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Is Barter Right For You?

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What Do Companies Like Pepsi, Wal-Mart, And Your Plumber Have In Common? Bartering.

Business bartering is BIG… and it’s happening at every level. The International Reciprocal Trade Association reports that in 2011 over 400,000 companies worldwide used bartering to earn an estimated $12 billion on unwanted or underused assets.

Discussions with senior executives around the world, show that in response to tighter credit and budgets companies are exploring new ways to create and capture value. In this context, they see bartering as a way to steer around the restrictions imposed by cash and credit, to extract value from perishable or under-performing assets, and to expand channels to market and find new customers.

Business bartering has been around for a while (Pepsi conquered the USSR by bartering the soft drink for vodka in 1990), but the pace is rapidly increasing. In 2010, for example, the North Carolina Bar Association approved the participation of attorneys in organized barter exchanges allowing them, for example, to swap legal services for credits to “spend” on a vast range of services from computing to web design, auto repairs and advertising.

Now, at barter exchanges across the world, professionals from doctors to electricians are trading their services for goods, services or “trade credits” which can then be used to pay for business expenses like printing, advertising or travel. Meanwhile, corporate barter firms, the intermediaries in barter transactions, have flourished, helping companies to create value from assets which may no longer fit their strategy, may not be working at capacity or are no longer needed.

Client firms swap what they don’t want or need for something they do — frequently media services. In addition to swapping goods and services for media, companies can use the trade credits they receive from the bartering intermediary to exchange for freight, travel, waste management and equipment. Honda, Kia and Subaru for example, have bartered cars for media trade credits. Haymarket Exhibitions made part payment for advertising using tickets to their exhibitions. Leading electronics firms have bartered discontinued stock, placing it in leading hotels in exchange for media and trade credits — gaining a potential new client in the hotel group in the process. Food manufacturers have bartered excess inventory in exchange for media credits or trade certificates allowing them to purchase other services such as hospitality and cleaning. Lufthansa has bartered real estate for media credits and aviation fuel.

Companies Looking At Bartering Should Consider Three Questions:

Are there services for which you could barter to improve your cost base or capacity utilization? For example, if you are in the travel industry, can you trade “perishable” excess capacity — whether rooms or golf tee times — for Flatscreen TVs or refitting your fitness center, as Magnolia Hotels based in Denver has done?

What under performing or non-strategic assets do you have that could generate value through creative bartering? For example, food processor Hormel Foods Corporation sold a frozen food brand which no longer fit its strategic goals to corporate barter firm ICON in return for putting part of its media spending through ICON.

What other assets could your company benefit from by using barter? For example, could a barter deal quickly expand reach, credibility or brand recognition in the market for new products poised to launch? One start-up microbrewery in the US funded its launch and purchase of essential services by bartering for its stock via a barter exchange — building its brand in the process.

Look around your organization. How can you use barter to reduce costs, enhance revenues, build awareness or otherwise expand the pie? What linkages do you need to build in your organization, for example: between purchasing, finance and the business units to make these deals work?

So take a closer look at barter. You may find something very valuable that your company has been missing out on.

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