How AI and Economic Pressure Are Reshaping Grocery Loyalty

The grocery sector is facing a unique convergence of economic pressure, shifting shopping habits, and rapid artificial intelligence adoption. According to Capital One Shopping, 28 percent of American adults now grocery shop online at least once per month. Sales are mirroring this, as U.S. online grocery sales reached $10 billion in July, a 26 percent increase year-over-year (YoY).

With people shopping more online, and inflation and rising grocery bills also driving fundamental changes in loyalty and purchasing patterns, shopping habits are changing. Let’s look at how grocers need to adjust their strategies to respond to these major consumer shifts.

Price Sensitivity and the Experience Gap

According to a recent Algolia survey of 1,000 U.S. adults, a whopping 73 percent of shoppers are stressed about grocery bills this year. This financial strain has led to 30 percent seeking more deals, 28 percent buying only necessities, 54 percent swapping their favorite brands for cheaper alternatives, and 40 percent trying private label brands for the first time. And that private label trend is actually building on momentum gained in 2024, with private label sales YoY growth (3.9 percent) outpacing national brands (1 percent). With cost becoming an increasingly important factor in customers' grocery choices as inflation persists, we’re seeing price sensitivities erode brand loyalty.

What else is driving new consumer behaviors? A Deloitte survey found that 70 percent of retail executives plan to have AI capabilities in place during 2025 to personalize experiences for consumers. Retail experiences in other categories are better and have raised the bar for consumer expectations when it comes to grocery shopping. Grocery retailers are now being pressured to match or exceed the personalization, user experience, and engagement strategies seen in other retail sectors. If they don’t, they could risk losing a huge segment of online shoppers. Loyalty programs are a main strategy for both maintaining shopper loyalty, but also fueling AI-driven personalization.

Loyalty: Beyond Points to Personalized Value

It’s critical that grocers address the online experience that consumers are flocking to through loyalty programs that offer effective personalization and gamification. While we’ve seen evidence that product brand loyalty is dwindling, there are some bright spots when it comes to overall grocery loyalty. In fact, 79 percent of grocery shoppers use loyalty or rewards programs and nearly half of them prefer digital versions, according to VTEX. To be truly successful in cultivating a loyal grocery customer base, a business has to go beyond coupons and quick discounts. Personalization is key to offer deals and recommendations that help price-conscious customers feel comfortable and supported, and AI-fueled recommendations based on their shopping habits show customers that brands understand their needs.

Some grocers are taking it beyond basic personalized discounts and looking to the gaming industry for inspiration to engage their younger customers. We’re seeing grocery providers across the board embrace gamification this year, with giants like Walmart launching Walmart Unlimited, an immersive game-like experience that allows consumers to shop products in real time. Furthermore, smaller grocers like Samkaup, an Icelandic grocer, are offering in-app games, including spin-to-win, to boost customer engagement and loyalty. And it's not falling on deaf ears. Seventy percent of consumers from Algolia’s survey are interested in grocery app games and “adventures” that allow you to earn rewards, credits or savings and discover new products. To really hit all of consumers’ demands, loyalty programs must evolve into data-driven personalization tools that combine entertainment, savings and convenience.

Keeping Pace With Today’s Shopper

We’re no longer just figuring out what avenue consumers would prefer to shop for groceries in; we now must look at how we can meet and improve customer expectations with data-driven technology and value to inspire loyalty. Grocers have to factor in ongoing brand switching when strategizing competitive pricing, an interest in gamified digital experiences, and an emphasis on personalized offerings. Grocers that treat AI and other creative tech tools as a revenue and loyalty driver will be the ones who win over today’s price-sensitive shoppers.

Piyush Patel is chief ecosystem officer at Algolia, a leader in globally scalable, secure, digital search and discovery experiences that are ultrafast and reliable.