Businesses see value in bartering with each other in good times, bad - East Valley Tribune: Ahwatukee Foothills

Businesses see value in bartering with each other in good times, bad

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Posted: Sunday, May 8, 2011 7:45 am | Updated: 3:22 pm, Fri Sep 16, 2011.

Arizona Trade Exchange is growing. A business-to-business barter network, the Mesa-based company offers hundreds of businesses and individuals an advantage in the weathered economy.

Maxed out in its old facility, the group recently moved into a bigger location. Rob Miller, president of Arizona Trade Exchange, said this will allow the company to hire three more trade brokers and build a sales staff, adding to the eight employees that already work there.

The economy has failed to stunt the company’s growth. “It’s clearly a recession-proof business, because ours is up big time,” he said.

Miller claims that business “took a big jump recently” and boasted that there’s never been a layoff at his company, which he started in 1999. In fact, Miller said trade volume last year was approximately 7.5 million credits.

“Once people get into this industry, they never leave,” he said.

Arizona Trade Exchange helps its members – mostly small businesses – avoid spending real cash; instead, “trade credits” are used when any one of the about 700 members buys something another member of the network provides. These credits can be used on a service or product, anything ranging from doctors to florists, from go-kart racing to grout staining. The only cash one pays is the sales tax for a product – services aren’t taxed.

To get into the exchange, a member pays a one-time membership fee of $495, a $20 monthly maintenance fee and a 12 percent commission whenever they spend their trade credits.

Miller said that, on average, each member spends about 1,100 trade credits per month.

How members earn credits is easy: they sell their own services or inventory for trade credits, which they can then spend. Typically, these products or services are excess inventory and, as long as the item has enough profit margin, it’s worth using it to trade.

For example, a restaurant may see only 70 percent of its tables full on a weekday night. By bartering the excess capacity of 30 percent for trade credits, the members who obtain the credits fill the empty tables. The restaurant can at least get some profit, even if it’s only half as much. In fact, the lowest profit margin for a product or service the company will approve is 50 percent. What you won’t find on the network are products with small profit margins, such as computers.

The exchange also establishes a referral network. The company is selective about the types of businesses it includes in its network, and the number of similar businesses. If it had too many massage therapists, for example, that wouldn’t serve the member businesses.

Miller claims that, typically, members see a 2 to 5 percent increase in cash sales in the first 60 to 90 days. The sales bump often has nothing  to do with trade credits, but comes from peripheral spending (like a hot dog bought during a bartered-for round of golf) or referrals to customers not in the network (like a neighbor of a member).

“It’s fun,” said Miller. “You’re helping people and you’re doing a business owner good.”

Ed Bonadio has been in Arizona Trade Exchange’s network from the start. He’s the company’s oldest acting member and, since 2001, has been selling jewelry on the network.

“My wife and I go out once or twice a week and barter money for dining at restaurants,” said Bonadio. “I barter for landscaping, electric, fencing, trees, shrubs, a soft water system, grout cleaning and resealing, alarm system …”

Bonadio estimates that he makes about 20,000 trade credits each year from selling mostly watches. Of that, the 64-year-old said he might spend 13,000 to 15,000 annually. Planning to use about 6,000 in trade credits on an upcoming event, he said he’s saving about $4,000 he would otherwise spend in cash outside of the network.

Business-to-business barter networks, like Arizona Trade Exchange, have been around for a long time. But the economic recession pressed companies and individuals to really increase the use of an exchange networks’ money-saving services.

Miller claims that, nationwide, trade companies are doing somewhere between $8 billion and $14 billion a year in transactions.

Even if the economy stabilizes and money is easier to come by, he is optimistic about growth.

“I had a member tell me that in good times he could afford to trade and in bad times he has to trade,” Miller said. “Regardless of the state of the economy, our service is helping him.”

Lori Davis-Mundo is the owner of a flooring and decorative coating company called Amazon Coatings. She’s been with the barter network for since her company started about 10 years ago, and has noticed growth in the network.

“You’re dealing with people you know and you have a great referral system,” said Davis-Mundo. “In the last few years, I’ve seen the membership grow tremendously.”

She said she doesn’t do all of her business on trade, although she routinely uses it for services. Her company represents the typical small company that is benefitting from this network in hard times, and, as she’s even used it in good times, she said it will continue to be a part of business.

“(We) will continue to grow,” said Miller. “We will bring you business. We guarantee that.”

Correction: Members of the Arizona Trade Exchange do not purchase credits. Rather, they trade services or goods with other members, and one trade credit is worth one U.S. dollar. The exchange does not control the profit margin associated with members' businesses.

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