Networks Foster No-Cash Trading Of Goods And
ILLINOIS — Like most small businesses these days, Michael
Martin has had some empty tables at his Le Peep restaurants in Chicago
and Mount Prospect.
But instead of letting them sit idle, he allows members of the International Monetary Systems (IMS), a bartering network based in New Berlin, Wisconsin, to eat at his restaurants and pay for their meals with exchange currency. In return, he uses the currency to buy goods and services from other exchange members. Martin recently accumulated enough exchange dollars to put in new air conditioning in his West Loop restaurant, cutting his cash outlay to $3,000 from $6,000.
"It has definitely helped us minimize astronomical costs in the last year," he said. He also used exchange dollars to pay for carpet cleaning, repair work on delivery cars, business cards, restaurant menus and advertising.
Martin's is one of a growing number of small businesses turning to alternative currency systems to generate revenue streams during a down economy, experts said. More than $8 billion in international trade is conducted on a non-cash basis annually, according to the International Reciprocal Trade Association.
By joining a barter network, small businesses also find customers who might otherwise not purchase from them. That's making barter networks more enticing during the recession.
"Barter is good in good times and great in bad times," said Don Mardak, president and chief executive of IMS, which has 18,000 clients representing 23,000 cardholders. "People still have talents and abilities and the capacity to do business. We're giving them a secondary currency."
The company processed $114 million in barter transactions last year and generated $14 million in revenue, collecting transaction fees of 6 percent from both buyers and sellers.
ITEX Corporation, a barter company based in Bellevue, Washington, with offices in Chicago, reports an increase in membership registration of 47 percent over last year, though its trade volume is about the same because exchange members use their barter dollars judiciously in the tough economy.
|In boom times, they're more likely to spend
exchange dollars freely on expensive trips or jewelry. Now, however,
they using the currency to purchase necessities, including health-care
services such as dentistry and optometry, said Alan Zimmelman, ITEX
In 2005, Susan Conrad joined the Illinois Trade Association in 2005 (now part of International Monetary Systems) after acquiring a Money Mailer franchise that was part of the exchange.
"We joined through necessity to keep customers," the owner of Money Mailer of Greater Woodfield said. At first, Conrad wasn't sure what to do with the exchange dollars, which account for about 5 percent of the company's revenue.
Since then, she has used them to pay for oil changes, pest control, eyeglasses, apparel, meals, vitamins, makeup and Christmas presents. "It has totally affected the way we shop," she said.
She typically buys more than $20,000 in goods and services with exchange dollars, she said. This year, due to the economy, "we're holding them closer and using them more carefully." Conrad also has picked up new clients for her direct-mail business. "We meet a lot of small businesses through it," she said.
Connecting small businesses is a focus of Art Of Barter, a trade exchange based in Elgin, with 1,400 small-business clients throughout the Chicago area. Developing a sense of community among barter members helps boost loyalty, co-owner John Hora said.
"People will go out of their way to eat at your restaurant because you're in the family," Hora said. "It's a covenant." He recommends companies limit their trade dollar intake to 10 percent of their total business.