Fatwa: Is Dropshipping/Drop Servicing Halal?

Islamic Finance Fatwa
#12

Wasalam

May Allah bless you.

This method you have described is not shariah compliant. This sort of arrangement falls under the concept of bai’ al dayn bil dayn i.e. deferment of two countervalues.
One method that would work is, if the customer makes an enquiry about the product. You then ask her to wait for a period of time to confirm if you can make the product available. During that waiting period, you acquire the product, contact the customer, and then you make an agreement to sell it to her for an instant payment. However. you must bare the risk she might not want to buy the product anymore by that time.

Otherwise, please refer to the fatwas above for the Salam method of transaction.

And Allah knows best!

#13

In regard to your question, when you say you take the order, are you considering this as a sale to the customer from yourself or simply as an order to source the item?

And when you purchase it from the supplier, who is considered the owner during that purchase and delivery?

#14

alright i can see now the meaning . yes there is sometimes when the buyer cancel the ordre after that i purchased the product. thank you @Mufti_Billal

for the first question , i mean just as an order to source the iteam, the sale is done when the buyer get his product physically

the second one , when i do the purchase , i am the owner during the purchase and delivery .

thank you again

#15

Mufti am really confused with the different conclusion could you please enlighten me on how could I do dropshiping in a halal way without contradicting the shariah .Thank you for all the content you spent on doing and may Allah reward you all.

#16

@Mufti_Billal @Mufti_Faraz_Adam As-Salaam Alaikum wa rahmatullahi wa barakatuhu to all. I am a little late to this forum, have been seeing many fatwa and opinions on drop-shipping and if it is shariah compliant. After understanding the various positions, I have concluded with the following opinion. It is a little lengthy sorry about that, Would really appreciate your comment on it.

Please note that my recent eagerness to start a drop-shipping business might influence this opinion, so please correct me if I missed out something or added something unnecessary or misinterpreted something or made a wrong opinion. Nevertheless, I tried to keep my view Islamic and not influenced by my interests. May Allah guide us.

I have put the opinion with regards to salam transaction as it is the closest concept to the drop-shipping done today. There might be other ways like broker, or partnership but I did not study about them.

OPINION:
Requirements for understanding this opinion:
-To know what dropshipping is exactly, especially the way it is widely done today.
-To know the 2 hadiths that seem to cause contradictions- Jami’ At-Tirmidhi 1232 (1st Hadith) and Sahih Al-Bukhari 2239 (2nd Hadith)
-And most importantly, a god-fearing heart with clean niyyah.

The main concept causing contradiction in drop-shipping is ‘selling something you don’t own’. This concept is seen in the 2 hadiths mentioned above.
In complete watered-down form- 1st hadith doesn’t allow selling in advance what you don’t possess and 2nd Hadith does allow selling in advance even if you don’t possess it at the moment(with conditions). Since they seem to contradict, therefore, the context and reasoning of the hadiths should be understood to come to a conclusion.

For dropshipping to be halal, it should not come under the 1st hadith that says ‘don’t sell what you don’t possess’ and should come under the 2nd hadith of ‘salam transaction of the dates’. Both the conditions should be met.

The 1st hadith was given to not cause any ambiguity in the transaction which can put both the parties in unfavourable situations and can lead to a major dispute between them. And the 2nd hadith is because people are not allowed to take a loan, so this hadith stimulates business for the seller and also brings the product to the buyer, given that both agree to the strict conditions. Dropshipping should satisfy both the concept to be considered acceptable.

For the 1st hadith, the hadith is for when a seller first makes the sale of a product and after making the sale he goes to look how to get that product( in this case, a source to provide that product). This causes great ambiguity on whether he will even get it, will the price be as expected included shipping etc, will the quality be as expected, what is the description?, and most importantly when will he get the product(i.e. delivery date) because the seller might keep delaying the delivery until he gets a source who can give the product of good quality, good price etc.
But as for dropshipping, the seller 1st gets the source to provide the product with its description, price, quality and also when will it deliver. So this causes no ambiguity and it is like a normal sale, except that the product doesn’t belong to the seller. So will the seller be able to show someone else’s product for sale without knowing if the other person(Manufacturer) will even sell him or not? No, he cannot unless he is in agreement with the other person (Manufacturer) to show their products and sell, then he becomes like an authorised agent who is authorised by the manufacturer to sell their products (Basically, the seller needs to be certain that the product will be sold to him and cannot leave any space for doubt that whether he can buy it after selling it to the buyer). The fact that the manufacturer agrees to handle and deliver is part of the contract which doesn’t affect the hadith.

For the 2nd hadith, the dropshipping method should meet all the conditions of a ‘salam’ transaction, including adequate description(there should be no ambiguity or doubt), price and delivery date etc. The buyer should be told that they are entering a salam transaction wherein, in this case, the product is purchased after the buyer pays in full. The seller can then do a transaction with the manufacturer for that product.
The adequate description of the product to be shown on the seller’s website is his responsibility and he should confirm its accuracy.
The liability of the product is also going to be as per the transaction. Between the buyer and seller, the seller has full responsibility to bring the product to the buyer with agreed factors(like description, delivery date and measure/quantity etc). Between the seller and the manufacturer, the manufacturer has full responsibility to bring the product to wherever and whenever, as agreed by the parties(in this case it is the address of the buyer). If the product doesn’t reach the buyer or is not as its description, the seller is responsible to the buyer and should either arrange to send another product or refund the full price(whatever the buyer wishes). This responsibility should not be altered even if it is the manufacturer’s fault and whether or not the manufacturer refunds the seller. Similarly, b/w the manufacturer and the seller, the manufacturer is responsible to the seller and should replace or refund the product if such an issue happens (seller can decide which one he wants). The validity of liability on the 2 transactions is independent of each other.

Dropshipping agrees with both hadiths and satisfies its reasoning and requirements. With this, the niyyah of the seller should be clean as well and strictly follow the requirements and not look to deceit the buyer or find loopholes in the transaction to make extra money.
And Allah knows the best.

As much as I have seen, according to me, the opinions that are against drop-shipping, like that of Sh. Assim Al-Hakeem, seem to be concluded without completely looking at all different aspects and focusing strictly only on the 1st hadith. This could be because sheikh answered it live and sheikh was continuously answering questions on other topics which gave less time for this, particularly new topic.
Allah knows the best, may he guide us all. JazakAllah

#17

Assalaamu alaykum, the following is the simple solution for dropshipping which can work:

1.Sell as Salam agreement with customer. This means you take payment in full from customer to supply an item you currently don’t own.

2.Thereafter, you go and purchase item from supplier in a normal transaction by paying.

3.You take responsibility for shipping so the Shariah requirement for possession is fulfilled.

  1. You take responsibility for Item to be sent directly to customer.
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Halal alternative to dropshipping
Model for Dropshipping
#18

Sh. Joe Bradford’s view on dropshipping: https://www.joebradford.net/isnt-drop-shipping-haram-no-and-heres-why/

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When discussing any business model, it’s important to drill down on the mechanics of each deal and understand how it differs compared to similar businesses and methods of selling.

So what is drop shipping?

Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

To understand drop shipping, we have to understand how the products we are selling are being sold and what form of protections are built into the sale for the consumer. When we sell an item we can either sell a fungible, unspecified item or a specified, unique item. Details below.

1- Selling an item by description:

This is an item which I have access to and the ability to buy one of its type to then sell. Example: I am selling unlocked samsung S4 phones. You will be provided with an unlocked samsung S4 phone with the color you choose. The serial number will not be the same as the one displayed, but the description will be the same or you will be refunded. Ruling: This is permitted, and is similar to Salam. There are conditions for this to be valid and drop shipping fulfills this for the most part (there may be specifics mentioned elsewhere that are different and change the ruling.) The item is sold before it even exists, but it is sold with a specific description (an unlocked S4 on any color) along with an explicit refund guarantee if the description is different or the item is not deliverable. The size, weight, color, quality, and any other distinguishing characteristic that will affect price must be stated at contract for this to be valid.

2- Selling an specific particular item, with particular characteristics:

This is what the questioner mentioned in the link you provided. For example, I go to Ebay, see a specific s4 phone for sale. I then go to Amazon and list that s4 as my own and that it is for sale. When my customer purchases it, I go back to Ebay and purchase the phone. What happens if it is sold before I get back? or the auction price is higher than my margin? or it is removed from the site? What about if the phone is locked instead of unlocked? or it is blue when I sold it as red? Or it is refurbished when I sold it as new? I’ve sold a specific thing that I did not own, nor was I able to reasonably obtain due to its description.

It is the exact same thing that Hakim ibn Hizam said to the Prophet. He would go to the market, scout a specific product, then sell it. He would then go and buy it, but if it had already sold then he would have disputes with his customer. the Prophet told him “Do not sell what you do not own” in another narration “Do not sell what is not with you.” To reconcile this hadith to the permissibility of Salam, we have to look at the differences between the two. In #1 above, the item is being sold according to its description along with a explicit refund guarantee if unavailable. In #2, a specific item is being sold as final. If that item is unattainable, then this will cause dispute, which is why this sale is impermissible.

To sum up, #1 above is permitted. You can sell items before you own them as long as you are not selling a unique, specific item and as long as you have the ability to access and deliver that unspecified item you are selling by description in a timely fashion and will refund the sales price if you aren’t able to.

#19

Assalamu Alaikum brother,

In reference to point 3, will this be still valid if “I” the dropshipper take responsibility for shipping the item to the buyer even if the manufacturer in China ships it on my behalf ?

jazakallahu khair in advance and may Almighty Allah bless you for your efforts

#20

Wa alaykum salaam brother, when you say take responsibility, what do you mean by that precisely?

#21

Assalamu alaikum brother,

What I mean is that I’ll take over the responsibility that the buyer will receive the exact product as described in the website and that if there is any issue I’ll fully refund the money paid by the buyer. Further more I will also try to offer tracking service of the parcel so that the customer will know where exactly their product is at any point once it leaves the factory

1 Like
#22

@Mufti_Billal @Mufti_Faraz_Adam
Asalamu ailakum

When you say take responsibility of the shipping does this mean i have to set up the shipping or the supplier ships it on for me.

#23

You should bear the costs and arrange it.

#24

@Mufti_Faraz_Adam
So I just go on aliexpress where the supplier sells from and i order the item and I pay for it and i put the customers address in that counts as arranging it.

#25

Does that process mean you bear the liability if something happens?

#26

Assalamualaikum,

For what I understood from this article and Ulema’s view point, is that you either need to inform your customers that you are dropshipping or you take possession of the items before reselling it.

As a new to be dropshipper, I am glad that I have stumbled upon this article and have clarified my views, Alhumdulillah. However, I have come across few links and have few proposals to consider before I start this journey and would like your opinion on this matter.

A). Following to Ulema’s view and make terms and conditions page in the website as below,

This terms and conditions page is to provide buyer details on the services offered by Seller (us in this case, name of the website) and is only a draft.

1). Seller does not posses any item listed but has the software in sync with the supplier’s inventory to keep the buyer up to date.

2). Seller agrees to have an indefinite contract with the buyer and without the option to rescind in order to provide the items listed in the website as long as they were advertised and in stock.

3). Seller is liable for the delivery of items and the delivery times (link to the Shipping and Delivery page).

4). The buyer is responsible to provide correct address place for delivery.

5). Seller is responsible to provide full descriptions and pricing of the items and is liable to provide the exact item that was purchased.

6). Seller will replace or provide another item during the dispute only after the consent of the buyer.

7). Buyer has to pay in full during the visit of the Seller and Seller is responsible to inform the buyers regarding the Shipping costs which needs to be paid by the buyer.

8). Buyer has the right to return or ask for refund of the item as per the Return and Refund policy (link to the Return and Refund page).

9). Seller is liable to provide correct and truthful information to the buyer.

10). Seller is responsible to make sure that the products are fungible and are replaceable by another identical item, mutually interchangeable.

Before I summarize below, I would like to highlight this, that the above terms and conditions (T&C) will be made mandatory and available during the registration process where the user has to check ‘I have read Terms and Conditions’ and then can register. For non registered users who are going to pay without registering, this will be made mandatory option (T&C) to check during the check out process. The link will be displayed on all pages in the footer so the buyer is aware of this.

Summary: The above option states we are not in posession, we dont charge them shipping and we mentioned through our software regarding the delivery days. From the customer viewpoint, we are liable for the product and Shipping. From our viewpoint the supplier is liable for the product and shipping. Refunds and returns (disputes) are manageable and depends on the supplier. From our side we need to choose the supplier that has such policy.

B). Another view point that was mentioned was to actually own the item before resell and below is my opinion,

1). There are some professionals who are known as dropshipping agents. You hire them and they are responsible for bulk purchase, keeping the inventory, testing and shipping of the items. Once the order has been received from the buyer, we send the details to the agent and they ship it to the customers. Since we hire them and they make bulk purchase of the product before reselling, this seems to be permissible as we become owners first. However, this could also be a little expensive as you might need to give them credit before hand to buy the items.

Summary: The above option is where we are in posession of items via an agent, we charge them shipping and we mentioned through our software regarding the delivery days. From the customer viewpoint, we are liable for the product and shipping. From our viewpoint, agent is liable for the product inventory and shipping. Refunds and returns (disputes) are managed via hired agent who then deal with the supplier for you.

C). Another view point is to have a contract with the Shipping company.

1). There are some companies who provide Shipping only. The process is like this, our software is in sync with the supplier (for the inventory) and the shipping company (for the shipping). The buyer buys the items from us, our software automatically sends the order to the shipping company, they source and ship it to the buyer. We pay the shipping company monthly subscription fee or pay as you go fee.

Summary: The above option is where we are not in possession of items but we are in charge of shipping. We charge them shipping and we mentioned through our software regarding the delivery days. From the customer viewpoint, We are liable for the product and shipping. From our viewpoint, Supplier is liable for the product and Shipping companies are liable for the Shipping. Refunds and returns (disputes) are manageable as they usually provide such policy.

D). One last view point is when we source and ship through the 3rd party rather than the supplier.

1). There are 3rd party companies that source the product direct from the supplier into their warehouses and takes care of the shipping and are dropshipping friendly. When the user buys from you, the order goes to the 3rd party, they ship and also have shipping cost that can either be paid by the buyer or is included in the item. We come in service agreement with the 3rd party by paying them monthly subscription charges.

Summary: The above option is where we are not in posession of the items and the shipping. We pay 3rd parties monthly fees and they do the rest. From the customer viewpoint, we are liable for the products and shipping and from our viewpoint the 3rd party companies are also liable for the products and shipping. Refunds and returns (disputes) are easily manageable as they do have such policy in place.

Please review and let me know if I have missed any option(s) for them to be sharia compliant. Also please let me know if my approach towards it is correct.

CC: @Mufti_Faraz_Adam @Mufti_Billal

Regards,
AB.

#27

@Mufti_Faraz_Adam if somthing happens to the order i refund the customer

#28

@Mufti_Billal @Mufti_Faraz_Adam
Assalamualaikum,
I know my post is lengthy but please bare with me and I would really appreciate it if you can just spare few minutes to read and provide me with your valuable comments.
Jazak Allah.
Regards,
AB.

#29

السلام عليكم طبقا لهذا الفيديو هل يعتبر الدروب شيبنج حلال اذا تم الالتزام بما قاله مقدم المقطع المرئي واذا كان هناك أي خطأ في كلامه؟

هل اذا وضحت في الجزء الخاص بسياسات البيع أنني لا أملك المنتجات التي أعرضها هل هكذا أكون دخلت في باب السمسره
الجائز واذا كان ذلك صحيحا هل يجب أن أوضح للمشتري وللمورد هامش ربحي
وأعتذر علي الاطاله

#30

السلام عليكم أخي الكريم

لدينا مناقشة طويلة حول هذا الموضوع. يمكنك مشاهدة الرابط التالي

#31

معذرة ولكن لغتي الانجليزيه ضعيفه و لقد حاولت أن أقرأ هذا النقاش ولكن لم أفهم شئ فهل تتفضلوا علي بالأجابه وجزاكم الله خيرا