THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE INTERNATIONAL CONFERENCE 2022 (iBAF 2022)

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THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE INTERNATIONAL CONFERENCE 2022

(iBAF 2022)

Factors Influencing the Acceleration Process of Halal Product Development in E-Commerce

Wan Rizca Amelia

Faculty of Economics and Business, Universitas Medan Area (UMA) Jl. Setia Budi No.79 Kota Medan, Sumatera Utara, Indonesia

Tel: +62856 6448 3091 E-mail: [email protected]

Siti Alhamra Salqaura

Alfifto

Faras Cattlya Febrizadly

Abstract

This study aims to analyze the acceleration of halal culinary development in e-commerce in Medan City. Factors related to the acceleration process need to be explored. The method used is descriptive qualitative. By analyzing the patterns that have been done by the SMEs, a proposed framework could be drawn. By using e-commerce appropriately in this digital era, it is able to increase the development of the halal culinary business where the majority of Medan residents are Muslim and realize that consuming halal food is an obligation, not a habit. The proposed model will hopefully give impact the increasing demand for halal food products, lifestyle, and the advancement of digitalization. SMEs could take advantage and expand their business potential with the acceleration process related to halal products.

Keywords: e-commerce; digitalization; halal food; acceleration

1. Introduction

The halal industry is one of the growing industries and has tremendous potential in the world. This industry refers to Shariah-compliant principles and requirements. The emergence of the halal industry aims to meet the requirements of products and services that are in accordance with Islamic sharia. Uniquely, this industry has

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spends USD 2.02 trillion on food, pharmaceuticals, cosmetics, fashion, travel, and media/recreation sectors which are influenced by Islamic ethics on ethical consumption needs. This expenditure grew 3.2% in 2018, it is expected to reach USD 2.4 trillion by 2024. The report also states that the consumption value of food—the most consumed halal product—to reach USD 1.17 trillion and will reach USD 1, 38 trillion by 2024 (Dinar Standard, 2020). The potential demand for halal products will be even greater in line with the wider awareness of consumers that the term halal is not only a demand for religious obedience but is also synonymous with products that have better quality and have a positive impact on humans life and the environment.

This condition is certainly a huge opportunity for halal product manufacturers. This great demand requires them to compete to provide products that are not only of high quality but also in accordance with sharia guidelines.

Thus, their income potential will be greater. Some companies that get halal certification experience an increase in the sales aspect. Sales of KFC, Burger King, and Taco Bell, for example, increased by 20 percent after their products were certified halal (Aday and Yener, 2014).

Indonesia is first ranked in e-commerce development (kemkominfo.go.id; 2019), and the Culinary Subsector is the largest contributor to the GDP of the Creative Economy in Indonesia (Kompas.com; 2021). Furthermore, it is known that the majority of Indonesian people are Muslim. As the country with the largest Muslim population in the world, Indonesia has the potential to become the largest player in the Islamic economy and finance in the world. This can be seen from the population and the level of religiosity of the community, the consumption, and trade of halal products which continues to increase, as well as the growing ecosystem that supports the growth of the industry, including from the regulatory aspect.

In recent years, the government has strongly encouraged economic growth from the trade sector by supporting the development of the halal industry in every community activity. So that some industries produces halal product.

Based on the coherence of these facts, it is certain that the halal food business and halal industrial products provide long-term opportunities for Indonesia. In addition, the term halal is also well known in the business industry such as halal tourism, halal fashion, and so on.

This development was marked by the emergence of The Halal Boom. The increasing development of halal products is due to the increasing consumption patterns of Muslims who are increasingly concerned about the halalness of a product. Not only the form of the product, from the value to the halal content, but it is also an ingredient that is taken into account by consumers. For example, the rise of halal cosmetic products in recent years (Al-Ansi, 2019; Aziz, 2013; Ela Safira, 2019).

Technological developments that affect the world in every activity help and facilitate economic activities, especially the digital economy through e-commerce. E-commerce provides access opportunities by anyone and anywhere so that it leads to convenience in the buying and selling transaction process and can reach a wider market share as a result of the form of internet users. Statista 2019 data shows internet users in Indonesia in 2018 as many as 95.2 million, growing 13.3% from 2017 which was 84 million users. In the following year, internet users in Indonesia will increase with an average growth of 10.2% in the 2018-2023 period. In 2019 the number of internet users in Indonesia is projected to grow by 12.6% compared to 2018, which is 107.2 million users. By 2023, the number of internet users in Indonesia is projected to reach 150 million users. Statista also mentions that the most popular online activities in Indonesia are social media and mobile messaging. The most widely used social network is Facebook, with users reaching 48% of the population. Furthermore, Indonesia is the Third Largest Internet User in Asia. The projection data for internet users in 2017-2023 is shown in Figure 1 below. Therefore, the present study aims to conceptualize halal products in the culinary context based on e-commerce.

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Figure. 1. Internet Users in Indonesia

2. Literature Review

The growing halal industry is not only in Islamic countries. Indonesia is a country that is in the 4th position in halal products. Currently, the government has also been trying to enter the domestic market.

2.1 The term Halal Product

Before exploring further, we must know clearly what the definition of halal is. Halal is a Quranic term that signifies what is allowed, permissible, permitted, or lawful (Ali, 2020). Moreover, a halal product is defined as a product where the material procurement, processing, storage, packaging, distribution, sales, and presentation processes are carried out with a halal process. A product is said to be halal if it has passed the testing of a certified body. In Indonesia itself, the Indonesian Ulema Council is the body that conducts inspections and publications of halal certificates for food, medicine, and cosmetic products circulating under the auspices of the ministry of religion. However, effective as of March 1, 2022, the regulation of Law Number 33 of 2014 concerning Halal Product Assurance and Government Regulation Number 39 of 2021 concerning the Implementation of the Halal Product Assurance Sector has decided that there are three parties involved in the halal certification process, namely MUI, BPJPH, and the Indonesian Legal Aid Institute. Halal Examiner (LPH) (voaindonesia, 2022). BPJH functions as a representative of the government that has administrative authority to issue halal certification, after a halal decree has been issued by the Indonesian Ulema Council. Meanwhile, LPH has the task of scientifically checking the halalness of a product by checking the content of the substances in it. Furthermore, The authority of the Indonesian Ulema Council is in the area of religion, namely determining the halalness of a product according to Islamic law. Later it will be decided through the MUI Fatwa Commission so that a halal decision is produced.

2.2 Development Of Halal Product Opportunities in The World

The results of the study (Ab Talib et al., 2017) concluded that there is a relationship between halal food certification and business performance. This means that halal product certification also affects the business

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2.3 The Emerging Issue of Halal Products in E-Commerce

Indonesia is first ranked in e-commerce development (kemkominfo.go.id; 2019), and the Culinary Subsector is the largest contributor to the GDP of the Creative Economy in Indonesia (Kompas.com; 2021). E-commerce is the latest trend after the COVID-19 Pandemic. The COVID-19 pandemic has provided a new lifestyle alteration for the people of the world, especially in Indonesia. E-Commerce is an alternative solution to meeting daily needs which are part of the routine of life. E-Commerce must be used optimally to support the development of halal products. The optimization of e-commerce halal products includes the fulfillment of halal-guaranteed product quality, management of Islamic business, the implications of resource empowerment, Islamic business ethics, Muslim consumer behavior, and business capital (Utami, P., & A., 2019).

3. Method

This research is a type of qualitative research. The method used in this research is a literature review study from various sources. The data used is secondary data from various sources such as journals, websites, and reports from various parties such as the Central Statistics Agency (BPS) and MUI. Furthermore, this study uses descriptive analysis. The data obtained were analyzed descriptively. Thus, the data obtained were then analyzed and interpreted in order to answer the research questions.

4. Result and Discussion

The results and discussion of the research are divided into two categories, namely a). potential demand for halal culinary products in the city of Medan; and b) conceptualization of the factors that influence the acceleration of the development of halal culinary products in e-commerce.

4.1 Potential Demand for Halal Culinary Products in Medan City

Based on the descriptive analysis conducted in this study, it is known that there is still a great opportunity for Indonesia to become a producing country for halal products such as culinary/food and beverage, fashion, and tourism. In particular, as a country with the largest Muslim majority population in the world, Indonesia has a large potential market share for halal products.The preference of Muslims who are aware of halal products will feel the need for these products to be consumed in meeting their daily needs, causing a strong dependence on halal products so that people will look for the product in question anywhere as well as contributions from Islamic organizations that hold activities / events using halal products so as to increase the amount of market demand so that producers will compete to fulfill them. The potential demand for the global halal product market is divided into several types of sectors as follows.

Table 1. Potential Global Halal Product Market Demand

Sector Type Predicted Value 2024 (USD, billion)

Indonesia Position

Fashion Sector 402 3

Halal Food and Beverages Sector 1,97 1

Halal Pharmaceutical Sector 134 4

Halal Cosmetics Sector 95 2

Source ; Dinar Standard (2020)

Based on Table 1 presented, it can be seen that there is a potential market demand for halal products. This certainly shows that the potential for the development of the halal industry will be even greater. Not only in the country but also in countries where the Muslim population is a minority, not only the Muslim community but also non-Muslims. Furthermore, in the city of Medan, public consumption expenditure has continued to increase in the last three years. The average monthly per capita expenditure of the people of Medan City is shown in Table 2 below.

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Table 2. Average Monthly Expenditure per Capita by Commodity Group and Residential Area

Item Group

Average Monthly Expenditure per Capita by Commodity Group and Residential Area (IDR)

2019 2020 2021

Food 576322.00 598246.00 607812.00

Rice 77945.00 78432.00 79496.00

Tubers 5423.00 5854.00 6354.00

Fish/Shrimp/Squid/Scallop 67859.00 68302.00 72939.00

Meat 21743.00 21914.00 23425.00

Eggs and Milk 32924.00 36143.00 35621.00

Vegetables 41229.00 50502.00 54526.00

Nuts 7606.00 7914.00 8637.00

Fruits 25889.00 27877.00 25453.00

Oil and Coconut 16985.00 18239.00 19572.00

Drink Ingredients 15171.00 16818.00 16554.00

Spices 9174.00 9899.00 10437.00

Other Consumption 6196.00 5962.00 7011.00

Prepared Food and Beverages 170625.00 171262.00 166496.00

Cigarette 77553.00 79128.00 81289.00

Not Food 487641.00 526008.00 534905.00

Housing and Household Facilities 237309.00 248333.00 266349.00

Various Commodities and Services 129397.00 143394.00 142308.00

Clothing, Footwear and Headgear 38020.00 38825.00 33606.00

Durable Commodity 36550.00 38350.00 39623.00

Taxes, Charges and Insurance 34446.00 42606.00 43715.00

Party and Ceremony/ Feast

Supplies 11919.00 14500.00 9304.00

Amount 1063963.00 1124254.00 1142717.00

Source ; BPS, National Socio-Economic Survey (Susenas) (2022)

Based on Table 2 above, it can be seen that the average consumption expenditure of the people of Medan City from 2019 to 2021 has increased. In line with the increase in consumption, the demand for halal food also increases. Based on data State of the Global Islamic Economy Report2020-2021, it is known that market size Sharia economy in the halal industry reached USD 2.2 trillion in 2019 for food, pharmaceutical, cosmetic, fashion, tourism, and others. This number increased by 3.2% compared to 2018 (https://kemenperin.go.id/artikel/22883/Kemenperin-Kukuhkan-Eksistensi-Industri-Halal-Indonesia-di-Expo- 2020-Dubai).

4.2 Conceptualization of the Factors Affecting the Acceleration of the Development of Halal Culinary Products in E-Commerce

Based on the research, the author classifies two factors areas influencing the acceleration process of halal product development in e-commerce, namely internal factors and external factors. The conceptualization that was

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4.2.1 Internal Factor 4.2.1.1 Information system

An information system is a system that provides various information technologies (IT) such as computers, software, communication systems, databases, the Internet, mobile devices so forth, to perform specific tasks, and interact with and inform various actors in different organizations or social contexts (Boell & Cecez-Kecmanovic, 2015). The author divides information systems into two categories of factors, namely information systems as internal factors and information systems as internal factors. In this case, the internal factor information system is the provision of websites, e-commerce, and various websites provided by the company. Meanwhile, the external factor information system consists of various information systems about a company through ranking websites such as tripadvisor.com, halaltrip.com, and so on. In line with the advancement of internet technology, e-Tourism has become an important platform for promotional, marketing, and product development of tourism products and services. It provides traveling information, halal food, prayer time, religious places, etc. (Samsi et al., 2016).

4.2.1.2 Information quality of the company

Information quality is an important factor in e-commerce which is part of the dimensions of the Information System (IS). (DeLone & McLean, 2003; Zakiah et al., 2016). Companies that will sell their products or services on the internet must ensure that the information provided on the website is of quality and in accordance with the information needed by consumers. For example, selling halal food products in e-commerce must include the composite embodied in the food ingredients needed, the location where the food is produced, and the halal label on the product.

4.2.1.3 Halal logo

The halal logo is a certification issued by MUI, BPJPH, and the Halal Inspection Agency (LPH). The halal logo is an important indicator in reaching consumer trust. Based on research results, 80% of Muslim consumers will check the halal logo before purchasing a product (Hamel et al., 2007). Furthermore, Hamel (2007) explains that the most important halal logo is first seen from the text/ typography, colors, Islamic elements, and circle patterns.

4.2.1.4 Trust

Consumer confidence in a product will cause the consumer to have an interest in buying back the product.

Even repeated buying behavior is a form of consumer loyalty to a product. Based on research results (Cahyati, 2015), consumer trust has a positive and significant effect on consumer loyalty in buying a product.

4.2.2 External Factors 4.2.2.1 Marketing Strategy

a. Relationship Marketing aims to create good relationships between companies and consumers so that companies can survive in the long term of intense competition (Andreas. Hatane. Ritzky & Brahmana, 2013, p. 2). The community creates a good relationship between the company and consumers through marketing management, thus helping to strengthen the company's relationship with consumers and maintain the company's sustainability in the future.

b. Community Marketing is a marketing strategy to jointly develop existing businesses in the community. Where everyone who is incorporated in it has a goal to market not only their products but also the products of other community members. For example, the community in question is IHC (International Halal Community).

c. Marketing communication which is a process involving the public so that it will convince and change a person's behavior or attitude towards something by using the AIDA model (attention, interest, desire, action).

Table 4 AIDA Model

Stage Target

Attention Demonstrate tangible benefits or value in order to get the attention of the target communication Interest Build target attention through

Further explanation of the benefits logically and emotionally

Desire Build desire with give additional supporting details and answer potential questions Action Motivating to take steps

Next through closing with interesting activities to take action

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4.2.2.2 Government

Supporting factors from external sources in an effort to accelerate the development of halal products are government assistance in providing literacy on the benefits of consuming halal products and through the Trade and Tourism Offices which also encourage the promotion and development of halal products as a whole in an effort to attract consumers of halal products in e-commerce.

5. Conclusion

This study concludes that halal food and beverage products still require more in-depth research. This is due to the fact that halal food and drink are very important because it directly enters our bodies as humans, and are related to our adherence to religion. God said in 168th verse of the Surah Bakara as following: “O ye people! Eat of what is on earth, lawful and good; and do not follow the footsteps of the Satan, for he is to you an avowed enemy”

(Boğan & Sarıışık, 2019).

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