Fatwa: Is Dropshipping/Drop Servicing Halal?

Islamic Finance Fatwa
#41

Assalaamu alaykum,

The question is, do you intend to sell the goods yourself to the customer or do you intend to charge a commission?

If you want to sell with a mark-up, you have to buy the item and take possession, and thereafter.

If its a standardised item, what you can do is contract a Salam contract with the customer which is simply making him pay in full at the time of order and give a maximum time for delivery. Then, you can go and buy the item from the supplier. However, you ensure you bear the logistics risk by paying for it.

The above would then be fine.

Allah knows best

#42

Assalaamu alaykum
what do you mean by"a standardized item"?

#43

What I mean is its an item that’s available in the market and not something which requires manufacturing.

#44

I totally agree with you. It would be unrealistic to sell an item which is not yet manufactured.
so just to confirm, you are saying that basically, there are two ways to make this business permissible:
the first one is to buy bulk for the product, warehouse it at a paid warehouse who will take care of the shipment on behalf of me.
the second option is to ensure that the supplier has already manufactured a large quantity of the product I wish to sell, so that when I’ll have sells the product shall be ready to be shipped. And concerning the latter option, there is no need to buy in bulk ahead of time.
Am I right ?

#45

To make this Shariah compliant, you should do the following:

  1. Sell as a Salam agreement (where you receive payment upfront) with customer.
  2. Thereafter, you go and purchase item from supplier.
  3. You take responsibility for shipping so possession (Qabdh) is done.
  4. Item is sent directly to customer.
#46

@Mufti_Faraz_Adam @Mufti_Billal @ibrahimkhan
Asalamu alakum

Am i allowed to do dropshipping on facebook marketplace.

Ruling on a specific business resembling dropshipping
#47

Wa alaykum salaam,

It all depends on the process you use.

You would need to highlight the process and liabilities at each stage for us to comment.

#48

@Mufti_Faraz_Adam so when i go on facebook marketplace I post a listing for a product, I put the price and all the information about the different sizes. Then when sombody sees the post the message me and they say they want it. I ask them there shipping address and then they pay me on paypal or to my bank account. Then I go onto aliexpress and I order the item and I put it under there shipping address.

#49

Salam Shiek…There is a website which sells beauty and wellness products for ladies…(Oriflame)…here we create account with them and we do marketing using phone,instagram etc and if we receive order, we take money from customer for confirmation of order and den we place order in the website which direct delivers to the customer…we get 20% off on the product which is our earning through the product…we are purchasing for my customer and i use my discount offer 20% while placing order,this 20 % is my earning…is it halal or haram…what is the proper way of doing business like this…shipping is done by manufacture…

Another quetion is…i have to form a team and brief them about new products and encourage them to sell …if they sell i get commission as they are in my team…is it permissible…

#50

Dear Mufti Faraz Adam,

I have read alot on this forum and other sites about dropshipping, to find out wether it is halal or not.

I am still in confusion, because of two points.

I am referring to the usual way dropshipping is done online, not the unusual cases.

So, one sells on a marketplace (like ebay) or their own website, describing the product accurately, giving a delivery date range. After the customer purchases the product online, I then order it from the supplier, pay them and supply the details and shipping address (which is the customer’s). The supplier then ships it to the customer.

You said in a post above:
“3. You take responsibility for shipping so possession (Qabdh) is done.”

This is the point in question. What does this mean exactly? In reality, the supplier ships the product to the customer, using their shipping company. That’s practically how dropshipping works. It will not be possible to arrange shipping oneself.

If “you take responsibility for shipping” means that in the customer’s eyes I have responsibility then all is well, and should any problem occur I will be liable to the customer.

However, if you mean that I have to arrange shipping then this is not possible.

It is vital to understand this point, and this needs to be made clear to the layman, rather than him trying to understand what rulings mean in the practical world we find ourselves dealing with.

I cannot see how this shipping variation would make any difference to the business though. I hope a clear ruling can be given on this, especially as peoples livelihoods depend on it.

The other point is, do we have to state in our terms and conditions that we are dropshippers?

May Allah reward you for your efforts.

Hope to hear from you soon, as this is of huge importance.

#51

I have spoken to some dropshippers who have been able to pay for shipping costs. This is potentially one way to make the process Shariah compliant. Although, there is no consensus on this among scholars. The issues in dropshipping are twofold:

  1. The type of sale you enter into with the end customer (this can be easily resolved through Salam or Istisna).

  2. You bearing asset risk upon purchasing the sale item from the supplier before delivery to the customer. This is key.

Given the dominance of dropshipping as a business model, there are several ideas being formulated on ensuring this to be Shariah compliant. At present, I am in discussion and review with several scholars at an alternative Shariah interpretation of dropshipping. Hopefully, a different approach will be released soon.

#52

Can I Do Dropshipping It’s Halal or Haram

#54

Salam,

What about cash on delivery with and without down payment (e.g. 10% of the fixed price is paid when the order is being placed and 90% is paid on the delivery to the shipping company which sends the money to the seller)?

  1. When the seller owns the item
  2. When the seller does dropshipping
    The buyer liability is as little as the shipping cost of both directions (if he decides to return it)?
#55

Assalamuwalaykum,

I need your advice. I have watched your vides on Dropshipping but still need clarification on the specific business I am doing with dropshipping.

I am planning to do an Ebay Business only doing dropshipping from a wholesaler in China who specializes in dropshipping and they have a very good reputation. When I post items for selling I will describe the item as accurately as possible, display how long the shipping will take etc. The wholesalers in China will prepare and package the items to be sent and they will send me a tracking number for which I will then provide to the customer. With regards to the price, I will offer free shipping, however in the price I will add shipping price. For example I am selling a t shirt for £10 which will include £3 delivery within the price. Not sure if this is allowed. I want to do this because of Ebay Algorithm of whereby they promote listings with free shipping and that people from a psychological aspect would most likely buy items that has free shipping.

Is what I am doing going to be sufficent to be halal? Really want to make a side income. The reason why I am resroting to dropshipping, is because I would sell items on ebay in the past however, I had issues on stock storage as I would have limited space to place products. Plus if I do well with dropshipping, I can scale my ebay business even higher and perhaps use the money to get into private labelling on other selling platforms like Amazon.

1 Like
#56

Salamualikum,

Please can I get feedback on the below.

Buyer places an order to purchase a product.
Seller accepts the order but does not take payment. Seller lets the buyer know that they will be paying in 30 days, by that time they should have received the product.

Seller then buys the product from the supplier, supplier then sends the product to the seller’s fulfilment centre (a third party that then packages the product as per seller’s request), the fulfilment centre then sends the product to the buyer.
The buyer receives the product. The seller then requests payment from the buyer.

Would this be considered halal?

Jzk
Alaha

#57

Assalamu alaikum. I just checked out the video on the dropshipping is halal. as per the discussion, if the retailer gets all the liabilities in the selling, dropshipping is halal right?
and also can you guys explain the eBay model. amazon is totally different. we cant bring amazon under the dropshipping model. the main issue for us is eBay dropshipping model. where we sell products from aliexpress on eBay.

#58

I have spoken to some dropshippers who have been able to pay for shipping costs. This is potentially one way to make the process Shariah compliant. Although, there is no consensus on this among scholars. The issues in dropshipping are twofold:

  1. The type of sale you enter into with the end customer (this can be easily resolved through Salam or Istisna).
  2. You bearing asset risk upon purchasing the sale item from the supplier before delivery to the customer. This is key.

Given the dominance of dropshipping as a business model, there are several ideas being formulated on ensuring this to be Shariah compliant. At present, I am in discussion and review with several scholars at an alternative Shariah interpretation of dropshipping. Hopefully, a different approach will be released soon.

If I clarify that I use the principle of dropshipping on my store, the transaction will be correct ?

#59

As-salamu alaykum, I would like to know - If I open a drop shipping website and in the terms & condition section - if I declare that the product will be fulfilment from China and I am not the actual seller. Does it make doing the drop shipping halal? JazakAllah Khayir.

#60

As salam alaikum wa rahmatullahi wa barakatuhu

I am new to dropshipping and have been reading all the opinions on this forum and Amja, and others. I did watch your YouTube episode with Mufti Omarjee, Br Ibrahim Khan and Br Mohsin.

I have few questions to clarify what I have read and understood in relation to your opinion and dropshipping in general.

Ownership, possession and risk/liability are three components to watch out in dropshipping.

  1. As for ownership, it is taken care of through Bayah Salam.

  2. As for possession, majority of the opinion is via proxy through the shipping company as it logistically and economically the best.
    My question is, can I get my supplier/manufacturer to charge me shipping and they deliver the product directly to the customer. In this case, I will be issued the tracking service along with the buyer rather than seeking a third party or a shipping company to pick the product from the supplier

  3. As for risk/liability, i remember from your YouTube discussion, it unlawful for us to make profits without taking any risks. So, in relation to risk, would the following fulfill the requirement;

a. By taking responsibility of shipping, all the risk is transferred from the supplier to me till it reaches the customer.
b. Any problems with the shipping, I will take full responsibility including either refund the full amount or arrange for a replacement item mutually agreed.
b. Further, in relation to refunds, I cannot seek the refund back from the supplier which is what my current dropshipping structure is.

Terms and Conditions

If all the above conditions are met, do I have to still make contracts with the customer and supplier or would it be sufficient to list the T&Cs on my website for the customer and have a separate T&Cs for the supplier.

Apologize for the repeat questions and the long message but I would really appreciate if you could help me with this one.

Barak Allah feek. Jazak Allah khairan

Wa Salam alaikum wa rahmatullahi wa barakatuhu

1 Like
#61

Salam walakaium , How Are You .
I would like to please ask about if this method of dropshipping Model is halal .
I first advertise the product that i want to sell . When customers buy it from my website . Instead of dropshipping them the product , i buy in bulk first and give it to them. However i will state and say we do not have possession of the product first . I will also tell them delivery date .

Another method i would like is this halal if i dropship the product but i be an agent and say how much comission we will take from the customer due to the service we provide and we will state that we are an agency business and do not have possession or own any products . Jazakallah