First of all, I will explain, what is drop-shipping. It involves selling an item online (through an e-commerce website) that we don’t have in our stock, After getting order(s) then we place the order(s) with a supplier/manufacturer to ship the sold item directly to the customer.
Most Scholars say drop-shipping is not permissible based on the following Authentic Hadith of Hakam bin Hizam (May Allah be pleased upon him).
Wherein the Prophet peace be upon him tells Hakam Do not sell what is not with you. (Tirmizi 1232)
Since with drop shipping you are selling something that isn’t with you, this hadith has been considered by scholars to prohibit it and it is not permissible. However, it is not true this rule is not absolute and cannot apply in all cases. whereas another Hadith.
The Prophet peace be upon him came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), ‘Whoever pays in advance the price of a thing to be delivered later should pay it for a specified measure at specified weight for a specified period. (Bukhari 2240)
As the above Hadith gives us implicit approval as Selling dates two or three years in advance of delivery; means at the time of sale these dates didn’t even exist. This type of advance sale in Islamic finance is known as a “Bai’ Al-salam” Salam contract.
However, the Prophet peace be upon him did not tell the people of Medina not to sell that which was not with them as he did to Hakam bin Hizam, may Allah be pleased with him.
Therefore, it must be true that there are instances where selling that which is not with you is prohibited and others where it is not.
When is it permissible to sell what is not with us?
So now, the question is raised how we know when is permissible or impermissible to sell something that is not with us
We have to ask ourselves what is the reason for the Prophet peace be upon him prohibited in the case of Hakam bin Hizam, may Allah be pleased with him, it’s possible that he sells something and then goes to the market to find what he sold and either can’t find the thing he sold, finds the thing he sold but it doesn’t meet the buyer’s expectations or finds what he sold for a price that is greater than what he sold it for. All these instances may bring about conflict between the buyer and seller.
On the other hand, in the case of people of Medina selling dates two or three years in advance, the supplier of the dates had already been identified before the sale and the supplier was willing and likely to be able to deliver the dates by the delivery date and according to the specifications agreed to.
So the criteria for understanding when this rule apply; this rule applies in the following:
Criteria for Bai’ Al-salam
- The supplier has been identified
- Willingness for supplying item(s)
- Agreed with the delivery date, Quantity, and prices for supplies in the future.
On the other case, if you’re selling something and only after you make the sale do you figure out who is going to supply the item then this falls in the “don’t sell what is not with you” category and that is not permissible or against the Salam contract.
Therefore, in the case of dropshipping, when trying to ascertain whether it falls in the category of “don’t sell what is not with you” or a Salam contract, we need to ask ourselves. Has a supplier been identified who is willing and likely to be able to supply the item on the agreed terms before the sale?
Even in this case, there are two parties, you have a retailer and the purchaser, there is no condition that the seller must be a manufacturer or supplier, or wholesaler.
PERMISSIBLE CONDITIONS FOR DROP-SHIPPING
- Cannot sell Copyright or Counterfeit Products, Illegal items, and Gold & Silver.
- Supply Chain & Sourcing must be established or identified before taking the orders (To avoid conflict between customer and seller).
- Products must be tested with their quality and specification to be communicated to the customer.
- Product Description must be properly mentioned on your product page or website; and communicated to the customer.
- Delivery dates & prices must be mentioned. No Fake delivery time to catch the orders.
- Use the order Now Button instead of Buy Now.
EXAMPLE FOR IMPERMISSIBLE:
If we are selling watches but we don’t have watches with us. after taking orders we will start to find the supplier check quality/specification and figure out how to fulfill the customer obligation then that is impermissible and it falls under the category of the hadith narrated by Hakam bin Hizam, may Allah be pleased with him.
If we have a supplier and he is willing and likely to be able to fulfill our order of specified items we are selling online before getting orders, then the restriction on having what you sell with you before you make a sale can be eased. Therefore, dropshipping can be permissible under the above-mentioned conditions.
Allah(swt) knows best………
DISCLAIMER: This is just an analysis so would not be treated as Fatwa or Final thoughts.