Question
Is a dropshipping business is allowed in Islam?
So how it works is:
1. I create a website or advertisement for a particular product (it has all the details of the product and an expected delivery date. The advert does not say that I do not have the items in my possession )
2. The customer places an order on my website paying me the amount I advertised. (I received the money)
3. I order the item and pay my supplier and ask my supplier to deliver it directly to my customer.
4. My customer receives the product.
5. If the customer is not happy with the product or does not receive it I take responsibility to refund or exchange for a better product.
Is this way of trade Islamic and if not, could you please advise on what to do to make it Islamic.
Answer
The type of transaction that you have described is not permissible according to Shari’ah, since it falls under the category of ‘selling an item which you have not yet taken possession of’.
The method of making it Shari’ah compliant:
Carrying out the transaction in the form of a ‘Salam’ transaction. In a Salam transaction, after receiving the payment from your client, you will purchase the item from the supplier, whilst making a third party or a person based at the supplier to become your agent to take possession and then deliver the item to your client. The process would remain the same, except that the following information will have to be explicitly detailed in the advertisement:
– You would have to mention in your advertisement that you are not in possession of the item and will arrange its ordering and delivery once the client has transferred the payment.
– A complete description of the item being sold will have to be advertised.
– The time duration for delivery will have to be specified.
– (Note: There are more rules also governing a Salam transaction mentioned in the books of Fiqh, but we have highlighted the basic and more important rules above).
An alternate method could be that you become an agent for the supplier; you make an agreement with the supplier to receive a percentage-based commission that will be given to you for selling his products.
Example – The supplier and yourself, both agree to a 10% commission that you will receive for selling a certain product. If the product sells for R10 000, you will receive a R1 000 commission.
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.