Walmart enlists artificial intelligence for online grocery substitutions

Walmart is putting artificial intelligence (AI) to work in making sure customers get what they like in online grocery orders.

Srini Venkatesan, executive vice president at Walmart Global Tech, said in a blog post yesterday that the company has developed AI-based technology to help its personal shoppers and customers make smarter substitutions for out-of-stock products.

The solution is designed to help identify the next best item for a customer if the product they initially ordered isn’t in stock, Venkatesan said. Deep learning AI considers hundreds of variables — size, type, brand, price, aggregate shopper data, individual preference and current inventory, among others — in real time to determine the best next-available item. Then, customers are asked to approve or reject the substituted item. The decision is fed back into learning algorithms to improve the accuracy of future recommendations.

“The decision on how to substitute is complex and highly personal to each customer. If the wrong choice is made, it can negatively impact customer satisfaction and increase costs. In the past, our personal shoppers would go through a manual process to determine the best way to manage a substitution. But there are nearly 100 different factors that can go into that decision. Trying to account for all of these would not only be too difficult, but it would also be incredibly time-consuming,” Venkatesan explained. “To help ensure a substitution that will result in a happy customer, our team created a technology solution to help identify the next best item for customers if an item they selected is out of stock.”

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The solution from Walmart identifies the next best item for customers if the product they initially ordered isn’t in stock.

Venkatesan illustrated the complexity of online order substitutions with an example: a personal shopper seeking cherry yogurt for an online grocery order but, once reaching the yogurt aisle, the cherry yogurt is gone.

“You see strawberry, raspberry and blueberry yogurt. Would the customer like one of those options? Perhaps another flavor, like vanilla? Fat-free? Skip the yogurt all together?” he said. “How can a personal shopper decide which is the next best option for a customer they may never have met?”

Such situations really presented a challenge last year, when the COVID-19 pandemic triggered a boom in consumer demand for food and groceries. Venkatesan noted that the sudden surge in in-store shoppers and online volume caused some popular items to rapidly sell out.

“The solution is also designed to make our associates’ jobs easier. Instead of having to guess, the personal shopper can be told precisely what the customer may prefer,” he said. “If our personal shoppers are preparing orders and come across an item that is not available, our system suggests the alternative product. Our tech even shows our personal shopper where the item is located in the store, simplifying the decision-making process for our team and enabling them to prepare orders quickly and efficiently.”

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Since deploying the AI solution, customer acceptance of online grocery substitutions has climbed over 95%, Venkatesan reported.

“We continue to iterate and enhance this technology, and our customers are responding positively,” he added. “The best part is, throughout the entire process the system is learning and getting smarter based on customer input and actions. Our goal is never to be out of stock and never to have substitutions. But, when it happens, the technology we’ve built helps ensure customers get the next best thing.”

That capability in grocery will be critical for Walmart in its e-commerce battle with online retail giant Amazon. According to Austin, Texas-based Jungle Scout, which provides a e-commerce platform for selling on Amazon, 51% of consumers shopping on Walmart.com in the first quarter purchased groceries, compared with 23% for Amazon. The percentage of grocery purchases in Q1 for Amazon was down from 31% in Q4 of 2020.

What’s more, in Q2 2021, 25% of consumers plan to shop for groceries at Walmart stores and 20% at Walmart.com, versus 17% for Amazon and 12% for other online retailers, Jungle Scout’s research found. Over the past three months, 54% of consumers shopped in-store at Walmart, followed by 30% at Target. Online, 71% shopped at Amazon in that time compared 39% at Walmart.com.