Introduction

The growth of Indonesia's economy is significantly influenced by Micro, Small, and Medium Enterprises (MSMEs), which serve as the backbone of the nation's economy and can stabilize the country during critical times. MSMEs are independent productive business units operated by individuals or business entities across various economic sectors. The distinction between micro, small, medium, and large businesses is generally based on initial asset values, excluding land and buildings. According to Rias Tuti [1], MSMEs have a substantial impact on the national economy by absorbing a large number of unemployed individuals and contributing significantly to the Gross Domestic Product (GDP). MSMEs contributed 61.41% to Indonesia's GDP and accounted for 96.71% of employment (Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia, 2019). MSMEs are considered flexible economic actors capable of adapting to various changes in the business climate, thereby increasing their contribution to the Indonesian economy. According to Law No. 20 of 2008, MSMEs are trade businesses managed by individuals, referring to productive economic activities that meet specific criteria outlined in the law. MSMEs play a crucial role in Indonesia's economy by creating new jobs and increasing the country's foreign exchange through business taxes [2], [3].

Sidoarjo Regency is a district in East Java Province, Indonesia, with its capital in Sidoarjo District. Alongside Gresik, Sidoarjo serves as a key support for Surabaya and is part of the Gerbangkertosusila area. Established after independence based on Law 12/1950 concerning the Regional Government of East Java Regency, Sidoarjo's roots can be traced back to the Jenggala Kingdom. Known as an industrial hub in East Java, Sidoarjo's economy is driven by the processing and trade industries, the largest economic sectors. In 2020, the gross regional domestic product (GDP) reached Rp 197.24 trillion, with the processing industry contributing 51.17% and the trade sector 16.02%. Other significant sectors include construction (8.68%), transportation and warehousing (7.40%), information and communication (3.86%), accommodation and food and beverage services (3.41%), and agriculture, forestry, and fisheries (2.25%).

Sidoarjo hosts one of the largest numbers of MSMEs/SMEs in the region, with over 206,000 small and medium enterprises (SMEs) and 6,000 micro, small, and medium enterprises (MSMEs). Key small industrial sectors include the bag and luggage industry in Tanggulangin, the sandals and shoes industry in Wedoro - Waru and Tebel - Gedangan, and the cracker industry in Telasih - Tulangan. The area also boasts over 664 large industries and 297 medium industries, primarily concentrated in the districts of Taman, Waru, Gedangan, and Sedati, with more than 400 companies producing industrial goods.

Sidoarjo's economy is supported by 219,200 micro and small enterprises, 2,202 medium, and 368 large enterprises, focusing on labor-intensive sectors. As the number of enterprises increases, competition intensifies, leading consumers to switch between MSMEs, affecting the sales volume of MSME products in Sedati District. The similar nature of products and competition leads to less loyal customers, impacting sales volume and potentially causing MSME bankruptcies.

Business legality and halal labeling play crucial roles in preventing undesirable outcomes. For Muslims, choosing halal products and services is a form of compliance with Islamic Sharia law. As mentioned in QS al-Baqarah: 168, it is essential to consume halal and good food while avoiding the steps of Satan. Halal consumption means the product is not haram in substance or procurement and must be healthy, clean, safe, and not excessive. The halal value emphasizes both upstream and downstream products, starting from the raw materials used. Halal products are also regulated by Law No. 33 of 2014 concerning halal product guarantees (JPH), requiring halal certification for five years.

The importance of business legality for MSME actors lies in proving legitimate business activities accountable under the law. Business licensing protects MSME actors and ensures the business operates without interference. MSMEs are a foundational aspect of Indonesia's economy, providing flexibility and resilience without relying on a large financial system. They play a vital role in strengthening the lower society's economic system. Regional Government efforts to support business legality include simplifying permit processes, such as obtaining a Business Identification Number (NIB), which serves as the identity of business actors and remains valid as long as they comply with the law [4], [5].

Business legality and halal certification are mandatory for business actors in Indonesia, including culinary MSMEs. By obtaining a halal certificate, culinary MSMEs can enhance customer trust and boost sales. According to Law No. 33 of 2014 concerning Halal Product Assurance, MSME actors must have a halal certificate for their processed products. During halal product processing, MSME actors must use halal ingredients and ensure production facilities are free from impurities or contamination.

Halal labeling is crucial for business actors and Muslim consumers. Many people in Sedati sub-district, Sidoarjo Regency, purchase products without considering their halal status. Therefore, business legality and halal labeling significantly influence sales volume. The author aims to research Micro, Small, and Medium Enterprises (MSMEs) products in Sedati District, Sidoarjo Regency, focusing on the impact of business legality and halal labeling on sales volume. Consequently, the researcher is interested in conducting a study titled "The Effect of Business Legality and Halal Labeling on Sales Volume in Micro, Small, and Medium Enterprises (MSMEs) Products in Sedati District, Sidoarjo Regency."

Literatur Review

1. Business Legality

Business legality serves as an official source of information, providing details about a business such as its identity, establishment, and position, making it easier for anyone to access relevant data. It ensures consumer security by guaranteeing safe and quality products and services. Business legality confirms that a business has met safety standards and adds value by enhancing consumer confidence in the products they purchase.

There are various forms of business legality, each impacting the business differently. Properly selecting the right form of business legality can add value to the business, while incorrect selection may hinder its progress. Business legality provides peace of mind for business operators, fostering an environment that supports business development. This supportive environment encourages innovation and smooth business operations.

2. Halal Labeling

According to Zulham [6], halal labeling is a permit granted by the POM Agency to display the word "HALAL" on product packaging, based on recommendations from MUI in the form of MUI halal certificates. The MUI issues these certificates following detailed inspections by LPPOM-MUI. In Indonesia, halal product regulation involves two interrelated activities: halal certification and halal labeling. While different, they are connected. Halal certification, a written MUI fatwa, confirms a product's halal status per Islamic law, allowing the product to display a halal label on packaging authorized by Badan POM.

Labeling aims to protect consumers by providing accurate information about the quantity, quality, and content of products. It enables consumers to compare similar products and must transparently list all ingredients, including hidden ones, processing methods, and aids. O'Rourke emphasizes that food laws and labels are crucial for conveying product information to consumers. Labels on packaging help consumers identify and verify product information before making purchases, ensuring product quality.

The purpose of labeling is to prevent fraud and help consumers make informed product choices, achieving benefits and welfare. Informative labels help consumers identify the best-suited food products, allowing them to choose their preferred items. Providing this information improves consumer welfare and freedom in decision-making. Therefore, labels play a vital role in helping consumers select desired products.

Labels as product information serve the following functions:

a. Changing consumer behavior towards products

b. Accommodating consumer preferences and improving food safety

c. As a guarantee that the state is considering consumer interests.

Labeling offers convenience to consumers, enabling them to maximize the benefits of a product by considering label information alongside their needs and desires. This increases effectiveness, achieving higher consumer benefits and welfare than before labeling. Halal labeling, featuring a specific design and halal image according to MUI provisions, guarantees the product's content has been researched and certified halal by an authorized institution. The MUI-issued halal logo is a valid label, indicating the halalness of a product's components. Halal labeling adds value to products, attracting the majority of Muslim consumers and enhancing the product's selling value due to the halal guarantee. Typically, halal labels appear on product displays alongside the brand and business legality information.

Certificates and labeling assist consumers by providing knowledge about product properties and materials, allowing them to compare competing products. Such information is crucial for consumers of halal food products, enabling informed choices. Valid information enhances consumer welfare and supports fair market conditions. Halal labeling offers a reliable halal guarantee, ensuring that processing and raw materials are free from haram elements. This assessment process ensures accurate labeling, providing consumers with valid information to guide their food product purchases.

3. Sales Volume

Sales volume measures the quantity of goods or services sold. The seller's condition and ability significantly influence buyers' confidence in the marketed product. The target market also affects sales levels, impacting sales volume. Market conditions to consider include the market type, buyer group or segment, purchasing power, frequency of purchases, and buyer needs and wants.

According to Zulkarnain [7], sales are the goal of marketing, with the company's marketing department and sales force striving to sell produced goods. Although increasing sales volume is an effectiveness marker in marketing activities, it does not always correlate with profit increases. To maximize sales, companies must aim to sell large quantities of products within a set timeframe. Rangkuti [8] defines sales volume as a quantitative expression of sales achievement, measured in units, kilograms, or liters.

Daryono [9] describes sales volume as an indicator showing the quantity of goods or services sold, significantly influencing company profit. A profit increase will boost sales volume, while failing to meet profit targets will reduce sales volume. Experts agree that sales volume measures the quantity of goods sold and the sales achievement target within a specific period.

Figure 1. Reseach Framework

H1: Business Legality has a direct effect on sales volume

H2: Halal labeling has a positive effect on sales volume

Methods

This study employs quantitative research using SPSS for analysis. Quantitative research is systematic scientific research that collects numerical data on various symptoms and social phenomena, examining their relationships. This study explains associative relationships between variables, determining if an independent variable causes changes in a dependent variable. The goal of quantitative research is to develop and utilize mathematical models, theories, and hypotheses related to natural phenomena. It encompasses various methods such as surveys, experiments, correlations, and regressions, and is commonly used in social sciences like economics, sociology, and education.

For this study, a quantitative method was applied, with a sample of 368 consumers of MSME products in Sedati District, Sidoarjo Regency. The sampling technique used is simple random sampling, ensuring each population member has an equal chance of selection. Given the population in this study is less than 10,000, Slovin's formula, a simpler approach, can be applied as follows:

(1)

Where:

n= approximate sample size N

N= large estimate of population

d= selected error rate (10%)

So, based on the Solvin formula

= 78,63

So, the sample in this study is 79 people.

The data used is primary data. The data analysis technique uses an instrument test consisting of a validity test and a reliability test, for which variables are tested by multiple linear regression tests. The last step is to test the research hypothesis including partial test (t test), simultaneous test (f test), and determination coefficient test (R 2).

Results and Discussion

A. Results

1. Validity Test

Validity tests are used to measure the validity of a questionnaire. A questionnaire can be said to be valid or valid if the questions in the questionnaire answer something that is measured in predetermined variables. The instrument can be used in research if the instrument tested is declared valid. The following are the results of the validity test:

Table 1. Table of Validity Test Results of Research Instruments.

The instrument is said to be valid if the Corrected item Total Correlations (r calculation) shows a significant correlation between the item score and the total score or by comparing the correlation value of each item with the correlation value of the table (r table), if r calculates > r table then the instrument is said to be valid. The table shows that the items of the statement submitted are declared valid and worthy of analysis.

2. Reliability Test

Reliability is the value of accuracy or likened to the percentage of measurements made. A high-value reliability coefficient will produce more maximum research with high accuracy of results. The variable can be called reliable when the value of Cronbach Alpha > 0.60.

Table 2. Table of Reliability Test Results of Research Instruments

Instrument reliability testing is carried out on statement items that have validity. The instrument is declared reliable if the value of the reliability coefficient is above the value of 0.6. The results of the reliability test presented in the table show that each value of the alpha coefficient is greater than 0.6 so that the instrument used is declared reliable.

3. Classical Assumption Test

a. Normality Test

The purpose of the normality test is to prove that the levy of the free variable and the bound variable is normally distributed or not. Regression that has a good model is to distribute data normally.

Normal Q-Q Plot of Sales Volume

Figure 2. Test for Normality with P-P Plot

The P-P Plot graph can be interpreted by examining how data points spread along the diagonal line in the graph. According to Ghozali [10], a P-P Plot graph does not meet the normality assumption if the data points are scattered far from and do not follow the diagonal line. The graph above shows the P-P Plot's distribution around the regression line. The data points in the P-P Plot graph above are distributed along and follow the direction of the diagonal line. Therefore, the regression model is normally distributed and meets the normality assumption requirements.

b. Multicollinearity Test

A sign of a good regression model is shown by the absence of correlation between independent variables. Multicollinearity can be seen through the Tolerance and Variance Inflation Factor (VIF) values. If the tolerance value > 0.10 and VIF < 10, then the regression model is free from multicollinearity so that there is no correlation between the independent variables and the other.

Table 3. Coefficients^a

Based on the tolerance value and VIF of each independent variable, it can be seen that the tolerance value of each variable is above 0.1 and the VIF value is below 10, thus between the variables of Business Legality, Halal Labeling, and Sales Volume there is no multicoloniality.

c. Heteroscedasticity Test

The purpose of the heteroscedasticity test is as a tool that aims to test and find out about the existence of variance differences from the residuals of one residue to another or to find out the distribution of data in a regression model.

Scatterplot

Dependent Variable: Sales Volume

Figure 3. scanttrplots Data

From the scanttrplots image of the data processed using SPSS Version 25 above, we can conclude that the dots in the image above are random or random, not wavy or narrowing and the dots are above and below zero. Thus, there are no symptoms of heterokedasticity.

d. Linear Regression Test

Regression analysis aims to determine whether Independent Variables influence Dependent Variables. One type of regression analysis is Multiple Linear Regression Analysis, which is used when there are at least two Independent Variables. Before conducting Multiple Regression Analysis, several prerequisite tests must be passed, including the normality test, heteroscedasticity test, multicollinearity test, and autocorrelation test (for time series/secondary data). The scale used in Multiple Regression is Interval or Ratio (Dependent Variable). The formula used in the Multiple Regression Analysis method is:

(2)

Information:

Y= Performance

a= Constanta

X1= Business Legality

X2= Halal Labeling

Where,

Y = 87.219 + 1.001X1 + 0,750X2

From the Formula and Results Above, it can be concluded as follows,

a. The value of the Constant obtained is 87.219, then it can be interpreted that if the independent variable has a value of 0 (constant), then the dependent variable is worth 87.219

b. The value of the Regression Coefficient of Variable X1 has a Positive (+) value of 1,001, then it can be interpreted that if Variable X1 increases then the Y variable will increase, and vice versa.

c. The value of the Regression Coefficient of Variable X2 is Positive (+) of 0.750, it can be interpreted that if Variable X2 increases, the Y variable will increase, and vice versa.

4. Hipotesis Testing

a . Partial Significance (t-Test)

According to Ghozali [11], the t-test difference test is used to assess the extent to which independent variables individually explain dependent variables. The basis for decision-making in the t-test is as follows:

If the significance probability value is greater than 0.05, the hypothesis is rejected, indicating that the independent variable does not have a significant effect on the dependent variable

If the significance probability value is less than 0.05, the hypothesis is accepted, indicating that the independent variable has a significant effect on the dependent variable.

Table 4. T Test Results

If the Sig. Value < 0.05 concludes that there is a significant influence, and if the Sig. Value is exactly 0.05, then to find out whether or not there is an influence of the Independent Variable on the Dependent Variable, you can use the comparison of T Count with T Table. The analysis of the T Test (Hypothesis Test) above is as follows,

a. The value of Sig. Variable X1 is 0.031 (< 0.05), then it is concluded that Variable X1 has a significant effect on Variable Y

b. The value of Sig. Variable X2 is 0.047 (< 0.05), then it is concluded that Variable X2 has a significant effect on the variable

b . Partial Significance (t-Test), (1 & 2 Directional Significance)

If the value of sig> or t-count value < t-table, then there is no influence of Variable X on Variable Y, on the contrary, If t-count > t-table, then it can be said that there is an influence of Variable X on Variable Y. The following are the Formulas and Calculations, among others::

(3)

Keterangan:

n= Number of respondents

k= number of variables

a= level of significance

Known: n = 79, k = 3, a = 5%

Asked?

1-way significance T test

2-way significance T test

Answered:

T = (5% :(df = 79 – 3)

T = (0.05 : 76 )

T = 1.66515 (1-way)

So, the table T value at n= 79, k= 3 with a significance level of 5% is 1.66515 T

T = (5% :(df = 79 – 3)

T = (0.05 : 76 )

T = 1.99167 (2-way)

So, the table T value at n= 79, k= 3 with a significance level of 5% is 1.99167 T

Conclusion =

So the t-table value on, n = 79, k = 3, a = 5% is 1.66515

So the t-table value on, n = 79, k = 3, a = 5% is 1.99167

This means, from the calculation above, the T-count is greater than the T-table, so it can be said that there is an influence between Business Legality Variables, Halal Labeling on Sales Volume.

5 . Simultaneous Regression Test (Test F)

The F test is carried out to find out together whether all independent variables have an impact that can affect the bound variable or not. This partial test can be done by comparing F calculation with F table. If F counts > F the table can be stated that the hypothesis formulated earlier is accepted. However, if F counts < F table, it can be stated that the hypothesis formulated previously was not accepted (rejected). Or it can also be a comparison between sig. with a significance of 0.05 or 5% by looking at the results of the F test in the following table:

Table 5. Test Result F

Regression Model is declared FIT if the Sig value is (< 0.05). It is known that the value of sig. is 0.000 (< 0.05). Therefore, it is concluded that the Independent Variable has a significant effect simultaneously (together) on the Dependent Variable.

F test (significance level 1% & 5%)

Df numerator(N1) = k – 1 (4)

Df penyebut(N2) = N – k (5)

Information

N= number of respondents

K= number of variables

Known: N = 79, k = 3

Asked? significance level 0.05?

Answered:

Df numerator (N1) = k -1

= 3 – 1

= 2

Df Denominator (N2) = n – k

= 79 – 3

= 76

Conclusion =

So, the value of the Level of Significance of 5 % (0.05) = 3.12

F-Count = 1.458

F-Table = 3.12

This means, from the calculation above, the F-count is greater than the F-table, so it can be said that there is an influence between the Business Legality Variable, and Halal Labeling on Sales Volume.

6 . Determination Coefficient Test (R2)

The determination coefficient test has the purpose of determining how much overall variation over the bound variable is described in the independent variable. In the sense that this test is used to measure how close the influence between the free variable and the bound variable is. The determination coefficient has a value between 0 to 1

Table 6. Test Results F

It is known that the Adjusted R Square value is 0.012, so it is concluded that the influence of Independent Variables on Dependent Variables simultaneously (Together) is 1.2%

B. Discussion

The findings indicate that both business legality and halal labeling have a significant impact on the sales performance of Micro, Small, and Medium Enterprises (MSMEs) in Sedati District, Sidoarjo Regency. Business legality plays a vital role in providing MSMEs with a formal identity, ensuring regulatory compliance, and building consumer confidence. A business operating within legal frameworks is more likely to gain market credibility, access larger markets, and sustain long-term operations.

Meanwhile, halal labeling serves as an essential factor in addressing the religious and ethical requirements of consumers, especially in predominantly Muslim communities like Sidoarjo Regency. The presence of a halal label not only signifies adherence to Islamic guidelines but also assures consumers of the product's quality, safety, and authenticity. This assurance fosters greater trust among consumers, which is directly linked to an increase in sales volume.

The combined influence of business legality and halal labeling highlights the necessity of incorporating these elements into MSME strategies. Together, these factors create a synergistic effect, with business legality establishing trust at a foundational level and halal labeling meeting specific consumer preferences, ultimately enhancing overall sales performance.

Conclusion

This study concludes that business legality and halal labeling are crucial in boosting the sales volume of MSME products in Sedati District, Sidoarjo Regency. Legal recognition strengthens MSMEs by enabling growth and expanding market opportunities, while halal labeling meets consumer demands and preferences, particularly in regions with strong religious sensitivities.

To maximize sales, MSMEs should focus on obtaining the appropriate legal certifications and halal labeling, in addition to ensuring high-quality products and innovative marketing approaches. Further research should investigate other factors influencing consumer purchasing behavior, such as pricing, promotional activities, service quality, and product innovation, to gain a more comprehensive understanding of sales dynamics in MSMEs.