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The weekly newsletter for everyone interested in barter--the world's most versatile business tool!

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January 7, 2003

Written by Bob Meyer, Editor of BarterNews

Retailers Use Their Scrip (Gift Certificates & Gift Cards) To Boost Profits

Retailers, who painted themselves in the corner in recent years by discounting earlier and earlier around the holidays, have found another way to profit...sell the harried shoppers on the idea of providing a gift certificate to a loved one, then let the recipient do the selecting of gifts.

That's exactly what's happening, according to a Bain & Company study which shows that retailers are increasingly pushing the use of their own scrip, i.e. gift certificates and gift cards, on shoppers.

Bain reports the use of these certificates grew almost 20% this year to about $36 billion, as hundreds of smaller retail and restaurant chains moved in this profitable direction by installing the necessary transaction systems for their first holiday season with these offerings.

These figures are more impressive considering that gift certificate sales are recorded only after the recipient redeems them--which is an accounting rule that all retailers agreed to go by in 2000.

Certificates Aid Profits

Retailers report between 60% to 75% of gift cards and/or certificates are redeemed within a month, and the value is spent on frivolous, full-priced items. (And of course, breakage will occur.)

So, bottomline, the so-called "Week After" which was once rather bleak for retailers because of returns and deep discounts is changing. They're now capitalizing on the week-after (post Christmas) mall traffic, and the gift card/certificate craze looks to make this week one of their most profitable.

Outlook: How long will it take for the trend to grow substantially, as entrepreneurs everywhere see the value of promoting and selling their gift certificates or scrip? Not only for cash during the holidays, but utilizing scrip with valued employees, as well as with selected vendors and suppliers.

Trade exchange owners can duplicate this growing trend as well, by providing sub-accounts to the members (who would open a separate account for a valued employee or vendor), thus increasing trade activity.


Offsets Prevalent In Central and East Europe

A week ago Poland decided to purchase 48 F-16 Falcons from Lockheed Martin Corporation--an American defense contractor. The $3.5 billion purchase included a massive offset program, i.e. purchases from Polish manufacturers that more than erased the costs of the deal in foreign exchange.

(Offsets that include co-production, licensing, subcontracting and joint ventures, are not uncommon in the defense industry.)

According to numerous studies, barter-like arrangements (known throughout the region as "compensation") constitute between 20% and 40% of all transactions in the economies of the former Soviet bloc. Corporate debts to suppliers, payments for goods and services, even taxes, all have a non-cash component or are entirely demonetized.


Product Placement To Be Values Same As Commercials

A new company, iTVX, intends to put dollar signs on product placements in much the same way that commercials are valued.

They have developed a scale of product exposure levels. The lowest level, level 1, is simply a clear product logo in the back-ground of a shot or a scene. A level 3 would be a "background plus a close-up" that includes the product.

Level 6 would include not only a product close-up but also a "hands-on" interaction by one of the actors. Level 9 adds a verbal mention to the hands-on interaction. And at Level 10, the ultimate in product placement, a show's entire episode is written around a product.

iTVX will offer clients information on placements in any show on the six broadcast networks as well as on HBO, Lifetime and Discovery. According to Frank Zazza, the 20-year placement veteran who heads iTVX, "You now have the ability for a network and a marketer to do business together. And you can pay by performance, after the placement appears, just like a commercial." For more information: www.iTVX.com.


Ambitious Out-of-Home Advertising Slated For New York Subways

Clear Channel Communications plans on installing 100 digital screens, 3 feet high by 5 feet wide, at the entrances to Manhattan subway stations. The cost of the screens will be around $45,000 each. (Digital LED displays cost up to 10 times the cost of static versions).

A major advantage of digital screens is that messages can be changed instantly from a central control point, and multiple advertisers can be signed up since the display cycles through several messages.

Advertising rates have not been set yet.


Here's A Way To Guarantee Advertising Revenue!

The Sinclair Broadcast Group is investing $20 million in Summa Holdings Ltd., a car dealership holding-company controlled by Sinclair CEO David Smith.

Sinclair won't be involved in Summa's day-to-day management or operations but will take a board seat. Summa expects to use proceeds from the investment to acquire automobile dealerships. And they will maintain a certain amount of advertising with Sinclair's television stations.


"There are only two options regarding commitment. You're either in or you're out. There's no such thing as life in between."

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For two decades the highly effective Competitive Edge newsletter has been used by the top trade exchanges in the country...professionally written and designed, it's also the inexpensive answer for a busy, growing exchange like yours.

Check it out...click here to see a sample copy.

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Get New Money-Making Ideas, and Valuable Contacts!

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Here And There. . .
  • Our lead story this issue on scrip and gift certificates shows the growing use of such instruments. More entrepreneurs should realize the value of using their own currency...the FastStart Barter Program I devotes an entire chapter to this subject. Included are the 21 advantages of using scrip, 9 ways to obtain scrip, as well as samples of scrip and due bills.

  • Venture capital funding is down 60% according to a recent Ernst & Young/Venture One report. Currently, an estimated $90 billion in committed capital remains in the venture pipeline, with the majority of investments going towards shoring up existing venture-backed companies rather than to launch start-ups.
  • Three of the nation's biggest media companies (NBC, CBS & Fox) told federal regulators that the government's media-ownership rules are anachronistic and should be ended. FCC Chairman Michael Powell has hinted that he may be willing to drop or substantially modify many of the rules, which were designed to ensure diversity of voices and viewpoints and prevent individual companies from amassing too much control over what Americans see, hear, and read.

    Today, thanks to the Internet and technologies like digital television, the rules are simply outdated (according to the media companies), and policy makers should rely on the Federal Trade Commission and Justice Department to use antitrust laws to prevent unhealthy levels of consolidation.

  • Two men were indicted in Sacramento on a $60 million online investment scheme--offering prime bank notes that didn't exist. This scheme has been around for decades.

    They operate by claiming to know of world-famous people (financiers) with connections which will enable you to earn 25% or more per month on your investment. However, they tell you that because the individuals behind this are so big, they can't divulge who they are! Run in the opposite direction when approached on this one.

  • Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner) to sign up!

  • Citigroup is purchasing 8.3% of China's second biggest publicly traded bank, its first such purchase in a country where it has operated for a century. (The purchase represents the fourth time China has allowed a foreign bank to buy a stake in one of its lenders.)

  • Stocks lost ground in 2002 for the third consecutive year, only the fourth time that's happened since 1900. In all, investors now are out some $7.2 trillion since the market first cracked in early 2000, based on the cumulative fall in the Wilshire 5000, a total-market index.

    Even if stocks generate what many prognosticators expect will be 9% average annual total returns (market gains plus dividends) it will take until early 2009 to regain all the lost ground.

  • Credit-card companies, armed with an array of member points and perks, have overtaken airlines and their frequent-flier programs for the number of participants, according to a survey by InsightExpress, an online market-research firm based in Stamford (CT).

    Of the people polled, 27% said they belonged to a credit-card issuer's loyalty program, followed by 19% loyal to an airline. Restaurants had 15%, followed by 12% who belonged to a hotel program. More than half said rewards for products and services were the main reason they joined a customer-loyalty program.

  • Satellite TV companies added almost 10% more customers last year, and now serve 21.1 million homes. Cable's portion of the pay-TV market still dominates, being in 68.8 million homes...but their growth is much slower, up less than 1% for the year.

  • The $91 billion foreign-tourism industry in the U.S. contends our nation's perception of having become "Fortress America" will cost us bigtime. Travel to the U.S. was down 17% in the first six months of 2002, and more than 345,000 tourism-related jobs have been lost since the attacks.

  • A Sacramento-based entrepreneur, Tom Langeland, has erected 10 billboards that can display both video and text and can be programmed with changing messages and images. The billboards include fledgling technology that is designed to identify the radio frequencies of passers-by. By deducing demographic information from the radio stations the drivers are listening to, the billboard can then display advertising aimed at them based on their income, sex, race, and buying habits.
     

  • The idea is not to single out individuals but drivers en masse, i.e. if a preponderance of rush-hour drivers are tuned to a radio station known to have affluent or educated listeners, the advertisements at that time would be aimed at such consumers.


We welcome your comments, questions, and observations.
? Copyright BarterNews 2003. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.