Christine Barrette of Gel Lights candle shop in Woonsocket trades some of her inventory with a local exchange company.
Swapping is a way to get goods, services without the cash
Christine Barrette had long been looking to unload some excess inventory from her specialty candle shop in Woonsocket. A bunch of inventory – about 9,000 candles, or $180,000 in retail value.
The seasonal candles – containing small ceramic figures that glow when lit – had been gathering dust for years at her Gel Lights Inc. warehouse following the rollout of several new product lines. Just before dumping the stuff on a liquidator at pennies on the dollar, Barrette stumbled on an idea that made her uneasy at first: What about trading them?
A friend had passed along a business card for Barter Bing, a Hope-based bartering exchange. It serves as a trading network for more than 100 local businesses and thousands more nationally, connecting disparate buyers and sellers in a cashless community where one person’s inventory glut is another’s treasure.
Since joining Barter Bing last month, Barrette has found three takers and is shedding $6,000 worth of surplus candles. Her return: $6,000 in credit to be used on anything the exchange has to offer – from hotel rooms and limousine service to office supplies and air-conditioning repair.
“I accumulated the credit using stuff that was just sitting here anyway, without pulling cash out of my pocket,” Barrette said. “To me it’s like found money.”
Barter Bing is one of about 500 retail trade exchanges in North America, helping facilitate a resurgent form of currency that is as old as commerce itself. Some 200,000 businesses are members of a formal exchange, bartering $2 billion in goods and services a year – an industry that’s growing 10 percent annually, according to a recent estimate from the National Association of Trade Exchanges.
While many companies trade their goods or services to other businesses in one-on-one deals, members of an exchange don’t trade with each other directly. Rather, in exchange for delivering products or services, each member receives credit that accumulates in an account.
For example, a restaurant might agree to trade $1,000 worth of gift certificates to another member. That money sits in the restaurant’s account until the owner spots something on the exchange that he or she would like to buy – linen services, perhaps, or a deejay to host a party.
The exchange operator matches buyers with sellers and tracks member accounts – for a fee. Exchanges take a percentage of the transaction, typically 12 percent to 15 percent, and usually charge an initiation fee or annual membership fee, according to the national association.
“We’re constantly brokering on behalf of our members,” says Barter Bing owner Bill Rosenberg, who launched the exchange in late 2001. “If we have members who say, ‘I need a printer or paper supplier,’ we actively pursue bringing those type of people in.”
Barter Bing takes 5 percent in both cash and trade from the buyer and seller – or a total of 20 percent on each transaction. It also charges a $250 annual membership fee, but gives that back in trade.
All trades are taxed as income: Trade exchanges are required by law to maintain tax records for each member and send out 1099B forms at tax time, according to Tom McDowell, executive director of the National Association of Trade Exchanges.
McDowell says exchanges must convince businesses that the trading network allows them to barter deals they never would have found on their own.
“You’re gaining business you probably wouldn’t have gotten, and that additional business allows you to purchase things you didn’t have the cash for before,” McDowell said.
Indeed, while an exchange serves as a clearinghouse for unwanted inventory, it also can generate new business by tracking down customers who often fall well outside of a seller’s usual target market.
“For startup companies, it’s like having a salesman,” says Martin Israelit, owner of Coldmasters Temperature Control Inc. in Providence. “Barter people don’t make money unless you make a deal with someone. So they’re always shaking the bushes, asking ‘What do you need today?’”
Coldmasters, however, is not a startup, having been in the heating and refrigeration business for more than 30 years. Israelit has plowed much of his trade credit – about $12,000 last year – into advertising, such as billboard space from Barter Bing member Lamar Advertising Co.
He also uses barter bucks at an East Providence body repair shop to fix dings in the company’s service trucks, and occasionally uses them to treat employees and clients. Israelit has given away concert tickets, gift baskets, weekend getaways – even VIP passes to the Foxy Lady gentlemen’s club. (In an ironic twist, the venerable Providence club is a member of Barter Bing, which is a play on the name of a strip club in the HBO series “The Sopranos.”)
Barter Bing is affiliated with more than 70 other trade exchanges throughout the country, giving members access to goods and services produced by 10,000 members via its Web site.
Access to the local market is foremost for most members – after all, free oil changes aren’t worth much if you have to travel 1,000 miles to get them. But many Barter Bing members have found success with out-of-state exchanges, Rosenberg said.
For example, about $1,000 worth of Barrette’s candles are being shipped to a company in Alaska that spotted Gel Candles through one of Barter Bing’s affiliated exchanges.
There can be downsides to a bartering exchange, though. Occasionally members will inflate the price of an item, Israelit said.
For example, he once used his barter credits to buy a fax machine for about twice the amount he would have been willing to spend in cash, simply because it was the only machine available.
“I wasn’t in a position to spend cash, but I had the points,” he says. “Sometimes it’s like having Las Vegas money; you feel a little less prudent with it.”
And big-ticket items can be hard to come by. If Israelit barters a job for $2,000, for example, he’ll likely have to use the credits a little bit at a time – a process that can be time-consuming, he said.
For that reason, Rosenberg says members are warned not to accumulate more trade dollars than they can comfortably use.
He cites the example of a Middletown appliance retailer who joined the exchange and quickly became inundated with trades.
“He got clobbered because everybody needed an appliance,” Rosenberg said. “Before he knew it, he had $20,000 in trade bucks. You’ve got to be careful and discrete in how you trade.”
It’s a trap Barrette says she plans to avoid as she unloads the rest of her candles.
As for what she’ll get with her $6,000 in credit, Barrette says that’s the fun part.
She plans to use at least part of it on her wedding – as soon as her fiancé, a Special Forces Ranger, returns from a two-year deployment in Iraq.
After trolling the Barter Bing Web site, Barrette already has her eye on a florist, a deejay and a limo.
“Before, I was going to eat the inventory and pay cash for my wedding,” she said. “So why not use the inventory and get part of my wedding for free?”
Mike Colias is a contributing writer to PBN.
