Merchants Barter-Scam or Innovation?

In recent weeks, Merchants Barter has received some online questions as to the legitimacy of trade organizations. The following is intended to resolve those questions.

Imagine a situation where every time one spends a dollar on a business purchase they are guaranteed a dollar back in new business. That's exactly how more than 350,000 U.S. companies now operate-profitably trading billions of dollars worth of products and services.

They do so through formal organizations known as barter networks or trade exchanges. (A trade exchange acts as a clearinghouse to match buyers and sellers, and also as a bank to track each transaction.)

Worried about fraud or scams? The federal government gave trade exchanges the "stamp-of-approval" through the Tax Equity and Fiscal Responsibility Act of 1982, which recognized them as third-party record keepers of financial information, the same as banks and stockbrokers.

Why are so many companies happy, even eager, to trade? Because they have a surplus of goods and services, and a shortage of cash-just like you. Plus they need what you have. For many, it's the only way they can easily generate substantial additional business.

Through the nation's trade exchanges, it's possible to gain exposure to tens of thousands of potential clients. And many times, the by-product of all this new barter business (because everyone you deal with has friends and business associates) is cash referral business…a great side benefit.

The bottom line, when a company is a member of a trade exchange, it can purchase almost anything it wants without paying cash. Purchases are paid for with the promise to provide products or services at full retail value. These new sales are the proven way to build a customer base, and solidly expand the operation in these times of tumultuous economic change.

Just take a look at what some companies are doing:

Syrup For Advertising
Barq's, a Louisiana manufacturer of root beer, had a great product, but little recognition outside of their regional market. That was before they doubled their ad budget, and increased sales, by trading root beer for advertising. Their efforts were so successful that Coca-Cola recently bought them out.

Empty Rooms For Exposure & Name Recognition
Howard Johnson Franchise Systems traded 120,000 room nights, or 5% of their capacity, in return for advertising. Since their average hotel has a 65-67% occupancy, they always had some vacant rooms… and their only trading cost was "changing the sheets." Such barter financing of advertising is an inexpensive way to build name recognition, because of the hotelier's low marginal cost structure.

Cooperative Barter Effort Brings P.R. Coup
Brazil's Tourism Board concluded a $40 million deal with an American corporate barter company for a public relations and advertising effort in the U.S. to encourage tourism in Brazil. Rio de Janiero's hotel-keepers' association participated in the transaction, as the bulk of their trade would be bartered hotel rooms.

Trading Space (Empty Seats) For 9,000 New Uniforms
Australian-based Qantas airlines recently adopted a major barter acquisition program and promptly traded airline tickets (empty seats) for 9,000 new uniforms.

Unsold Time For Equity In Emerging Growth Companies
Recently, ABC-TV formed a new unit with the express purpose of bartering its unsold time to new, young, emerging, growth companies in exchange for 5% to 20% equity stakes (stock ownership as payment for their TV time). ABC, knowing that the second-hand on the clock never stops, has adopted the profit-making mantra, "We must trade our unsold time or lose it, forever."
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