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

July 16, 2002

Written by Bob Meyer, Editor of BarterNews

eBay Moves In On Corporate Barter Marketplace

Assisting corporations in the moving of their excess inventory has been the MO for the corporate barter community. Now a major competitor is on the horizon. It's Ebay, the online auctioneer.

Already several dozen big companies, including Home Depot, Dell Financial Services, IBM and Sharper Image, are using Ebay as a market for their excess inventory. And they accounted for over 4% of Ebay's gross merchandise sales in the first quarter.

A year ago these companies didn't make the radar screen. What's the draw? A much better price than liquidation and immediate cash.

Ebay's CEO Margaret Whitman expects to see $30 billion to $40 billion worth of goods sold annually by 2005, up from $9.3 billion in 2001. If Whitman is correct, then even at the present 4% sales figures it would equal what the corporate barter companies are aggregately now doing.

Increased sales on Ebay as more corporations begin to emulate those already using the auction site to move excess inventory could mean Ebay surpasses the corporate barter marketplace in transactional volume in the near future.

Our continuing dialogue on the question "What are your thoughts on why more bartering isn't occurring in the marketplace?" comes from Don Loughnane, President Maritime Barter Associates (Canada).

"I have read with interest many of your Tuesday Reports and enjoy learning the thoughts of other people involved in the barter business.

"I agree that recent bankruptcies and the proliferation of less than sterling brokers is a problem for the industry. But in my opinion, the biggest problem that is holding us back are the trade exchanges who allow members to bump prices.

"As long as people are allowed to ask, and get 3, 5 even 10 times what things are actually worth we will NEVER achieve serious consideration among the major players. Just today I received a solicitation for a computer that would retail for approximately $1,500 and they are asking $6,999 on trade.

"I can think of nothing that denigrates our industry more than people trying to sell barter credits for huge discounts. If the barter dollar was actually able to buy products and services for the same price as cash these people wouldn't be offering the credits for such ridiculous discounts.

"Most trade exchange member contracts have a clause demanding that they charge same price as retail. It's high time they start ignoring the short term benefit of increased commissions on these deals and enforce the rule!

One Person Can (And Does) Make A Difference

We often hear people lament "What can one person do?," when faced with various challenges in life. This story, about the leading Indian industrialist Dhirajlal Hirachand Ambani, shows what a dedicated talented individual can do.

Ambani is credited with transforming the Indian stock market when the company he founded, Reliance Industries, went public in 1977 and created a million shareholders. Until then, India's stock market was largely played by state-run financial institutions and a handful of business enterprises.

Ambani expanded his business from a $2,000 trading firm to a $12 billion Fortune 500 company in three decades, before suffering a recent heart attack at age 69.

Prime Minister Atal Bihari Vajpayee said about Ambani, "the country has lost an iconic proof of what an ordinary Indian, fired by the spirit of enterprise and driven by determination, can achieve in his own lifetime."

Marketers Strike Cross-Promotion Barter Deals

Network television and music companies are bartering with one another in an effort to boost sales for each other. The ad agency for Ford Motor's Jaguar struck such a deal with Sting's manager to use his song "Desert Rose" and part of the video in an ad for the luxury-car maker. The ad showed Sting being chauffeured through the desert in a Jaguar S-Type, and the $19 million in airtime resulted in soaring album sales.

Sheryl Crow is now the recipient of a deal with American Express, which decided to get behind her new single, "Soak Up the Sun." The song gets a plug in an American Express ad which features a woman buying a surf-board with her Amex card, and then heading off to the beach, as Crow's song is heard in the background. (In 1999, Crow helped American Express launch its Blue card with a concert in Central Park.)

• Widespread investor distrust is reinforced by the recent U.S. Trust Survey of Affluent Americans. (U.S. Trust is a unit of Charles Schwab Corp., which conducts an annual survey to gauge the attitudes of America's top 1%...those having a gross income of $300,000 or a net worth of more than $3.75 million.)

  Eighty-five percent (85%) of respondents believe there should be tighter regulation regarding financial disclosure by publicly traded companies, 73% said they don't trust the recommendations of equity analysts, and 66% said they don't trust management of publicly traded corporations.
  

• Val Valentini, a member of IRTA's North American Board of Directors, has resigned from the Board and terminated his membership in IRTA and UC in protest to the way the Universal Currency is being managed.
  

• Business groups and port officials are raising new objections to transferring the Customs Service to a newly created Homeland Security Department. Putting the emphasis on stopping terrorism, they complain, could disrupt the efficient movement of goods and people across U.S. borders.

  The 300 U.S. entry points--land border crossings, international airports and seaports--have become busier since 1994, when the North American Free Trade Agreement eliminated many barriers with Canada and Mexico.

  Last year, international trade into the U.S. was valued at $1.3 trillion, and 47 million people entered the United States. The importers, exporters, brokers and other companies involved in all this activity say the nation's economic vitality could be threatened if Customs becomes mainly an anti-terrorism agency.
  

• Trade Exchange owners, check out the hottest marketing tool in the industry...click here!
  

• Vinod Khosla, a general partner with Silicon Valley's Kleiner Perkins Caufield & Beyers, reported at a venture-capital community annual gathering that he's assessed the oversupply of capital at $100 billion for the next 10 years. (He didn't expect much of that to get spent in the short run.)

  He also warned of a continuing bloodbath among portfolio companies. From 1995 to 2000 14,463 companies received VC funding, of those 978 went public and 1,529 were acquired. Another 1,180 went out of business, leaving 10,776. Suggesting that, while the numbers are fluid, "thousands have been hung out to dry and are likely to fold."
  

• A group of respected economists for the London-based Centre for Economic Policy Research says that freer commerce, epitomized by the cutting of tariffs and the lifting of trade barriers, has boosted economic growth and lifted the incomes of rich and poor alike. The report says the proportion of the world's population in absolute poverty is now lower than it has ever been.

  The study seeks to refute the claims of anti-globalization campaigners that Western-dominated capitalism has damaged the world's poor in the name of profits for large, multinational and mainly U.S. companies. However, the European Commission, the European Union's executive body that commissioned the report, has issued a less-than-glowing response to the study.
  

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• The All-China Lawyers Association reports there are now 110,000 attorneys in China, up from 200 two decades ago.
  

• The SEC's new order requiring CEOs and CFOs of the nation's biggest companies to swear to the accuracy of their company's financial results cover only U.S. domiciled companies. U.S. companies based offshore, even though doing most of their business in the U.S., will be excluded. Some twenty insurance companies are in this category, as well as Tyco International and Global Crossing.
  

This Issue's Glossary of Terms:

Cash Conversion:
A method of converting trade credits, products or services into cash.

Cash Generator:
A property or asset which can be used to raise cash.