Definition of Dropshipping
Dropshipping is a form of business in which the reseller/dropshipper does not own the assets or stock being sold. The reseller or dropshipper only promotes the products sold by another party and earns commissions from successful sales.
The dropshipper only needs to promote the products, take orders from customers, and inform the supplier or wholesaler who supplies the goods or assets. Subsequently, the seller will handle the shipment of the goods to the buyer.
Issue
As mentioned in a previous article, according to the Shafi'i school of thought, there are FIVE conditions for the validity of traded goods in Islamic law:
- The goods or assets must be pure.
- The goods or assets must be beneficial.
- The goods or assets must be deliverable.
- The goods or assets must be owned by the contracting parties.
- The goods or assets must have been seen.
In the context of dropshipping, the issue arises regarding the fourth condition mentioned above, which states that the goods being traded should be in the possession of the dropshipper. The goods being traded should actually be the right of the contracting party. However, in this case, the contract occurs between the dropshipper and the buyer, not between the buyer and the original seller.
Furthermore, when a dropshipper does not own or possess the assets, they have no liability or risk. This contradicts the fiqhi principle that states:
Liability accompanies gain
Or simply put, "No pain, no gain" or "No risk, no reward." Therefore, the absence of risk in dropshipping can potentially raise Shariah concerns.
Solution
According to Dr. Abdul Bari Mashal (Managing Partner at Raqaba | AAOIFI Governance & Ethics Board), he shared three ways in which dropshipping can become a valid business transaction:
- By first possessing the assets before selling them. This method aligns with the concept of a stockist.
- By renting a storage room owned by the original seller. The goods or assets should enter that storage room before being shipped to the buyer.
- By using a wakalah contract. Both the agent or seller can set the price for the dropshipper or the dropshipper can determine the wakalah fee as their profit. The crucial aspect is that both parties (seller and dropshipper) agree on the wakalah fee. From the buyer's perspective, it is not obligatory or necessary for them to know the wakalah fee.
Based on these three methods, we can say that the third method is widely used and suitable for implementation in the present time.
Another important aspect to emphasize is that the goods or assets being traded must be halal and permissible according to Shariah. They should be safe, beneficial, and not harmful to the users.
Conclusion
In summary, the ruling on dropshipping is permissible (halal) if it is conducted through contracts and methods that comply with Shariah. It is essential for us to have a proper understanding of the legal rulings of transactions or sales in Islam before engaging in them.