Drop shipping is where the retailer does not hold the stock but instead sends customer order details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
Where one is selling an item by description, having access to and the ability to buy one of its type to then sell, this is permitted and is similar to a transaction known as salam. For example an iphone 6. There are conditions for this to be valid and drop shipping generally fulfills this. The item is sold before it exists, but it is sold with a specific description along with an explicit refund guarantee if the description is different or the item is not deliverable. The size, weight, color, quality and any other distinguishing characteristic that will affect price must be stated at contract for this to be valid.
If however you are selling an specific particular item, with particular characteristics, for instance a second hand specific Android phone, where you do not own it, nor could you reasonably obtain an alternative due to its specific description then this is the same thing Hakim ibn Hizam said to the Prophet. He would go to the market, find a specific product, then sell it. He would then go and buy it, but if it had already sold then he would have disputes with his customer. the Prophet told him "Do not sell what you do not own" in another narration "Do not sell what is not with you."
To reconcile this hadith to the permissibility of Salam, we have to look at the differences between the two transactions above. In the first, the item is being sold according to its description along with a explicit refund guarantee if unavailable. In the second, a specific item is being sold as final. If that item is unattainable, then this will cause dispute, it contains significant uncertainties and so on, which is why this sale is impermissible.
So in conclusion, many jurists will say you can sell items before you own them as long as you are not selling a unique, specific item and as long as you have the ability to access and deliver that unspecified item you are selling by description in a timely fashion and will refund the sales price if you aren't able to. I am however uncomfortable with this perspective.Whilst I'm broadly sympathetic with what he is saying as that is the argument for many jurists my worry is that their conceptulaisation of the prophetic imperative is a little too limited. They seem to take an unecessarily too short term and limited a view of the prophet prohibiting the sale of items that have yet not been manufactured or in existence or in ownership.The revelation is prohibiting such things due to the uncertainty created - and potentially disputes no doubt. But it also takes a more wider perspective of not institutionalising these things in society for the destabilising effects they can have. Thus allowing riba allowed banks to exist, trade in debt instruments etc which almost brought down the entire global economy. Uncertainty in ownership and sale contracts has the propensity for similar effects.
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