Next generation Bartering
One day my wife told me that her friend offered her to teach swimming. This was in return for taking care of her aquarium while she was away on vacation. My wife said 'what an offer', to which I said 'what a Barter'.
The barter system for getting goods and services dates back many centuries. In most cultures the barter system was used before money was created. What makes the barter system even better today than ever before is that it can now be done globally.
There are examples of property bartering system popular in Dubai to swap their lands as per their convenience and deal. Interesting?
Musician Joel P.West launched his record Dust Jacket and the record is available only through the barter system. It mentions that To receive the free download, send in something of your own creation that describes a part of you. It could be a candid thought or a journal entry, a drawing you've been working on for months or a photograph you accidentally took thirty seconds ago. It could be a song or video, an image of something you are building, or it could even be a single word.
I think Bartering is widespread now. In 2008, China signed a barter deal with the Democratic Republic of the Congo worth $9bn to build the country's infrastructure in return for a slice of its mineral wealth. Both parties held the deal up as a win-win. China needs raw materials for its industries and DR Congo does not have the money to pay to upgrade its infrastructure. (BBC, 14 April 2008)
Bartering can also be used by businesses that are seasonal in nature such as resort hotels. A bartered hotel room is more cost effective than an empty one. Bartering thus allows businesses to capitalize on unproductive assets and spare or unused capacity. With a large exchange, it is possible to barter pretty much anything.
Bartering is a win-win situation for the individuals and businesses. Following are the benefits of bartering for individuals and businesses:
Benefits of bartering for individuals
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Save money
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Recycling
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Build relationships
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Spring cleaning
Benefits of bartering for Businesses
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Conserve cash.
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Generate new business.
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Turn excess and idle inventory into useful products and services.
There are several bartering websites which allow online transactions:
Let's take a plunge to see how these websites work. Few websites allow Items to be exchanged for items or skills, however some of the websites allow transacting with cash as well. Below table explains the mode along with some examples:
What Can be Swapped?
|
Items/Skills |
Cash |
|
Items/Skills |
Items/Skills |
|
Items/Skills |
Items/Skills + Cash |
Example:
|
Items/Skills |
Mode of payment |
|
Textbooks |
Cash |
|
Grassmowing |
Cash |
|
Computer Repair |
Used Games |
This is growing up at good pace. Infact the barter industry have 450,000 businesses worldwide turning over US$9 billion per annum (barternews.com, 9 July 2009). This has grown up over the past years of recession when there was cash crunch however Companies should focus on utilizing this new mode of commerce and drive innovative ways to do online business and reduce cost.
Can you suggest some innovative ways of bartering which can help various companies in different sectors? I term it as Barter e-Commerce or B-Commerce. What do you think?
Comments
I think this is a great piece.
It would be interesting to see how barters are assessed. For example - in the China-Congo deal, how did the business case look like for both the parties. In cash transactions, the value of cash is fixed & you exchange a product or a service with a declared value. Net-net you are exchanging known values. In case of barter, both the values are unknown or undeclared. Let me explain what i mean by this.
Undeclared value: The China-Congo deal involves undeclared values on both the sides. China would have easily arrived at the price of raw materials as well as the cost of building the infrastructure. In fact US has been doing this sort of barter for a long time with under-developed oil producing nations, though its very complex in nature & topic for a separate blog :-).
Unknown value: In a scenario where laymen are bartering, both the sides may not be sure of the value of goods/services they are exchanging. It may boil down to a "degree of want" for the goods/services. At the end of the day, one may not be sure on the fairness of the barter.
Do you see a scope of creating a barter exchange where everything gets valuated so that consumers are sure of the fairness of barter? How about a barter auction, where a consumer can put the item he/she holds & wants to barter and people respond with the items they are willing to part with for the item on auction?
Posted by: Ritesh Arora | June 2, 2010 4:28 AM
Another good example : Tata Motors in barter deal for Commonwealth Games : http://economictimes.indiatimes.com/articleshow/6217126.cms
Posted by: Manish | July 26, 2010 4:54 AM