Businesses cash in on bartering: Introduces companies to new clients
Saturday, March 20, 2004
Page: E1 / FRONT
Byline: Tamara Gignac
Source: Calgary Herald
When Steve Valenti decided to renovate the dining room of his Italian bistro, he didn’t open his wallet or visit a bank. Instead, the restaurateur supplied meals as payment for electrical work, a new floor and some patio furniture.
Valenti is a member of a barter exchange, a group of businesses that swap products and services as payment for goods instead of money. Members buy and sell items using “trade dollar” currency, which makes it easier to trade services of incomparable value.
“I’m always looking for ways to get what I need while spending as little of my own cash as possible,” said Valenti, owner of Valenti’s on 12th and a member of Calgary-based Sabre Trade Exchange Corp.
“I barter because I get things I can use and I also get new business. I also see it as a great networking opportunity.”
A growing number of companies and entrepreneurs consider bartering an effective — and frugal — way of conducting business, and introducing themselves to a host of new clients.
For example, if a dentist cleans the teeth of another exchange member, his barter account is credited with trade dollars he can use to buy items from other members. Meanwhile, the account of the person who received the dental work is debited.
It’s also a means for companies to sell off excess inventory or capacity without having to resort to fire sale prices or scramble to attract new customers.
“Bartering changes people’s habits,” said Ken Lang, president of SabreTEC. “From the seller’s point of view, it’s very much about getting a new client and brand recognition. For the buyer, it reduces cash expenses.”
Last year, SabreTEC’s 400 members traded more than $10 million in goods and services, from web design work, snow removal and window cleaning to gift baskets, custom garage doors and silk plants.
The exchange charges a standard membership fee of $495, and there is a six per cent transaction fee and a monthly administrative cost, which is $15 in trade dollars and $15 in cash.
To make sure everything goes smoothly, SabreTEC trade manager Barb Stevens organizes deals and fuels activity by sending members regular updates and tips on new service offerings, whether it’s a trip to Mexico or a haircut from a local barber.
“Just by talking to people, I get an idea of what their lifestyles are like,” she said. “Maybe they like to take vacations or require some work done on their home. I offer suggestions and it usually snowballs from there.”
Bartering is a way of life for Tom Peacock. The general manager of radio stations CJAY92, The Vibe and CKMX routinely swaps airtime in exchange for everything from fax machines and printing services to promotional T-shirts and pens.
“We trade products and services so we don’t have invest our cash,” he said. “It saves a lot of money because we don’t have to use capital to purchase items for the company.”
It can also be an entertaining way for savvy traders to do business, said Peter Huszar, owner of Casablanca Interiors Ltd. He has purchased everything from office stationary and printing services to high-end clothing and art work using SabreTec trade dollars.
For Huszar, the effectiveness of barter depends on the exchange itself.
“ The value is in the ability to spend the money you have to your credit. If a barter company is doing things incorrectly, it’s kind of like owning the currency of an obscure, wartorn African nation: there’s lots of it around, but nobody is willing to accept it.”
A common shortcoming of some barter exchanges is price inflation, where members boost the normal cost of their product or service.
Such tactics undermine the spirit and credibility of bartering, said Lang, and are not tolerated at SabreTEC.
“We’re heavily involved in all of our trades and we have no issue punting somebody out to protect the integrity of the exchange. It’s something we watch out for it,” he said.
The business of bartering has evolved in recent years to include online exchanges and virtual trading posts. Some, such as eBarter.ca, allow consumers to haggle for a tropical holiday by peddling comic book collections or a vintage drum set, while others act as digital extensions of bricks and mortar exchanges.
SabreTEC is equipped for small online trades — the sale of a restaurant gift certificate, for example — but the majority of transactions are still facilitated by trade brokers.
“There was a belief during the dot-com bubble that our business could work online. But for centuries, barter has been about people and relationships. The existence of the Internet is never going to change that fact,” said Lang.
Fast Facts on Bartering
- Hundreds of barter exchanges exist across North America, many of them web-based.
- Barter exchanges typically charge a membership fee, a monthly service charge and a commission on all trade items.
- At Calgary-based SabreTEC, 500 members traded more than $10 million in goods and services, including printing services, interior design work and alarm systems.