Harnessing Consumer Insights for Strategic Decision-Making: Evidence from Sales Growth and Profitability Dynamics in Indonesian Retail Firms

Abstract

This study examines how consumer behavior, proxied by financial indicators, shapes strategic business outcomes in the Indonesian retail industry. Specifically, it investigates the effect of Sales Growth (SG), Receivable Turnover (RT), and Inventory Turnover (IT) on firm profitability measured by Return on Assets (ROA). Using panel data from six retail companies listed on the Indonesia Stock Exchange over the period 2021–2025 (n = 30), the study employs a Fixed Effects Model (FEM) to control for unobserved firm-specific heterogeneity. The results indicate that Sales Growth emerges as the primary determinant of profitability, with a positive coefficient (β = 0.1041) in the within-group estimation, although marginally insignificant at conventional levels. In contrast, Receivable Turnover and Inventory Turnover show no significant effects after controlling for firm-specific factors, suggesting that their apparent significance in pooled models is driven by spurious correlations. A robustness check incorporating lagged Sales Growth reveals a stronger and more statistically relevant coefficient compared to contemporaneous growth, indicating the presence of dynamic adjustment and delayed profitability effects. These findings highlight the dominance of demand-driven factors over operational efficiency in shaping retail performance and provide empirical support for the operating leverage mechanism. From a strategic perspective, the study underscores the importance of leveraging consumer demand insights to drive sustainable profitability in emerging market retail contexts.