Bartering networks provide liquidity in cash-starved economy

Bartering networks provide liquidity in cash-starved economy

March 2nd, 2010 by Ellis Smith in Businesstopstory

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.'"