Dropshipping involves selling an item that you don’t have, then placing an order with a supplier to ship the sold item directly to the buyer.
For example, let’s say I have a dropshipping website that sells watches. I don’t currently own any watches, nor do I have possession of any. When I receive an order for a watch on my website, I place an order for this watch from its Indonesian manufacturer who then ships the watch directly to the customer that ordered it.
Halal or Haram?
Some have deemed dropshipping haram because of the following authenticated hadith of Hakam bin Hizam, may Allah be pleased with him, wherein the prophet peace be upon him tells Hakam:
“Do not sell what is not with you”Tirmidhi, no: 1232
Since with dropshipping you are selling something that isn’t with you, this hadith has been deemed by some to prohibit it.
However, we know the prophet’s prohibition on selling that which is not with you is not an absolute prohibition.
We know this is because of the following, also authenticated, hadith:
“The Prophet 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 no: 2239
Selling dates two or three years in advance of delivery means at the time of sale these dates didn’t even exist yet, let alone being in the seller’s possession.
This type of advance sale in Islamic finance is known as a Salam contract.
Yet 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 Hakim 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?
What seems obvious to me and many other commentators on this topic is that the prophet peace be upon him forbade selling what is not with the seller when such a sale is likely to bring about conflict between buyer and seller.
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 of these instances may bring about conflict between the buyer and seller.
On the other hand, in the case of selling dates two or three years in advance, the supplier of the dates had already been identified prior to 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.
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 the following:
Has a supplier been identified who is willing and likely to be able to supply the item on the agreed terms prior to the sale?
If a willing and likely to be able supplier has been identified prior to completing the sale then you are likely in Salam contract territory where the restriction of having what you sell prior to the sale can be eased.
On the other hand, if you’re selling something and only after you make the sale you figure out who is going to supply the item then this falls in “don’t sell what is not with you” territory.
Additional considerations for permissible drop shipping include:
- Proper description of item being sold so that the buyer knows exactly what they purchased.
- You aren’t dealing with a haram item (you already knew that).
- Specifying the time period by which the item should be delivered to the customer.
- No drop shipping of ribawi items e.g. Gold or Silver.
- The retailer i.e. the party making the sale, accepts responsibility for delivering the items they are selling according to their advertised specifications.
If you have a supplier that is willing and likely to be able to supply the goods you are selling identified prior to making a sale, 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 aforementioned conditions.
…and Allah knows best.