published Tuesday, March 2nd, 2010

Bartering networks provide liquidity in cash-starved economy

Audio clip

Jurgen Mootz

When Pilgrims landed at America's shores, they bartered pelts for corn they needed to survive their first winter.

Some business owners are now returning to this non-cash system of exchange in an attempt to soldier through an economic winter.

Sophisticated electronic trade exchanges and business-to-business -- or B2B -- barter networks serve as the centerpiece of modern-day bartering.

Publicly traded International Monetary Systems, which claims nearly 450 Chattanooga members, operates the largest barter exchange in the U.S., according to CEO Don Mardak.

"It doesn't often happen that two parties have the exact need at the exact same time, so we've created a virtual currency called trade dollars," said Mr. Mardak. "We've created a secondary economy within the economy."

Membership continues growing at the rate of about four a month, said Donna Burlingham, one of two brokers at the local IMS office.

"We have some manufacturers, we have some distributors, we have people who provide service and people who provide product," she said.

Wisconsin-based IMS processed $110 million in barter transactions and earned $14 million in revenue last year, according to SEC filings.

But IMS isn't the only barter broker in town. Tradebank, a Lawrenceville, Ga.-based private company operating primarily in the Southeast, claims 500 Chattanooga businesses as network members. The list, which includes AJ's Plumbing and the Pickle Barrel, counts members in every category of business, from duct cleaning to wedding services.

"We have a thing called trade university where we actually teach you how to barter," said Jurgen Mootz, regional owner of Tradebank's Chattanooga office. "As far as adding members, it has doubled from what it used to be; In the last six months it has taken off."

Darla Blose, owner of Aqua Pool Service in Cleveland, Tenn., said when the going gets tough, the tough learn to barter.

"I was a little skeptical at first, but I've had no problems with it," she said. "The incentive is that people nowadays are looking for ways to get things done without having to spend money, because everybody's having a hard time with their money right now."

Ken Grimes barters his limo service during off-peak hours in exchange for legal services, jewelry, travel, pest control, home improvement, office furniture and restaurant meals.

"It puts cars out on the road working as well as drivers out on the road working where otherwise they may be sitting still," said Mr. Grimes.

Landscaping company owner Glenn Wilser believes that the barter network has helped boost his business.

"The way I usually look at it is: It's business I wouldn't have gotten otherwise, so the fees that you pay are sort of like advertising, so you just kind of have to write it off as that," Mr. Wilser said.

While fees vary, participants typically pay a quarterly membership fee, as well a 10 to 12 percent transaction fee to be part of the network.

"You have to limit yourself; you have to bring in enough real cash to pay the bills," Mr. Wilser said. "If I took on every (barter) job that somebody wanted, I would go bankrupt, so you just have to say 'No, I'm not taking any more trade right now.'"

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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K_St87 said...

Yes, bartering is coming back. This "new" trend offers a great opportunity to save time and money. At first, I was skeptic, but after a while I saw that it's really worth it. I tried my first barter at http://www.barterquest. com - it was so easy to find a trading partner, as you have the possibility to link your own items. Now, I would never ever think about storing our throwing away stuff, which is still usable!

March 2, 2010 at 9:04 a.m.

Jct: How in the world are barter networks that rely on raking a percentage of every transaction going to compete with community currencies that rely on a one-time service charge? Who in their right mind would pay an 8% fee on every transaction to use barter credits when they can pay a small one-time service charge to use LETS credits interest-free?

March 2, 2010 at 1:26 p.m.
plumbbob said...

This was tried during the 1980s and the government broke up the movement by imposing an "income tax" on all bartered items and goods. The IRS can declare bartered items and goods as "income" for the same reason they can declare wages as "income". Although in reality, a wage represents nothing more than a bartered item given in exchange for time spent on a job. The way the courts and the The IRS look at it, they can can declare virtually anything as income because the tax code (Title 26) contains no defintion of what "income" actually consist of.

March 2, 2010 at 6:26 p.m.
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