December 2, 2025
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How Can Substitutions Be Improved In Online Grocery?
A university study has found that personalizing alternatives notably raises acceptance rates when an online grocer order requires a substitution due to an out-of-stock.
An accompanying survey of 25 international retailers found the solid majority of consumers (70%) would allow substitutions if their first choice is not available. In responding to a substitute situation due to the out-of-stock:
- Half of retailers surveyed rely on data based on the popularity or sales of similar items.
- Almost a third (31%) employ “decision trees or category-based logic,” such as replacing one brand of yogurt with another brand, or one size of pasta with a different size.
- Less than a third (31%) of the retailers surveyed leverage customer purchase history as well as machine learning, or artificial intelligence models, for personalization.
Partnering with a European online grocery platform similar to Instacart, the study — led by researchers at Argentina’s Universidad Torcuato Di Tella School of Business — came up with a system to identify optimal substitutes via personalization before the picking process began.
Historical basket data for each customer was used to build an algorithm that ranks customer preferences and suggests substitutes when the preferred products are stocked out.
The suggestions then weighed “stable preference patterns,” such as the unlikelihood that another dairy-based substitute would be accepted by a customer who frequently buys lactose-free milk despite being in the same category. A “contextual filter” was also added to ensure that suggested substitutes were “relevant,” or within the same price range or subcategory.
The study found that compared to the retailer’s existing machine learning system, the personalized and context-filtered suggestions led to a 26–32% increase in acceptance rate. The researchers wrote, “The biggest gains came from customers with few past transactions—traditionally the hardest group to personalize for. Importantly, a simple relevancy filter—such as only suggesting items within ±50% of the original item’s price—improved success rates by more than 12 percentage points.”
The study found substitutions costing retailers, on average, $2.66 in labor costs and lost margin for every $1 in recovered profit margin. The costs include delivery refunds for unwanted substitutes, the time in-store pickers spend searching for the desired product in the backroom or elsewhere, and/or time spent attempting to contact a customer to ask for the best replacement. Some retailers will also substitute a more expensive replacement without extra charges.
Poor substitutions were also found to be a leading driver of churn, even over late delivery.
Online Grocery Research Produces New Findings on Customer Preferences
Research led by London’s Leeds Business School around substitution techniques found:
- In vertical differentiation (VD) categories where products can be ordered easily according to their levels of quality or performance (i.e., margarine, ketchup), shoppers are more inclined to consider the alternative satisfactory if it is from the same brand.
- In horizontal differentiation (HD) categories that that cannot be categorized objectively, as they are generally differentiated by attributes such as flavor (i.e., cereal, pizza, potato chips), shoppers are more inclined to consider the alternative satisfactory if it is from the same brand.
- Consumers are generally much more liable to accept products they have purchased previously.
The study also indicated automation may enable retailers to contact a customer directly to ask for the best replacement instantly when in post-purchase, “opening the door to more options to satisfy customers.”
BrainTrust
Brad Halverson
Principal, Clearbrand CX
Scott Benedict
Founder & CEO, Benedict Enterprises LLC
Nolan Wheeler
Founder and CEO, SYNQ
Recent Discussions
Discussion Questions
How can grocers improve satisfaction rates with online grocery shoppers when substitutions are required for out-of-stocks? Should certain categories or products not receive an alternative choice?
Is it practical to contact the customer about a possible replacement in the picking process for a stock-out?
Poll
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The best way to manage substitutions is to avoid them altogether and, where this is not possible, minimizing them. This is important as substitutions are a major driver of dissatisfaction among online shoppers. Preventing them requires real-time inventory visibility and sensible stock buffers. Where substitutions are necessary, giving the customer control is the next best thing. This means alerting shoppers to low stock levels, allowing them to pick their own substitutions (Whole Foods offers this) or leave notes to the picker.
The best way to boost satisfaction among online grocery shoppers—especially when substitutions are needed—is to prioritize preventing stockouts in the first place. Proper inventory management, demand forecasting, and regular replenishment form the foundation. When a product runs out of stock, it’s a failure of execution, not of the shopper. Developing systems that detect low-stock items early and use predictive reorder logic can eliminate the need for substitutions altogether.
When substitutions are unavoidable, grocers should handle them with intelligence and respect for the customer’s preferences. That means using dynamic personalization — not generic “closest match substitutes,” but choices tailored to the shopper’s history, dietary needs, brand loyalty, or price sensitivity. Even better: offer options such as fulfilling the missing item from another local store or shipping it directly to the customer at no extra cost. That kind of flexibility — providing the actual product even if it’s slightly slower — often beats forcing a replacement on someone who may dislike or distrust it.
Reaching out to customers during the picking process about substitutions can work in theory, but often causes friction and delays fulfillment in practice. Instead, build trust by reducing surprise swaps: either deliver exactly what was ordered or offer a clear choice — perhaps at order confirmation or through a quick push notification — before fulfillment continues. By treating substitutions as exceptions rather than defaults, and by prioritizing customer preferences over convenience alone, grocers can significantly boost satisfaction and loyalty in their online grocery channels.
From the findings in the article, it’s clear that substitutions improve when they reflect the shopper’s actual preferences. Most retailers aren’t there yet, but tools that learn individual habits, restrictions, and brand loyalties will outperform generic “similar product” logic every time. And in the meantime, giving customers the ability to confirm substitutions in real time removes the guesswork.
Unless tech leaders like Amazon or others invest in a massive and detailed option tree of content for customers to quickly digest, it’s better off offering no substitutions. One of the big challenges toward good outcomes for online grocery substitution is most customers will have a head full of questions and considerations for alternates. They will want to see the products on the shelf, while store pickers won’t have time to wade through the details like specific ingredients, where something is made, or an acceptable price/quality ratio.
Traditional retail environments often leverage immediate customer interaction to execute effective upselling, cross-selling, and substitution, benefiting from instant, on-site customer approval.
However, in the online commerce scenario, there appears to be ambiguity regarding the standardization of substitutions, which directly impacts customer acceptance and satisfaction. This raises two critical questions:
- What are the established parameters for online substitutions? Are they typically confined to brand-level replacements (e.g., same product, different brand) or do they often involve substitutions across broader product categories?
- To what extent are these substitution algorithms currently informed by and personalized using individual customer purchase history and stable preferences?
A Proposed Solution: Real-Time Customer Confirmation
I advocate for the immediate integration of a real-time communication channel, such as an integrated chatbot or SMS notification system, to confirm substitute items instantly.
This model is already successfully employed in sectors like online food delivery, where vendors proactively seek customer approval for out-of-stock items. Adopting this proactive, instant-communication approach would not only clarify substitutions but also significantly enhance customer trust, satisfaction, and acceptance rates for substitute products.
Online grocery is so broken that systems exist to text customers about substitutions or do analytics to optimize substitutions. Rather than fix the root cause.
I ordered colgate toothpaste, baking soda and peroxide from a major retailer. Out of stock. Offered substitution (not making this up) Crest, whitening gel. Aside from category, no other attributes matched.
Amazon isn’t asking me if I’ll take Adidas running shoes when I request Nike basketball high tops.
If you only received 85% of the items you ordered from Amazon or any other online retailer in any other category, you would stop shopping them.
By relying on the dynamic inventory environment of stores for fulfillment, grocers will always have an out of stock problem.
The first “retailer” to do grocery ecommerce with a dedicated, known, fixed inventory will capture a lot of grocery ecommerce sales by offering what’s available and fulfilling orders as ordered. They will not have legacy stores to protect. They will sell bigger orders to more valuable customers. The assortment will reflect what shoppers buy online. Larger sizes. More multi-packs. More premium items.
Delivering grocery ecommerce orders as ordered is an opportunity waiting for someone to capture.
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The best way to manage substitutions is to avoid them altogether and, where this is not possible, minimizing them. This is important as substitutions are a major driver of dissatisfaction among online shoppers. Preventing them requires real-time inventory visibility and sensible stock buffers. Where substitutions are necessary, giving the customer control is the next best thing. This means alerting shoppers to low stock levels, allowing them to pick their own substitutions (Whole Foods offers this) or leave notes to the picker.
The best way to boost satisfaction among online grocery shoppers—especially when substitutions are needed—is to prioritize preventing stockouts in the first place. Proper inventory management, demand forecasting, and regular replenishment form the foundation. When a product runs out of stock, it’s a failure of execution, not of the shopper. Developing systems that detect low-stock items early and use predictive reorder logic can eliminate the need for substitutions altogether.
When substitutions are unavoidable, grocers should handle them with intelligence and respect for the customer’s preferences. That means using dynamic personalization — not generic “closest match substitutes,” but choices tailored to the shopper’s history, dietary needs, brand loyalty, or price sensitivity. Even better: offer options such as fulfilling the missing item from another local store or shipping it directly to the customer at no extra cost. That kind of flexibility — providing the actual product even if it’s slightly slower — often beats forcing a replacement on someone who may dislike or distrust it.
Reaching out to customers during the picking process about substitutions can work in theory, but often causes friction and delays fulfillment in practice. Instead, build trust by reducing surprise swaps: either deliver exactly what was ordered or offer a clear choice — perhaps at order confirmation or through a quick push notification — before fulfillment continues. By treating substitutions as exceptions rather than defaults, and by prioritizing customer preferences over convenience alone, grocers can significantly boost satisfaction and loyalty in their online grocery channels.
From the findings in the article, it’s clear that substitutions improve when they reflect the shopper’s actual preferences. Most retailers aren’t there yet, but tools that learn individual habits, restrictions, and brand loyalties will outperform generic “similar product” logic every time. And in the meantime, giving customers the ability to confirm substitutions in real time removes the guesswork.
Unless tech leaders like Amazon or others invest in a massive and detailed option tree of content for customers to quickly digest, it’s better off offering no substitutions. One of the big challenges toward good outcomes for online grocery substitution is most customers will have a head full of questions and considerations for alternates. They will want to see the products on the shelf, while store pickers won’t have time to wade through the details like specific ingredients, where something is made, or an acceptable price/quality ratio.
Traditional retail environments often leverage immediate customer interaction to execute effective upselling, cross-selling, and substitution, benefiting from instant, on-site customer approval.
However, in the online commerce scenario, there appears to be ambiguity regarding the standardization of substitutions, which directly impacts customer acceptance and satisfaction. This raises two critical questions:
A Proposed Solution: Real-Time Customer Confirmation
I advocate for the immediate integration of a real-time communication channel, such as an integrated chatbot or SMS notification system, to confirm substitute items instantly.
This model is already successfully employed in sectors like online food delivery, where vendors proactively seek customer approval for out-of-stock items. Adopting this proactive, instant-communication approach would not only clarify substitutions but also significantly enhance customer trust, satisfaction, and acceptance rates for substitute products.
Online grocery is so broken that systems exist to text customers about substitutions or do analytics to optimize substitutions. Rather than fix the root cause.
I ordered colgate toothpaste, baking soda and peroxide from a major retailer. Out of stock. Offered substitution (not making this up) Crest, whitening gel. Aside from category, no other attributes matched.
Amazon isn’t asking me if I’ll take Adidas running shoes when I request Nike basketball high tops.
If you only received 85% of the items you ordered from Amazon or any other online retailer in any other category, you would stop shopping them.
By relying on the dynamic inventory environment of stores for fulfillment, grocers will always have an out of stock problem.
The first “retailer” to do grocery ecommerce with a dedicated, known, fixed inventory will capture a lot of grocery ecommerce sales by offering what’s available and fulfilling orders as ordered. They will not have legacy stores to protect. They will sell bigger orders to more valuable customers. The assortment will reflect what shoppers buy online. Larger sizes. More multi-packs. More premium items.
Delivering grocery ecommerce orders as ordered is an opportunity waiting for someone to capture.