Inventory Management
In an industry where it takes just months for a product to become obsolete,
more and more companies are turning to barter to get rid of their excess inventory and boost their bottom line. |
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| Turning Excess into Success |
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For Matthew Sethi, it was pricing error that first led him to bartering.
Sethi, the vice president of marketing for Innovation Computers, a $44 million computer sales and service company
based in Deerfield Beach, FL, said because of the error, its main distributor owed the company $10,000. The distributor
couldn't pay the $10.000 in cash, so it offered Innovation Computers $20,000 in trade credit through the National Trade
Association (NTA), located in Niles, IL. Sethi took the deal and ended up using the trade credit to purchase advertising space, This first experience in bartering
got him hooked. Now, Sethi regularly trades his company's excess inventory for items that have ranged from 500 gift
baskets to a forklift. In other deals, he has had cash costs reduced by using trade, such as when his company used
barter to offset printing costs by 40 percent for a run of 250,000 catalogs.
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| The Power of Trade |
Levy is a firm believer in the power of the trade, "I'm an
optimistic person." he noted, "and believe you can always find someone to trade with." He is currently helping a
client trade for a 737 jet. Levy's own bartering has garnered him items including a 54-foot yacht, a 40,000
square foot warehouse in Southern California and a 16-unit hotel in New Mexico. However, bartering is not
only used for personal gain. Sethi sent one of his employees to a top resort in Barbados, paying for the
accommodation and airline ticket on full trade. Indeed, the network of goods and services available through
barter is growing. Today's barter exchange may have as many as a few thousand members nationwide.
Nevertheless, as bartering becomes more popular, some barter exchanges are starting to trade with each other,
further expanding the opportunities available to their members. |
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| Full Trade Bartering |
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While some people frequently mix
barter and cash in the same deal, others prefer full trade barters. One such person is John Levy, the part-owner and
president of two Elkhart Indiana companies, Romaine and Market Development Specialists, and the former owner of a
chain of 31 computer stores. When people are not in a hurry, Levy explained, there is usually someone willing to do a
full trade. Levy estimated he has done at least $40 million in trades since 1984, and said he barters for goods and
services "Any chance that I possibly can," He calculated that Romaine, which sells cold compression bandages for
swelling and burns, had about $250,000 in barter last year. Levy also estimated Market Development Specialists, a
consulting firm that specializes in marketing, advertising, inventory control and management issues for computer
companies, bartered nearly $2.5 million last year. Levy often turns to barter for his clients, as well. "The moment we
find something we need in a company, the first thing we ask is, 'Can we barter for it?'" |
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| The Benefits of Bartering |
By bartering, computer businesses can acquire the goods or
services they need while conserving cash and reducing expenses. For example, a company can pay $10,000 for a
printing job with $5,000 in cash and $5,000 in barter trade credit. The credit may be inventory that only cost $3,000.
Therefore, the company reduced their printing expenses by $2,000 on a single job, resulting in an overall savings
of 20 percent. Bartering further bolsters the bottom line by enabling businesses to trade away excess inventory
or resources. Through bartering, manufacturers can receive up to full wholesale for their goods. Compare this to
cash liquidation, which may return just pennies on the dollar, Instead of taking a 60 to 70 percent loss on an item,
Levy stressed, he earns credit for the full value through barter. Bartering also provides another way of advertising.
By bringing together buyers and sellers who may not have used each other's services before, bartering can introduce
a company to new customers. These may be one-time customers, or people who come back to purchase items after
they are acquainted with the business.
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