In my post “Will Sharing The Customers’ Risk Become The New Customer Experience Best Practice?” I replied on February 10th that …
“As it relates to small business owners and the current economy I suspect that the age-old practice of bartering (with the help of the internet) will surface to a level not seen in the past.”
As it turns out a recent article in the Wall Street Journal (February 17th – “Barter Fits the Bill for Strapped Firms”) confirms that some small businesses are turning to barter to help survive the recession. Barter and trade exchanges provide the means to get business done while conserving cash. Since many small businesses are currently squeezed for cash and can’t get loans it’s logical they would turn to a payment system that helps reduce cash flow pain.
According to the WSJ article …
“In 2008 about 250,000 North American companies conducted barter transactions worth more than $16 billion, according to the International Reciprocal Trade Association … The amount for small businesses climbed to an estimated $11 billion last year from $10 billion in 2007.”
Bartering systems are not a cash flow cure-all and can be quite difficult for companies whose services aren’t widely used. During the difficult recession of the 1970’s the merchants and tradesmen doing business in the small Iowa town where I grew up set up a barter exchange. Of course this was long before the internet making the process back then clumsy at best. But my father owned a small appliance repair business at the time and even though I was just a teenager I can recall several transactions that helped pull the family business through during that critical time. My father still talks about those days, so I guess transactions made under those conditions lead to a memorable customer experience.
Hi Alan
If you go to, let’s say, less westernised economies, you will see bartering in widespread use. I worked in one for some months and quickly got used to goods being bartered by the roadside, often by weight. This will become more common as cash becomes tight but free time is increasingly available. It’s challenge for government’s to tax the value added though.
I remember hearing on the radio abut a chain of bartering that went something like: a factory produced tractors, these were ‘bartered’ to a company growing bananas, which in turn were bartered to a company making steel pipes, which were bartered to an oil refinery, which sold the oil on the open market, which allowed the factory to be paid at the start of the chain.
Don’t you just love human ingenuity in free markets? It reminds me so much of some of William Baumol’s writing on the subject, in books like, ‘The Free Market Innovation Machine’.
Graham Hill
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Nice article Alan,
Bartering and barter exchanges have certainly moved on from the 1970s. I’ve been actively involved with Merchants Barter Exchange for four years, and they have had the benefit and foresight of studying all the other barter companies out there and streamlining all the systems to create a true, 100% barter economy and alternative currency platform that can be expanded even globally!
This latest economic hiccup has only pumped more fertilizer on the bartering bedrock. It’s just my opinion, but I think the US economy has had quite a wake-up call with this latest recession, that barter will continue to gain a stronger foothold, even once the economy begins to rebound, simply because the People are still rebuilding their trust in the Administration and Treasury. We’re certainly seeing a HUGE increase in demand from businesses wanting to join AND individuals (like myself) wishing to purchase and run their own local MBE economy.
The economic situation has woken many people to the realization that we need to have a ‘back up’ to our dollar economy.
Again, good post! Thank you.