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May 30,
2006
Written
by Bob Meyer, Editor of BarterNews
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From the desk of Bob
Meyer...
05/30/06
The following letter
was received from Peter Tucker, President of CTEX in
Toronto, Canada. His response to my comments (on how
algorithms will be a positive assist for the barter world)
in this section of the May 16 issue, asks the question:
“Is Barter
Industry Ready For The Coming Technology Tsunami?”
Bob,
In the recent Tuesday Report article on
www.Swaptree.com, I found it interesting that
they’ve developed technology with sophisticated algorithms
to pull off direct trades between more than two parties.
It’s all done for free (cashless) with no rules and
regulations or protective manipulations by barter companies.
Not everything is available yet, but the implication is that
it will be some day.
And maybe a financial giant might just want to have their
credit card banner ad front-and-centre to help visitors
complete their transactions (taking it to the next level of
growth).
So as we see this progress, what does this say about the
future of the commercial barter model? Does the barter
industry have a breakwater to protect it from the
tsunami-like effects of Internet technology flooding its
market?
Or will the industry be washed away virtually overnight when
these technologies hit the beach? Travel online went from
zero to $100 billion annually in a handful of years.
Meanwhile the barter industry has some breathing room, as
this new software has yet to overcome the pricing issues
between items of differing value. But given that they’ve
nailed the trading of products down to UPC bar codes—used on
just about everything we buy—I would assume any other
pricing challenges will be solved.
Perhaps the one thing the barter industry has still, is it’s
collective database of a million clients. Yet we still have
not come up with a formula to combine and multiply. Will we
do that?
Peter Tucker, President
CTEX Group
http://www.ctex.com
Dear Peter,
I agree, the industry’s collective database is impressive.
It’s been an extraordinary achievement, given their
under-capitalization. As you know, these individuals are
extremely entrepreneurial, and getting them to collectively
agree on something is like the proverbial “herding of cats.”
At this time I see no evidence of any serious collective
thinking toward your suggested strategy of combining and
multiplying. As you’ve read the article “Suplizio Addresses
Biggest Challenge Facing Barter Industry” (found on the
bottom of our home page), you know that Paul Suplizio has
advocated such a collective effort.
Years ago, some within the industry suggested a move in this
direction would parallel MasterCard’s network through which
card transactions are processed. MasterCard is owned by
thousands of financial institutions, and yet these same
banks continue to compete with one another in the
marketplace. Such a model could be adopted by the commercial
barter industry.
(Last week, on May 25, an Initial Public Offering by
MasterCard raised $2.4 billion—for 46% of the company’s
equity—reinforced the power of a joint network ownership.)
We’re also seeing movement by major stock-and-bond exchanges
toward consolidation, to secure their futures beyond
national boundaries. The Nasdaq Stock Market is desiring to
merge with the London Stock Exchange. The NYSE Group wants
to acquire Euronext, which runs exchanges in Amsterdam,
Brussels, Lisbon, and Paris.
(Trading on global financial-markets has risen 20% a year
for 10 years. Last year investors bought and sold $51
trillion worth of stocks, and made bets on short-term
interest rates with more than 800 million futures
contracts.)
The consensus among a growing number of financial experts is
rather direct—serve your constituencies, which in the
financial sector means going global, or become irrelevant.
The commercial barter industry’s potential is staggering, as
the growth of entrepreneurs around the world continues to
multiply. Having access to another form of capital—the trade
dollar—can be of enormous benefit, as so many of us in the
industry have observed first hand.
But I have yet to see any movement toward building an
infrastructure, as suggested by Suplizio or similar to the
MasterCard model.
My observations lead me to the conclusion that a handful of
large barter companies fervently believe they will one day
prevail in the marketplace, thereby controlling the vast
majority of the multi-lateral trading activity.
And, of course, the application service providers (which
have grown substantially in the last six years by providing
accounting and other services to the smaller trade
exchanges) also see themselves as playing a significant role
in the future, wherein they become the network of choice.
But, in reply to your question about the barter industry
combining and multiplying together...I just don’t see any
evidence of it.
Bob Meyer
BarterNews
Touma Completes First
Step of BBX Global Barter Alliance
Australian based BBX Holdings has announced the sale of a
master franchise covering the north and south islands of New
Zealand for approximately $2 million. Managing Director
Michael Touma says it’s the all-important first step in
BBX’s goal of building a global barter trading alliance. For
more information see:
www.ebbx.com.
Current U.S. Listing
Information...
Florida Barter
2290 Lee Road
Winter Park, FL 32789
Ph: (321) 397-2050
Fax: (321) 397-2066
E-mail:
exchange@floridabarter.com
www.floridabarter.com
(Please feel
free to forward our newsletter to your friends and
colleagues. We have a “box” at the end of the
newsletter for your convenience.
See you next week. . .) |
ITEX
Completes Largest Convention Ever
CEO Steven
White is grinning from ear to ear after concluding the largest
national convention ever staged for the ITEX Corporation (OTCBB:ITEX).
The event was held in Las Vegas at the Excalibur, and according to
White, “our attendance was almost double the annual conventions of
the industry’s two trade associations.”
“The Winning
Team” was this year’s theme, focusing on the power of the
network—the company’s 95 locations.
Most
significant, from corporate’s perspective, was this year’s
convention signifying the end of free conversion for existing
brokers to franchises...with 60 offices completing or agreeing to a
franchise agreement. (New conversions will be subject to standard
franchise initiation fees.)
At the formal
awards dinner, Linda Rubendall was the recipient of the Brokers
Choice Award, Hal Henry carried off the Jule Gulley Award, and Jim
and Carolyn Young (Tampa, Florida) received the coveted Franchise of
the Year Award.
For more
information on the 22,000-member barter company go to:
www.itex.com.
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The Motley Fool
Newsletter Looks At Barter
An interesting
article by David Kuo appeared on The Motley Fool web site
on May 17. Wayne Sharpe, CEO and co-founder of Bartercard (LSE:BRTR),
covered a subject that’s often incorrectly used interchangeably in
newspaper and magazine articles—the difference in the meaning of the
words bartering and haggling.
Sharpe
contends that it is an unfortunate mix-up, because it gives
bartering a bad (and an inappropriate) image. Sharpe explained,
“When you haggle, you are trying to pay less than the asking price
for what you want.
“For instance,
when you submit an offer below the asking price, you are inviting
the owner to haggle or negotiate with you. But when you barter you
are paying the full ticket price for the particular goods and
services being sold.
“However, the
method of payment is different. Instead of forking over cash for the
purchase, you are offering something of equivalent value in
exchange.”
Sharpe pointed
out to the writer that when bartering, businesses can effectively
get what they need at a discount that is equivalent to their gross
margin.
Examples were
given in the article to further make the point. Overall, one of the
more articulate articles on understanding barter’s inherent value
and the use of trade dollars when trading.
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Another Perspective on Frequent Flyer Programs
Thomas H.
Greco, Jr., the author of
Money, Understanding and Creating Alternatives to Legal Tender,
has spent more than twenty years studying money, banking and
community currency systems, throughout history.
The
following is his insightful response to last week’s
Tuesday Report, regarding the
article on frequent flyer miles (FFM).
Frequent flyer
programs are what are generically referred to as “loyalty programs.”
Their primary purpose is to stimulate customer loyalty, that is, to
keep customers coming back to make subsequent purchases rather than
going to a competitor. These programs typically provide the customer
with some sort of rebate on purchases.
These rebates
are seldom in cash, and most often are in the form of vouchers that
can be used as partial or full payment on subsequent purchases.
Ideally, a voucher credit should be acceptable in payment on a par
with cash, without restriction, but that is usually not the case. In
an effort to maximize their loyalty effect and minimize their costs,
the issuer of loyalty points, such as frequent flyer miles, will
typically impose many restrictions as to when and how vouchers may
be redeemed.
In the case of
frequent flyer programs, only a certain number of seats are made
available for frequent flyer awards on each flight, and often the
number of seats so available will be based on the number of seats
that are available as the departure date approaches.
It is my
experience that on some airlines booking must be made more than two
months in advance in order to assure an award flight. If you desire
a less restricted reservation, at least one airline, Delta, is
increasing the number of miles required for an award flight. The
normal number of miles for a domestic flight is 25,000, but few
flights are available at this rate. If, however, you are willing o
pay 50,000 miles, you can probably get the flights you want.
Considering
the vast number of miles that the airlines have issued, it is
probably safe to bet that this kind of credit inflation will only
get worse as time goes on. The problem may be mitigated to some
degree as the airlines recruit “partner” businesses to not only
issue miles, but to redeem them, as well.
But any such
program that depends upon continual growth is a Ponzi scheme. Is
that in fact the case with frequent flyer programs? It’s hard to say
without detailed figures for each airline. The key question is, how
long would it take the airline to fully redeem its outstanding issue
of frequent flyer miles? The numbers that need to be looked at are
(1) the number of miles outstanding in relation to (2) the number of
round trip flights flown monthly or annually.
Another factor
that bodes ill for these programs is the fact that the competitive
advantage that loyalty schemes are supposed to provide disappears
when everybody starts doing it. Such was the case in years past with
supermarket stamp programs like S&H Green Stamps, Top Value Stamps,
etc.
One further
point: is it proper to refer to frequent flyer miles or loyalty
points as currency? Well, that depends on how you define currency.
While they are to some extent transferable, they are not generally
spendable. On the other hand, value can be obtained for them, but
only from a limited number of entities, and only with restrictions.
The technical and narrow definition of currency is “anything that is
commonly accepted in payment.”
On that basis,
loyalty points, including frequent flyer miles, do not qualify. I
would prefer to not muddy the waters with loose terminology, and
would urge that frequent flyer miles be categorized as loyalty
vouchers or rebate vouchers, not currencies.
For more
information on Thomas Greco, Jr., see his blog and/or web site:
www.beyondmoney.blogspot.com or
www.reinventingmoney.com.
Editor’s
note: In a recent issue
of Parade magazine an article titled “Don’t Lose Your Reward
Miles!” noted that 92% of frequent-flyer miles will never be
redeemed. The article suggests planning ahead, as FFM seats (about 8
in 100) generally become available 330 days before the flight date.
Also reported
was the declining estimated value of a mile over the last ten years,
from approximately 2-cents to 1.4-cents today. Miles usually expire
after three years on an inactive account.
Our Web Site Has Added A Search
Tool For You
Ever
wondered if a certain topic, person, or organization has been
written about on the Barternews.com web site? Now you can easily
find out, as we’ve added a search tool. It will quickly give you the
answer to your questions, in 3 easy steps that take about 12
seconds!
At the top
right of the page, just under where you sign up for the Tuesday
Report you will see a little Google box. It is where you can (1)
type in the name of a subject, company or person. Then (2) click the
button for www.barternews.com to search the site, followed by (3)
hitting the search button.
Every
barter company in the world is listed on our web site,
click through to our Global List
of Barter Companies.
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