The weekly newsletter for everyone interested in barter--the world's most versatile business tool!

April 1, 2003

Written by Bob Meyer, Editor of BarterNews

Bartercenter, Central America's First Trade Exchange, Off To Auspicious Start!

Panama's Bartercenter opened for business in 1999 with a very healthy self-image. "Right from the beginning we wanted to be perceived as bankers and we do everything within our reach to project ourselves in this way," explained general manger Carlos Medina.

Does such thinking work? Apparently. Bartercenter clients include major corporations that generally are not members of a trade exchange, such as Yamaha, Suzuki, Skoda, Generalli, and HB Fuller.

Medina says the key to their success is networking, and looking to find market niches that Bartercenter then points out to the larger client—a competitive advantage if they are willing to embrace the barter formula.

What is Bartercenter's formula—the one disliked by most trade exchanges? "I have seen a need to find a balance between my 100% barter system, and my 50% barter-50% cash system," Medina disclosed. "So we allow these larger corporations to sell under the 50/50 formula, as long as they agree to honor the first $10,000 on a 100% barter basis."

Bartercenter has signed on Aseguradora Mundial, the second largest insurance company in Panama, as well as Generalli—one of the major insurance companies in the world. According to Medina, Mundial is trading under the 50/50 formula in amounts of over $250,000 a year...working primarily with seven autobody shops.

But before Bartercenter approached the body-shops they made overtures to major paint manufacturers, signing on HB Fuller. All of the body-shops in Bartercenter now use ICI Autocolor on the 50/50 formula.

"However," Medina pointed out, "since our members do not paint cars themselves, HB Fuller also works with the exchange providing paint at 100% trade through their house-painting centers."

Bartercenter reports that after three and one-half years in business, they reached $4.2 million last year in transactions with their 255 members. Less than 6% of the members go on "stand by," and 95% of members renew their membership once the promised $10,000 minimum in new business is attained.

Carlos Medina and IRTA Director Cristobal Banados, of Barterhouse of Chile, have recently concluded a joint venture agreement that encompasses offering franchises in the Latin America market.

"We are very optimistic about being able to duplicate our success in the countries in our region, since we have a bartering system that has been custom made for our culture," Medina affirmed. (See www.bartercenter.cc for more information.)

Perspectives On Barter Today

A business newspaper for Suburban Chicago, The Business Ledger, recently quoted Chris Sweis of Ibart and Jack Schacht of ITA, which we feel you will find of interest. Here are a few selections from the article:

Sweis suggested that the reason for barter's slow growth is a distrust of barter perpetuated by partial bartering, or couponing. "The problem is, if you trade your product or service to a restaurant in exchange for 50% off a dinner, there's little value," he declared. "You could go buy an entertainment book and get the same deal from a coupon."

Many businesses, according to Sweis, trade out at 50%, but raise the price of the product to start with so bartering customers aren't really getting the value they should. All this can leave barter clients with a bad impression of the industry.

Growth in barter, Sweis warned, is bound to result in more regulation and more consolidation by companies. "Right now, there are a lot of companies trading with each other on their own, without any formal structure." Oftentimes what's traded never gets figured into the company's revenue, Sweis suggested. (Companies take a loss on the product they barter away, without recognition of what they receive in return.)

Sweis predicted the government will force companies, which are trading direct with each other, to be more honest in reporting their barter transactions. "It's like the wild west out there now, it needs more regulation."

Schacht Says The Problem Isn't The Transaction, But Understanding

Jack Schacht, President of Illinois Trade Association, pointed out that many clients think barter is just like cash, although it's not. "Barter has its own supply and demand," Schacht explained, "and you can't always measure barter for cash."

Schacht said that the intricacies lie in the cost-percentage of the product the business-owner pays. For example, he explained, a tire retailer pays about 75% for a tire, while a restaurant may have costs of only 30% for each meal.

For the two businesses to trade at a fair level, Schacht's organization raises the barter price of the tire to compensate. "You have to level the playing field or you'll never see a wide variety of companies involved in barter."

He noted that barter as a formalized process is more mainstream today, and businesses aren't as suspicious of barter as they used to be. "That bodes well for barter," he related.

What hasn't been good for barter, Schacht disclosed, is consolidation. "We used to have no problem getting office supplies, but now we do, because they've been taken over by the superstores."

On the positive side, Schacht said he's working with large corporations to facilitate exchanges for them, often in the hundreds of thousands of dollars.

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More Wine Available On Trade As Grape Glut & Imports Place Wineries Under Financial Pressure

Wine consumption is growing in the U.S., but California vineyards yield more grapes than wine drinkers consume. An influx of inexpensive, quality imports also has hammered U.S. producers. As a result, in California we see wine increasingly available on barter, and in the near future we expect more wineries will join the ones already trading.

Every barter company in the world is listed here click through to our global list of barter companies.

PLEASE NOTE: The Global List of Barter Companies has been updated. Check out the new companies added, as well as changes made to the existing listings. (Corrections and additions to the USA companies will be announced when completed.)

If you haven't read the current issue of BarterNews, get yourself a copy now! Orders are shipped the same day we receive them. (Click on Order Form.)

Get New Money-Making Ideas, and Valuable Contacts!

You can obtain these ideas and contacts in every every available back-issue of BarterNews.

• Follow-up on last week's lead story on Australia's Business Barter Exchange... BBX's 10th Anniversary is being celebrated by providing hundreds of members with thousands of prizes, which will total $500,000 over a three-month period. The promotion, BBX says, demonstrates their maxim—"The rewards are yours today!"
  
  
• Major record companies, strapped for cash amid flagging CD sales, are teaming up with advertisers willing to help finance costly videos in exchange for product placement.

  Case in point is rapper Ms. Jade's recent music video, where she's swerving on a dark city street to the beat of her song, "Ching Ching." The sparkling, tank-sized Hummer H2 she's driving (as is a rival racing alongside) seems to get as much screen time as Jade.

  (That bit of product placement cost Hummer's manufacturer, General Motors, some $300,000...more than half the expense of the video that was produced by Interscope Records.)

• Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner)to sign up!

• The Sarbanes-Oxley Act of 2002 is getting mixed reviews by corporate America. While changes in controls and compliance practices have been sparked in 85% of large U.S. multinational corporations, only a third of executives believe the Act will restore investor confidence in the capital markets or aid the ability of their companies to create shareholder value. And only 9% of executives believe it's a good and adequate response to problems in accounting and reporting. Half surveyed said they believe the law will have no impact in and of itself.

• Foreign-tourist revenue fell by $10 billion from 2001 to 2002 in the USA. Congress consequently allocated a one-time sum of $50 million to fund promotional efforts to get international travelers to consider America as a vacation destination. (No definite way has been set to spend the money, according to the U.S. Dept. of Commerce, which will supervise the funding.)

  Both Florida and Hawaii have begun to tout themselves as peaceful havens, with safety as prominent as comfort, escapism, or economics.

• Electronic retailing makes up approximately $186.3 billion of an estimated $3.2 trillion in total retail sales for 2002 in the United States. (Consumers bought more than $14 billion in infomercial products, $7 billion from home shopping channels, $85.7 billion from short form spots, $39.6 billion via radio, and over $40 billion via the internet last year.)