Bartering Makes Comeback As Economy Leaves Many Strapped

Trading goods and services allows companies to get what they need without cash.

By Valerie Miller
 
LAS VEGAS, NEVADA — As budgets shrink in the down economy, local businesspeople are discovering an old-fashioned way to get what they need without parting with hard-earned cash: bartering.

Some valley companies are flocking to barter and trade exchanges as the recession deepens. David Heller said business has jumped about 40 percent for his local ITEX trade franchise in just the last couple of months, he said.

Heller is accustomed to having to pursue potential members. The economy-driven interest seems to have caught him off-guard. "We get one or two calls a day, which is a lot, since we used to only get one or two calls a month," he said.

ITEX, which has 24,000 bartering and trading members nationally, is quickly expanding its 250-member base in the valley. Heller said he signed up a soon-to-open hotel in Las Vegas just before starting a telephone interview with a reporter. "We just cut a deal on $4 million of hotel rooms (stays) for a hotel now being built," Heller said, his voice full of enthusiasm. He declined to name the property.

That kind of a megadeal is not typical of what ITEXdoes, he quickly notes. For example, Heller just wrapped up another new membership deal with Patty Cakes, a small business that hosts little girls' tea parties. "I also have handymen and carpet cleaners," he said. Travel companies, resorts and restaurants, and all manner of professionals also trade with Heller. He acts as the broker.


David Keller, Las Vegas franchisee of ITEX Corporation, talks with Patty Cakes owner
Patty Zimmer about the bartering system his company enables.

Business owners can also use their trade dollars for personal purchases. "I did a wedding once where everything was on trade, from the photographer to the electrical stuff - the computer and the digital camera," he recalled. "Even the honeymoon was on trade."

Bartering offers its own economy in which cash is only used for paying a commission or an application fee. In ITEX's case, members are paid in ITEX trade dollars when they sell something through trade. They can spend those trade dollars with any other ITEX member.

 A 12 percent commission is typically charged on an ITEX deal. Half is due at the time of sale, and the other half is charged when the ITEX dollars are redeemed for a purchase. A "small" application fee is charged, Heller said without defining small. The ITEX dollars are deposited in a member's trade bank account to be used at their discretion.

Longtime barterer Larry Kozin has used ITEX for about 15 years to sell furniture. He has been trading for 27 years. He built up his trade account by bartering furniture, and used the trade dollars as needed. "At one point, I did $100,000 in barter in one day," he recalled. "I did my divorce on trade."

Kozin founded the Las Vegas-based National Chamber of Commerce. He is also a serial entrepreneur, starting furniture companies, selling them and starting over. Kids Beds was one of his most famous ventures. "I usually barter to open the business and later sell it," he said.

Kozin sees trading patterns, such as restaurants joining the bartering exchange only to earn enough credit for a remodeling or needed repair. Once the work is done, the eatery drops out until it needs more work on trade. The business then rejoins the exchange.

Las Vegas is popular among traders because out-of-state trade exchange members can use their trade dollars on Las Vegas resorts and motels. Locals can use their ITEX accounts for local or out-of-town getaways, said Heller, an 18-year barterer.

The recession has generated new interest in trade and business for trade brokers like Heller, but it has also made the membership screening stricter. He watches out for companies that may be too cash-strapped to do 100 percent trade. "I have a pretty high standard," he said. "One thing I look for is if the business isn't substantial enough and the first question they ask is, 'How much credit can I get?'"

He is also leery of those trying to break the ITEX rules of trade-credit only. "If you ask (an ITEX buyer), 'Can I get half cash and half trade?' you are out of the directory," he said.

Bartering may not work for low-margin businesses, such as grocery stores, Heller said, because their mark-ups are too low for bartering to be cost-effective. However, restaurants, hotels, advertising agencies and other service-oriented businesses tend to benefit from trade.

Paul Catania bartered solar screens and gift baskets through ITEX, and ended up generating cash anyway. "I did the baskets and solar screens on trade and (the buyers) gave me referrals," Catania said. "They weren't members of the ITEX organization, so I ended up getting cash from them."

Besides ITEX, Las Vegas is also host to rival trade network, International Monetary Fund (IMF), and chapters of the Barter Club. The latter hosts ads online for trades offered and trades wanted.

The club's Web site boasts the potential of bartering: "Barter today is in the high single-digit billions of dollars per year ... Barter brings new ideas to banking, allowing us to create ways to finance transactions that would otherwise go undone."

Heller agrees with the last part. "You might as well trade," he said, "because you can't sell yesterday's hours you didn't work."