competitive market

Customer loyalty is a significant challenge for online grocers, especially in such a competitive environment. With countless options available, differentiation beyond pricing is critical. Shoppers can switch to a competitor with just one click, so grocers need innovative ways to stand out and foster lasting connections.

Solution: enhancing customer experience with AI-powered recommendations 

Recommendations help online grocers create a more engaging and efficient shopping experience. By analyzing browsing behavior and purchase history, AI can suggest products that are relevant, convenient and enticing — making the weekly shop faster and more rewarding for customers while increasing average order value for retailers.

These recommendations can come in three forms:

• Complementary products. Suggest items that pair well together. For example, if a shopper adds battered cod to their cart, the system recommends oven chips and mushy peas.
• Similar products. Offer relevant alternatives based on preferences. If a customer views apples, the system might suggest organic or local varieties.
• Manual recommendations. Beyond AI suggestions, grocers can manually prioritize specific products to appear first, ensuring key promotions or high-margin items are front and center.

Looking for more ways to increase your average order value? Check out our blog on how to boost AOV in grocery eCommerce here.

Wrapping up and looking ahead

AI is no longer a future trend. It’s the present reality transforming the online grocery industry. For eCommerce managers, it’s the perfect time to embrace technology that personalizes, streamlines and enhances every part of the shopping experience. Tools like AI-powered product discovery and recommendations aren’t just innovations; they’re essentials for staying competitive and meeting customer expectations.

For marketers, this is your chance to showcase how your brand stands out. By leveraging these technologies, you can ensure the weekly shop is effortless and enjoyable — keeping customers coming back time and again.

Click below to connect with our experts and explore how AI can transform your online grocery business.