Have it all - without cash

SUN JOURNAL

Barter: Exchanges are springing up all over the country, bringing the age-old practice into the 21st century.

February 22, 2004|By Marego Athans | Marego Athans,SUN NATIONAL STAFF

NEW YORK - Lois Dale is a stylish Manhattanite who collects chunky silver jewelry, sees almost all the shows, dines at choice restaurants and hops around to exotic resorts - all without opening her wallet.

"I live my life on barter," says the spunky, 5-foot-3-inch consummate deal-maker, who is part of a growing network of people working and playing in a largely cashless universe.

Dale, 57, runs Barter Advantage, one of hundreds of exchanges around the country that have emerged in recent years that take the age-old concept of barter - neighbors swapping chickens for a hog, for instance - to new, sophisticated, IRS-approved heights.

Instead of simple swapping, the exchanges offer what's called round-robin trading, allowing members to barter their products and services for credits that they can later spend on whatever they want - from travel to office supplies to dental work - as long as it's offered within the network.

"A lot of small businesses have done this over the years with friends and neighbors," says Perry Constantinides, president and CEO of Kensington-based Barter Systems Inc., whose 1,200 members cover the Baltimore-Washington area. "All we did was organize it into a clearinghouse arrangement, and that got them even more excited."

The exchanges, which allow businesses to preserve cash while expanding their client base, typically charge a membership fee and a percentage of each purchase and sale - 6 percent at Barter Advantage.

"I'm a matchmaker at heart," says Dale, who started the company in 1980 and likes to point out that she gave birth to her daughter Jordana, now 16, on barter by arranging for the renovation of her doctor's office in exchange for delivery expenses not covered by insurance. "I took the personal aspect of matchmaking that I did informally and applied the concept to B-to-B [business-to-business]."

"Now," adds Dale, who is divorced, "I'm waiting to barter myself a husband."

The New York-based exchange is made up of about 2,000 small businesses - with access to 90,000 businesses through its membership in an international trade exchange - among them a furrier, a moving company, a company that rents out office space, painters, general contractors, printers, a designer of bridal gowns, 15 dentists and a dental lab.

Carolyn Goodridge, an artist who paints abstract landscapes using pigmented beeswax, sold $16,000 in artwork shortly after she joined the exchange last November, most of it at the network's holiday fair, where members go to shop for gifts. Before she joined the exchange, it typically took her more than a year to sell that much art.

As the single mother of twin teen-age girls, Goodridge, 43, works full time as a human resources manager and doesn't have the money or know-how to market her artwork.

But now that she has thousands of barter credits, she has arranged to meet with a business consultant, a Wharton business school graduate who charges $250 an hour.

"Would I be able to afford that right now? No, but I have the credits," she says. "I went to art school, not business school. I would like to hear from the big boys how it's done."

Also, she says, her daughters' 16th birthday is coming up and they want dinner at a fancy restaurant, a Broadway play and a ride in a limousine - not cheap, but all things that she can get through the barter exchange.

Bartering, once relegated to an underground economy, gained legitimacy with a 1982 Internal Revenue Service ruling that requires exchanges to report the barter income of each member. For tax purposes, barter dollars are treated as cash.

The practice, which got a boost during recent recessions when cash was tight, grew 12 percent in 2001 over the previous year, according to the International Reciprocal Trade Association, an industry trade group in Rochester, N.Y.

A survey by the association suggests that businesses traded $7.87 billion through barter companies in 2001, the latest year for which data are available. The industry counts about 800 barter exchanges worldwide, about 450 of them in the United States.

Bartering among corporations has been a common practice for more than 40 years, typically involving the purchase of a manufacturer's unsold inventory at wholesale prices in exchange for trade credits.

Retail bartering, a more recent phenomenon, has been aided somewhat by the Internet, particularly among younger barterers who are more comfortable than their elders doing business by way of point and click.

The idea so enticed venture capitalists a few years ago that they poured millions into start-up Internet barter exchanges with the idea of launching the barter-equivalent of e-Bay. But the barter market stuck to its local, low-tech roots.

"They accomplished virtually nothing," says Bob Meyer, publisher of Barter News magazine. Meyer is a wealth of information on everything barter, including the fact that piano lessons were traded for 4,000 acres in Southern California in the mid-1800s.

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