10 CHAPTER I INTRODUCTION 1.1 Background Supermarkets, which provide customers with a large selection of goods under one roof, have grown to be an essential component of modern retail. To meet the varied demands of customers, these self-service supermarkets offer a variety of food, drinks, and household goods arranged into several categories (Rejinold, C. C., & Kandi, S. K., 2021). The global supermarket market is expected to grow significantly, with projections indicating an increase from 1,600.34 (USD Billion) in 2023 to 2,313.88 (USD Billion) by 2032 at a CAGR that is expected to be around 4.18% during the forecast period (2024 - 2032) (Market Research Future, Supermarket market size, share, Global industry report 2032, 2024). The supermarket industry's upward trend is particularly evident in Asia, where it has been expanding quickly and becoming a major player in the global grocery market. The supermarket sector in Asia has been experiencing remarkable growth, with China expected to become the world's largest grocery market in the next 5 years, reaching $1,800 billion (Euromeat News, “Asia to dominate the global grocery market”, 2024). This growth trend extends to Southeast Asia, where the supermarket sector is valued at US$722.20 billion in 2024, with a projected CAGR of 6,7% over the 2024-2028 period (The 70 top supermarket chains in South East Asia in 2024, GourmetPro, 2024). The region's expanding middle class, estimated at around 250 million in 2023, is driving demand for modern retail formats and premium products. An excellent illustration of this regional growth is Indonesia, whose food retail industry has seen significant growth and a dynamic mix of retail formats to meet the varied needs of its customers. In Indonesia specifically, the food retail sector has become one of the largest in Asia Pacific. The Indonesian grocery market was estimated to be worth US$169.4 billion in 2022, with the country's F&B market growing at a CAGR of 5.7% during 2020-25. Indonesia's food retail sector has been experiencing significant growth. In 2022, the country's grocery market was valued at an estimated US$169.4 billion. The food and beverage market is projected to expand at a CAGR of 5.7% from 2020 to 2025, indicating a robust and steady increase in the sector. Among the top players in Indonesia's supermarket landscape, Indomaret and Alfamart are the largest chains, each operating more than 18,000 stores nationwide. Following these convenience store giants are larger format retailers: Hypermart maintains 98 locations on major islands, Lotte Mart operates 49 stores in different regions, and Foodmart runs 26 outlets spanning Java, Bali, Sumatra, 11 Kalimantan, and eastern Indonesia. This diverse range of retail formats, from small convenience stores to large hypermarkets, reflects the varied and changing consumer preferences in Indonesia's evolving retail landscape (The 10 leading food retailers in Indonesia in 2024, GourmetPro, 2024). This dynamic growth in Indonesia's food retail sector is closely tied to evolving consumer behavior, which is influenced by various factors, including the effectiveness of targeted sales promotion strategies in driving immediate purchases and catering to diverse shopping preferences. This rapid expansion in Indonesia's food retail sector is not only a testament to its economic potential but also reflects the evolving dynamics of consumer behavior within supermarkets. As the industry grows, so too does the complexity of shoppers' decision-making processes, particularly when it comes to unplanned purchases. A significant aspect of this is impulsive buying, a phenomenon influenced by both psychological and environmental factors that thrive in the modern retail environment. Impulsive buying in supermarkets is a significant phenomenon driven by various psychological and environmental factors. Research indicates that consumers are increasingly drawn to in-store shopping experiences, which enhance impulsive purchasing behaviors. A study highlighted by Talking Retail (2024) shows that the sensory engagement provided by physical stores, such as sight, sound, and smell, plays a crucial role in stimulating impulse purchases. The study reveals that consumers not only prefer in-store shopping but also tend to make unplanned purchases due to strategic product placements and promotional displays that capture their attention. Moreover, NielsenIQ (2024) emphasizes the power of emotional and environmental cues in driving impulse buying. These findings underscore the importance of understanding how sensory engagement and strategic marketing practices contribute to impulsive buying in the retail context (NielsenIQ, 2024; Talking Retail, 2024) Impulsive buying, influenced by sensory engagement and marketing strategies, is pivotal in Indonesia’s retail sector. Strategies such as sales promotions, direct selling, and product bundling effectively drive unplanned purchases, aligning with evolving consumer needs. Within this diverse landscape of retail formats in Indonesia, several key factors play a crucial role in shaping Indonesian consumer behavior.