Barter Meets the New Economy

By SmallBusinessComputing Staff | Posted November 01, 2000
by Allen Plummer

For Larry Bearg of Planet Organics, an organic food delivery service in San Francisco, the leap into the world of online bartering wasn't so much of a jump as it was a step. "We'd already been bartering internally -- trading our service directly with Almost every business has extra inventory, services, or goods that are never sold to consumers, and while some write this off as a loss, many have turned to bartering to make the most of their excess. According to the International Reciprocal Trade Association (IRTA), in 1998, 464,000 companies bartered almost $11 million in goods for the year. Traditionally, this has meant working through regional organizations and exchanges. However, as the Internet continues to change the face of commerce, a new crop of business-to-business bartering sites has begun to attract the attention of business people like Bearg.

"We use online bartering for ongoing expenses, rather than one time needs and it's been very helpful. It really helps with our bread and butter necessities." Bearg uses BarterTrust on a monthly basis for services like advertising and photocopying, as well as for employee perks such as trips to local restaurants and chiropractors. "It's a wonderful treat for our employees that we couldn't afford otherwise." he explains.

SWAP 'N' SHOP

Online bartering works fundamentally the same as traditional bartering does, with a few exceptions. The traditional version of bartering usually means joining a local or regional organization, listing the business' services and goods offered in a print catalog, then fielding offers from others in the organization. On line, companies register with a barter Web site, then offer goods through the service, which when bought, are exchanged for "barter dollars." Members then use these barter dollars to purchase a variety of goods and services from other members of the site. The Web site operates both as a bank and a shopping mall, holding and maintaining records of a member's barter dollars, which can be saved and used later throughout the site.

The major difference from traditional methods of trading is that online bartering offers a wider range of companies to do business with. Unlike many regional organizations, these Web sites bring together a variety of companies from across the country, which often translates into a greater selection for their users. Businesses can look beyond their region to get the best goods and services available. Shopping for services is often easier, since selections can be made on line 24 hours a day, seven days a week, and trades are often easier to make and process. Unlike print catalogs provided by barter organizations, these Web sites are continually updated and revised, so concerns about availability and correct price are irrelevant.

WHERE THE BUYS ARE

The number of online barter networks is growing, and each one differs in scope and practice. BigVine.com is perhaps the best-known and most popular barter Web site. BigVine is the only real-time bartering service, which means that changes in availability and accounts are instantaneous. The site's BarterScout option helps users find goods and services and provides e-mails with recommendations by tracking usage of the site.

Ubarter.com, which boasts a membership of more than 12,000 throughout the U.S. and Canada, grew into the Web from its traditional bartering service. The company offers three ways to barter: On its site, through a barter debit card that works like a credit card, or through a traditional trade broker. The debit card can be used at member restaurants and hotels, and it works by debiting your barter account. Although registration is free, every transaction carries a five percent fee.

BarterTrust.com is similar to Ubarter.com in that it's a blend of click and mortar. Barters can be transacted through e-mail, phone, or in person at BarterTrust's offices. They, too, offer an account debit card for transactions.

Another site, BarterItOnline.com, caters to businesses trying to make the leap into e-commerce. The site offers an equity trading feature where companies can trade stock options for services and goods, and its Barter Talent area allows new-economy professionals -- such as site designers, programmers, and business plan developers to offer their services in return for products and services they may need. In addition, BarterItOnline offers a program where companies can use their barter dollars as employee rewards, bonuses, and incentives.

BARTERER BE WISE

Before bartering on line, take the time to understand how it works. Larry Bearg of Planet Organics recommends getting comfortable with offline barter first. "Barter networks have expanded my potential customers and services," Bearg says, "but I'd encourage any business owner considering online bartering to explore bartering with their customers directly."

Many sites operate in similar fashion, but differ in product availability and fees, so shop around before deciding where to list your goods. Review several sites, taking time to register and browse before you make any transaction.

One drawback to be aware of is that other users may be just as unfamiliar with online barter as you are, and that can cause. "My only complaint with Ubarter.com, isn't really about the site. It's about other users," says Clint Fallow, owner of Synergy Network Solutions, a Web consultancy in Tempe, Ariz. "Other people don't always know what they're doing." Most sites offer peer reviews or comments on users, which can help avoid such problems.

And then there's the issue of timeliness. As with online auctions like eBay, the products available and inventories of barter Web sites change constantly. Products and goods are offered by other small businesses and quantities are limited, so assuming something will still be available in two weeks may cause you to miss out.

Bearg also recommends comparing bartering prices for good and services with actual cash prices for the same companies. "Some businesses take advantage of bartering, and their barter price can be up to two times as much as the cash price for the same service," Bearg explains.

Even the barter sites don't market themselves as the perfect solution for every need. A key thing to remember is, don't barter what you can sell for cash. "Bartering can be great for businesses," says BarterITOnline.com's CEO Richard Cravatts, "but it should be used as a way of avoiding losses, downtime, and excess inventories. Think of it as an enhancement to doing business, not a substitute for the old way." Don't go overboard: You may find yourself bartering items that would create a higher profit in cash.

Finally, barter dollars should be treated as real money. The I.R.S. considers barter dollars as taxable income, so it will affect your bottom line come tax season.

Above all, Bearg emphasizes the importance of planning before bartering on line. "Make sure that the services available are ones you'd use," he says. Bartering without having any idea of what your business wants from an online service can be frustrating -- some businesses accumulate large amounts of barter dollars only to realize that they have no idea what they want in return. Treat bartering like any other business action. Have clearly defined goals before you start and know how you want to get there.

Here's a sampling of online barter networks.

* BarterItOnline.com

Offers an equity trading feature, an area for bartering talent for goods and services, and a barter rewards program. 781-237-1900; www.barteritonline.com

* BarterTrust.com

Barters can be transacted through e-mail, phone, or in
person. They offer an account debit card. 877-222-7837; www.bartertrust.com

* BigVine.com

An online-only bartering service. The BarterScout option helps users find goods and services. 888-300-9998; www.bigvine.com

* Ubarter.com

Consists of a combination of both on line and traditional bartering. Users can barter through their Web site, with a traditional trade broker, or with their Ubarter credit card. 888-822-7837; www.Ubarter.com

For more information on online and offline barter networks, contact the International Reciprocal Trade Association. 312-461-0236; www.irta.com

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