Dropshipping is haram when done in the traditional method. In this business model, a person is advertising a product for sale on the internet without owning the goods. Instead, the dropshipper requests order fulfillment from their chosen supplier after receiving an order. The hadith of the Prophet is clear: a Muslim who doesn't own or have the goods cannot sell them. You need to own it and have possession of it. Qudamah said in al-Mughni (4/155), “It is not permissible to sell an item that you do not possess so that you will go and buy it and deliver it.” If these two conditions are violated, the conventional dropshipping method is haram.
On a Reddit thread, user r/BobSowmo shares about building his own dropshipping website but eventually decided not to pursue it after reading the hadith of Hakim bin Hizam.
However, many also say that it’s possible to design a halal dropshipping store that complies with Islamic teachings. For example, the fatwa website IslamQA declares dropshipping is halal “if you turn it into profit-sharing or if you act as an agent in return for a fee.” The site is supervised by Islamic scholar Shaykh Muhammad Saalih al-Munajjid.
By becoming an agent and adhering to salam transactions, a manufacturer/supplier is considered as the offeror (Ja'il) while the dropshipper is the worker (Amil). Dropshippers receive commissions for the products they manage to sell through their business.
The AppScenic website also says that dropshippers can “integrate their entrepreneurial endeavors with their religious values.” According to their blog, halal dropshipping is possible as business owners observe “guidelines rooted in transparency, fair pricing, quality assurance, ethical sourcing, and social responsibility.”
In the Practical Islamic Finance YouTube channel, Rakaan Kayali wars that while dropshipping can be halal, it’s definitely not a get-rich-quick scheme. “It's super hard to make any meaningful amount of money through drop shipping.” he says. “Getting customer's attention, driving them to your website is not an easy task by any means. However, it is a great way to get started in business if that's what you're into.”
In this feature, we discuss the Islamic way of doing dropshipping, plus the business model’s benefits and risks. We also share why local lead generation makes a perfect alternative for anyone looking for a halal online business idea.
When Is It Permissible To Sell What Is Not With Us?
It is permissible to sell what is not with us if you adhere to the criteria for Bai' Al-Salam, which states the following:
You can then set up your drop shipping business per the following guidelines and specific circumstances:
Traditional drop shipping is not permissible under Islamic principles indicate you cannot sell things you do not own. However, implementing certain business practices can make a dropshipping store halal. When a potential buyer asks to purchase the item, you inform them you will ship it to them for the shipping cost plus a fee (i.e. your commission). But if you don't tell a consumer that you are making a profit margin or refuse to take responsibility for the order fulfillment, then dropshipping is not permissible.
What Is The Ruling On Dropshipping In Islam?
The ruling on drop shipping in Islam is that the conventional drop shipping method is haram. This is because of the hadiths, wherein the Prophet (peace be upon him) said do not sell what is not with you. However, the context or interpretation of this hadith was about a person asking if they could sell something.
If a dropshipper has an identified third party supplier or online retailer ready, willing, and able to sell what is not with you, they can sell the product. This can be supported by the sale of dates in Medina, which happened 2-3 years in advance (before the dates even existed).
What Are The Shariah Issues Raised Against Dropshipping?
The Sharia issues raised against dropshipping are: 1) the structure of the business model between the retailer and the consumer (the sale of a non-possessed item) and 2) the retailer's lack of possession and possible risks (the selling of a non-possible product).
These are reasons why dropshipping can be a bad idea, if you don't consult with the Islamic perspective on doing business. The Sharia-compliant alternative is to do the transaction through the model of Salam where a dropshipper must explicitly advertise that they do not own the product. Instead, they must clearly indicate they will arrange order fulfillment, delivery, and customer service issues. The dropshipper promises the buyer they will provide the product for the said price. Once a mutual agreement is made and the consent to sell is legalized, it's a salam contract and the transaction can be considered halal.
How To Make A Dropshipping Business Halal
To make a dropshipping business halal, you can consider these two options:
The first option to make dropshipping halal is by speaking to your wholesaler and agreeing with your business practices on how you plan to promote and sell products. For each sale of a product you advertise on your website or online store, you get paid a commission for promoting that sale. You also need to inform your customer that you're a non-affiliate of the product you're promoting, meaning you receive a commission and aren't directly tied to the product. A Muslim may do this because now you are an agent to your supplier. You're not selling it directly, so no risks are involved.
A second option is to have a reliable dropshipping supplier who can guarantee the delivery of products to the consumer. Adhere to the guidelines that heed Islamic teachings as follows:
- Sellers must be honest and transparent about the origin and ownership of the products in all business dealings.
- Have a clear product description that includes sizing, color, design, etc.
- Sell products for a fair price. Don't leverage price hikes or manipulative tactics to earn higher profits for a sold item.
- Only sell high-quality inventory that aligns with Islamic ethics and fulfills your promise to deliver value.
- Only sell halal things that adhere to Islamic values. The products you sell should be ethically sourced and free from haram.
- Provide accurate information. Don't falsely represent or run misleading ad campaigns to make more money in your dropshipping store.
- Ensure that the products you sell are high-quality and not sub-par items.
- Avoid participating in scams or fraudulent activities.
- Be aware of social issues and your responsibilities as a dropshipper.
- Only sell things that are environmentally sustainable and follow ethical labor practices.
In a YouTube video, Indian Islamic public orator Dr. Zakir Abdul Karim Naik explains that while conventional dropshipping is considered haram, the business model can be halal.“If all (Sharia) rules are fulfilled, then dropshipping can become permissible,” he said.
As a dropshipper, you need to continue learning about changes to the business model and stay updated on current trends. Also, consider seeking instruction from an Islamic scholar or advisor to know specific information about dropshipping. The bottomline is to connect with someone who can supply insights on ethically running your dropshipping business and avoid deceptive practices, so it stays halal.
How Can You Ensure The Products You Sell Through Dropshipping Are Halal?
To ensure the products you sell through drop shipping are halal:
For example, the supplier uses halal materials and a shipping company that can guarantee that there will be no contamination during transportation and will preserve the halal integrity of your inventory. You can then ensure that the condition of the product you sell through drop shipping is halal and remains in compliance with Islamic law.
Muslim drop shippers cannot sell prohibited or haram items under Islamic guidelines, such as pork or products used for haram activities like gambling. So, you must be diligent about what you sell and the companies you use as your supplier.
How Important Is Intention In Conducting A Halal Dropshipping Business?
Intention in conducting a halal dropshipping business is critical. The best way to please Allah is to run a business that aligns with Islamic values. As a dropshipper, you need to conduct yourself and your business with honesty, transparency, and integrity. This includes things like:
- Refraining from engaging in riba or interest-based transactions. Instead, use a payment gateway that complies with Islamic finance principles.
- Using a tax method like zakat or almsgiving.
- Abstaining from price gouging, dishonest or false advertising, or misleading information.
Is Amazon Dropshipping Halal Or Haram?
Amazon dropshipping, in the conventional sense, is considered haram. The Prophet (peace be upon him) said, "Sales cannot occur except in that which you own." [Abu Dawud] The hadith of Hakim ibn Hizam also is clear: If you buy an item, you cannot sell it until you take possession of it; however, if you structure your Amazon drop shipping business based on a salam transaction style interaction between yourself and the buyer, you act as an agent instead of a seller. This means your Amazon drop shipping business can be considered halal.
What Is Dropshipping?
Dropshipping is an e-commerce-style online business model where a person can enter the market without owning or managing any inventory. Dropshippers rely on a third-party supplier to handle the product's packaging, shipping, and delivery to the customer. You don't need much capital to get started, and there is minimal risk involved compared to launching a traditional business.
Dropshipping is a growing industry with a global market size of $301.11 billion in 2024. According to Oberlo, this is “a 23.7% annual increase”. Experts also anticipate the market to hit $476.1 billion by 2026.
Is Dropshipping Hard?
Dropshipping is hard because dropshippers need to know how to attract attention from their target buyers online. In 2024, dropshipping isn't just about finding a winning product. You also need to be an effective marketer to rise above the competition. You need to know how to tap into consumer psychology and elicit an emotional response from online shoppers, so they will buy your product. Dropshippers need to develop a unique angle with ad copy or creatives that get people to stop scrolling and take action.
As a dropshipper, you are competing against thousands of other stores selling the same products and are using the same supplier. For Muslims, another challenge is to ensure they are observing halal business practices (such as selling halal products and using halal-certified suppliers).
That said, anyone wanting to start a dropshipping store has to stay one step ahead of the curve on the latest trends to make profit from the business model in 2024.
What Are The Benefits & Risks Of Dropshipping?
Benefits Of Dropshipping
A benefit of drop shipping is that you don't need to own or manage any inventory. The barrier to entry is low and most people can do it.
Another benefit of dropshipping is that the business model has low overhead costs and only requires a minimum capital of $100 to $1,000, according to Forbes.
The biggest benefit of drop shipping is that you can offer a wide range of items and make huge money from trending products.
Risks Of Dropshipping
One obvious risk of drop shipping is that you lack control over key aspects of your business, such as product quality and order fulfillment.
Another risk of the dropshipping is the unreliability of suppliers. Data suggests that 84% of ecommerce retailers express that finding a good supplier is the primary challenge of drop shipping.
The biggest risk of drop shipping is making profit in the early months. According to ecommerce experts, 90% of dropshipping businesses fail in the first year.
Why You Should Consider Local Lead Generation In 2024
Local lead generation is an Islam-compliant business model because you own the digital asset. The website, the tracking number, and the leads belong to you. Unlike dropshipping, you have full control over every aspect of your online business.
With lead gen, the idea is to build and rank simple websites you can offer to business owners for rent. You begin by picking a business service and then targeting a specific location. Because the focus is on the local market, achieving the top of the SERPs in under six months is entirely possible. Once your lead gen sites gain top spots on popular search engines, they're in front of people actively searching for your chosen service. Your sites will work like digital billboards and will attract organic leads.
When they start bringing in the leads, you can find a local entrepreneur who wants to boost their brand online. You can then create a salam contract where they pay you a commission or 'sliver to deliver' for your leads.
According to PR Newswire data, over 27% of small businesses don't have a website. With the lead gen business model, you're helping small businesses get more work and make a steady income online. There's also no limit to how many sites you can own, build, and rank. Once they're at the top, your lead generation websites won't need much work and may only require 10 to 15 hours per month to maintain. Each site can potentially make you $500 to $2,000 a month, so the more sites you own, the more money you can earn. I've done this for years and now that I own several local lead generation websites, I make up to $52,000 per month by providing these services to small businesses in different areas.
hi,
wow I've been scouring the internet for an acceptable answer on this and let me tell your piece is by far the best one I came across
it's thorough and very well presented, it is not exacltly the answer I was hopping for to be honest but I'll go through the alternative you spoke about and see what I can do
thank you
Great Asset, Brother….
Salamu Alaykum,
I really need this question answered please.
I want to know in the salam contract it says to take payment in full. Is it fine in dropshipping if the customer has paid me in full and the money is in my shopify store meaning the money is mine however I pay the manufacturer with my money. The reason I ask this is because it takes 3 business days for funds to be processed from shopify to my bank card which can ruin fast shipping times. Bear in mind the money in shopify is guaranteed mine and is already in the process of being sent to me however is taking a few days due to processing. Please do answer this as soon as possible.
I believe so. Please do further research.
Thank you for this article.
You’re welcome Max!