Barter

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Bartering: A New/Old Way of Doing Business

Bar¶ter vb: "to trade by exchanging one commodity for another." Bartering is the oldest known form of a business transaction, and it is a time-proven strategy gaining popularity within the aftermarket industry.

Why? Case in point: Let's say your company is an aftermarket manufacturer with an excess inventory of product, or a retailer owner who suddenly finds he/she has an overabundance of the "latest" hot item that's collecting dust in the stockroom. What do you do? Continue to let the inventory eat away at your cash flow? Mark the price down, and take a loss? Ignore the problem, and hope everything will eventually sell? Or, as several aftermarket companies are doing, barter for something your company currently needs?

Bartering can solve some of a company's most pressing problems. It can lower the risks of over- or under-ordering by allowing barter to absorb any leftover product, and corporate barter companies can also help ease a client's financial burden by eliminating markdowns by exchanging a product for trade credits valued up to full wholesale.

A company can use its excess inventory to help pay for an advertising campaign, a computer network, a telecommunications system or even a new truck - just about any needed business product or service.

Manufacturers in the aftermarket industry have benefited from barter companies' solutions to guard against red ink.

One barter company involved worldwide in the aftermarket industry maintains an extensive inventory of common denominator goods and services which can be utilized by almost any company. We take a company's excess inventory and remarket it outside the usual marketplace to protect existing business as well as opening up new territories for the company. If a company needs something which is not currently in our barter company's inventory, we will seek it out on a trade basis exclusively for the company.

One of the advantages of bartering - besides reducing the red-ink factor is - that one-on-one trading isn't the rule. A barter firm places the items you need to unload into a "barter pool." You then receive barter or trade credits which can be used immediately, or at a later date, to purchase completely unrelated items within the "pool."

Example: If a wheel manufacturers is faced with 1 million Sfr. in excess inventory, the barter company becomes the buyer and pays the company with barter credits. The wheel company then applies the credit in payment for products, materials and services available in the barter company's trading network. To illustrate, the barter company might trade for 5 million Sfr. in specialty steel, and instead of paying all cash, the wheel manufacturer would pay 4 million Sfr. in cash, the remaining 1 million Sfr. paid using the trade credits.

Today, virtually any product or service can be exchanged for others via a legal corporate trade/barter transaction. According to the information published, American companies will conduct barter transactions totaling 5 to 10 billion dollars in 1993. Barter is the best way for a company to maximize the value of excess inventory. Barter companies can quite often come up with the perfect solutions to some of the most disturbing problems plaguing a company by offering trade credits for an inventory. The main thing is to believe that every product has a value.

10 Good Reasons to Barter

To dispose of excess inventory at full value;

To profitably utilize excess products capacity in exchange for goods and services;

To restore value to outmoded packing rather than taking a write-off;

To swap idle production time for incremental sales;

To dispose of seasonal inventories at full value rather than liquidating at a discount;

To salvage a canceled order when the purchaser has reconsidered;

To dispose of buy-back or lift-out inventories in a discrete and profitable manners;

To remarket return merchandise without affecting existing distribution channels;

To expand distribution channels beyond existing cash clients, while developing future incremental cash-paying customers;

. To resolve cash payment problems with third-world countries.

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