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Barter is Smarter

The truly successful barter programs are, for the most part, locally ownedand operated. Most independents and professionals don’t care for the ideaof being administered and billed by some computer in Timbuktu. Most of the interstate and intercity barter bonanzas are a myth, as well as a greattool for franchise sales; too many would-be-barterers have been cinchedwith the promise of a Caribbean cruise or exotic lakeshore property inromanceland. Local level business and professional men and women havesufficient gray matter to initiate and operate this fine concept. It is a low-overhead operation and requires little capital to get started. And as theailing dollar creates a continued series of market convulsions, barter is onemove toward economic survival. It creates new hope, new business, newprofits, the closeness of a fraternal society and, above all – it’s fun! - JesseCornish

by Jesse F. CornishAn estimated 15 billion dollars in retail business was transacted during 1978which was never rung up on cash registers. The purchases were all made with anewly discovered source of buying power: inventory!Bartering, one of the oldest concepts of marketing, has been around since menfirst started doing business with one another. Now it’s back. And it’s organized.Inflation, taxes, the rising cost of the money commodity, and a flood of newproducts on the world market have combined to give new life to the age-oldpractice of swapping goods and services.In Ely, Minnesota, for example, a sporting goods dealer swaps guns, ammo andsnow shoes (at retail) for firewood; a Minnesota road builder swapped two dumptrucks for 39 acres of standing timber for the same purpose.One-on-one bartering has been common practice even in modern times, but itbecomes too cumbersome if advanced beyond the occasional, convenient trade-out. Weekend swap-meets and flea markets trace their lineage even beyond theexchange of trinkets for Manhattan Island. Today, bartering has become a highlysophisticated, computerized, multi-billion dollar business practiced by merchants,major corporations and nations. Most economists who specialize in marketconcepts now agree that bartering accounts for as much as 40% of world tradeand has passed 10% in western trade.Many communist or Third World countries doing business with U.S. corporationswill no longer accept western currencies. Instead, locally produced agriculturalproducts or manufactured goods are exchanged for needed western technologyand equipment.

No longer does General Electric call in their purchasing department to buy athousand tons of steel. Today, the sales department is confronted with onequestion: "Where can we best place this order to assure a reciprocal order of anequal, or greater amount?"Currency instability has engendered a new era of bartering between nations, andthis may be only the beginning. Times have changed since the dollar gainedstardom in 1940 as the world’s prime reserve asset and trade medium. Theseller’s quest for equity, and the buyer’s advantage in moving inventories iscreating a market romance that could leave the dollar in the role of the jiltedsuitor. Even on a global scale, examples abound: After raising oil prices – andstill suffering declines in revenue – many OPEC nations are beginning the switchto barter arrangements; the recent currency swap in West Germany to bolster thedollar has taken bartering from backyard deals to international finance.On the local level, the super stores and giant chains are turning the independentmerchant into an endangered species. But by bartering for portions of overhead,plus everyday business and family needs, an independent can save his cash flowfrom drying up. By using his inventory (products and/or service valued at retail) topurchase some of these needs, he is actually buying with his own built-indiscount – not to mention using his purchasing power (inventory) as a marketingtool to secure new sales.Most reputable barter groups organize on a club basis with an equitablerepresentation of members offering products, services and professionalcategories. Members pledge to sell a mutually agreed upon amount to other members and, if accepted, are extended a line of credit and buyer’s exchangechecks or vouchers to be used in all trade transactions. The seller is notobligated to purchase from the buyer and no physical exchange takes place. Hemay use his earned credits to buy what he wants from any other member at anytime.A barter group might also organize a central clearing house which functions justlike a bank. Credits for sales are deposited to each member’s account andmonthly statements are mailed to members giving the status of their accounts.Built-in checks and balances insure against over-purchase, or placing the seller in credit overload. Further, the program offers manufacturer, wholesaler andmerchant a way to utilize dead inventory and non-productive, off-season periodsby selling for full credit to swap for a current, or future need.There are other benefits, as well. Professionals, prohibited from soliciting newclients, gain by a host of new referrals. Advertisers trade dead time and space for wanted goods or services. A housewife can trade her husband’s businessinventory for carpeting, plumbing, or TV repair without asking if they can afford it;the trade itself guarantees new sales to offset the expense.