Entrepreneur Chris DeMassa is busy trading on his company's
name. DeMassa, founder and president of 14-employee Arcata,
California-based trademark research and consulting firm TradeMark Express,
has bartered for everything from printing jobs to entertainment
tickets.
DeMassa, 49, thinks barter is a great way to build business. He
estimates 10 percent of his $1 million annual sales are generated
through barter. "That's 10 percent we wouldn't have
otherwise," he says. "It makes better use of our
resources and lowers our cost of doing business."
Barter is the oldest form of doing business. Today's
companies barter for a number of reasons, from getting rid of
excess inventory and finding new customers to conserving cash and
supporting the local economy. Companies exchanged $8.25 billion in
goods and services last year alone, according to the International
Reciprocal Trade Association.
An Evolving Industry
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A number of online barter exchanges arose during the dotcom era,
only to go out of business after learning the hard way that people
still want human interaction. Meanwhile, small companies have grown
more sophisticated about barter over the past decade. There's a
better understanding of IRS reporting requirements, and business
owners are less likely to view bartering as a shady,
under-the-table practice. The barter industry is "becoming
kind of old hat. It's matured," says Jack Schacht,
president of the National Trade Association, a Niles, Illinois, barter
exchange.
Barter
Systems Inc. in Kensington, Maryland, which has 10 employees
and approximately 1,400 clients, is one of more than 500 barter
exchanges in North America. It uses a combination of e-mail,
monthly account statements, mailers, magazines, online directories,
in-house brokers and annual IRS 1099B forms to stay in front of its
customers. "Our clients can see their statements and histories
online and do a transaction online if they wish," says CEO
Perry Constantinides. "We've empowered our clients to do
more on their own if they want to."
DeMassa uses Bellevue, Washington-based barter exchange Itex. He
likes being able to track his company's account online and can
call an Itex broker if he wants to speak with someone. TradeMark
Express posts ads on Itex advertising items it wants to trade, and
Itex gets 5 percent of any purchase/sale on top of an initial $995
one-time fee--a trade-off DeMassa doesn't seem to mind.
"You'd probably be spending $3,000 or $4,000 a month in
advertising to reach the group of people that you reach through
barter," he says. "If you look at it as a marketing
expense, bartering pays for itself."
Barter industry experts predict the globalization of barter over
the next decade, and it will be powered by a universal barter
currency. "There are things happening out there that are truly
incredible," says Krista Vardabash, executive director of the
International Reciprocal Trade Association. The globalization of
trade is well underway: 15 percent of the $5.62 trillion in
international trade last year was in the form of barter, according
to the World Trade Organization. Asia, Australia and Europe all
have thriving barter markets.
The challenge for barter exchanges will be balancing supply and
demand as small companies grow more sophisticated in what, how and
where they want to barter. DeMassa sees barter exchanges
encouraging their members to trade higher-ticket items, but they
still have a way to go as far as he's concerned. "I think
the barter companies are making a mistake by not pushing real
estate, gemstones or stocks," he says. "There are a
number of things they can move that they don't
promote."
The challenge for entrepreneurs who want to barter will be
figuring out their options. Learn about the barter communities that
are active in your area, DeMassa suggests, and base your decision
on what's being traded instead of what fees are being charged.
One good place to start is Irta.com, where you'll find
everything from conference information to checklists.
Looking ahead 10 years, Vardabash envisions a global trade
credit system that reaches the average consumer, who will make
purchases using local barter currencies. Small companies will build
B2C loyalty programs around barter like the airlines have done with
their frequent-flier mile programs.
Whether this will happen is anyone's guess. Cash still
reigns supreme, after all. But Vardabash, for one, thinks
there's even more room for barter. "There's a little
saying in our circles," she says. "'Cash is king, but
barter's the next best thing.'" And the entrepreneur
who masters the evolving barter process will truly be a jack of all
trades.