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

June 4, 2002

Written by Bob Meyer, Editor of BarterNews

U.S. Government Uses Barter In Various Efforts

The federal portfolio of white-elephant real estate is gargantuan! Facilities ranging from abandoned World War II-era training facilities to historic but outmoded courthouses amount to billions, aggregately, and are but a part of some $500 billion of government-owned real estate, according to the General Accounting Office.

Budget director Mitchell Daniels Jr. is launching the most ambitious review to date with the objective of shedding the real estate, or using it more profitably. Most efforts will see the government either exchanging the property or developing it jointly with private-sector partners. (There is now a bill, pending in both houses, that will make it easier to either lease or form joint ventures with private-sector developers.)

On another front, the Environmental Protection Agency (EPA) is looking to use trading credits as a way to lessen pollution in our nation's waterways. Farms, timber operations and construction sites, as well as industrial and municipal polluters, would be provided "trading credits" when they cut their quota (lowered pollution) below assigned levels. These "trading credits" would have a value, in that they could be sold or bartered to other polluters which haven't yet met their quota.

Little-Known Women's World Banking Building A Better World

They haven't received much recognition yet, but Women's World Banking is doing a remarkable job of building an infrastructure that will transform the world. And It's all being accomplished by assisting poor women entrepreneurs and the globe.

Some 30 million women have been provided with small loans, from $25 to $500, and their pay-back record is an outstanding 98.5%.

Just eight years old, the program was started with limited funding coupled with measured performance. The rapid reinvestment and expansion of the micro finance networks shows what success can be achieved by assisting very poor women entrepreneurs, who for so long have been undervalued and ignored.

"If the public sees a wall and says it's blue and you know it is red, the reality is, it's blue until you can either get them to understand what red is, or change their belief in what blue is."

--Chris Sweis, CEO of Ibart.com

The above quote and the following thoughts were provided to us in response to last week's article, "What Are Your Thoughts" (on why more bartering isn't occurring).

Sweis contends, after speaking about barter at major events like Comdex, "Many educated business people who are very intelligent when it comes to business, have never even heard of trade dollars. And when they do, it becomes almost an economic revelation."

Perceptions about barter in the marketplace, according to Sweis are:

1. Price gouging for goods occurs, i.e. inflated prices beyond the normal retail.

2. Lack of liquidity is inherent.

3. Pricing is part cash/part trade, which is no better than a discounted cash price with a coupon.

4. Trade business replaces cash business. (The customer would have come to them and spent cash eventually.)

"Now more than ever the barter industry needs to push education in the marketplace," suggests Sweis. "The true growth in the industry will be a result of education, not monitization.

"I believe the industry needs both an evangelist to spread the word and one company that builds a brand synonymous with barter. Until then we are still evolving, and only the strong will survive. The weak and slippery operators will only hold the industry back."

Note: Next week we will have more feedback from our May article, "What Are Your Thoughts On Why More Barter Isn't Occurring."

LOOKING BACK...Tuesday Report, June 12, 2001

We reported on Blockbuster's use of barter to settle a $460 million lawsuit; the Barter4Golf.com web site enabling members of the Barter One trade exchange to pay green fees on trade at selected courses; and
the $70 billion airline currency, which continues to expand by moving into other markets.

Also noted was the power of the U.S. dollar, as immigrant wage-earners are exporting part of their pay. More than $13 billion a year is being sent to families in countries in all areas of the world.

He built a $126 million company and he's in the Pro Football Hall of Fame. Fran Tarkenton, a big advocate of barter, believes that most entrepreneurs are natural born traders. For more of Tarkenton's thoughts click on "What's New," then click "Trade Exchanges" to find and read the article.

• Venture Capitalists are turning the screws and their onerous terms could hurt innovation and investors, according to Business Week magazine. But other than their wanting three times more money before anyone else sees any payout, which may be a bit on the greedy side, the other changes they're now suggesting seem to be reasonable.

  The changes include more modest startup evaluations, less funds to startups per investment round, and doling out money only after a company meets certain milestones--like revenue targets. And finally, the founders now have to wait five years before cashing out entirely.

• With an assist from technology, McDonald's China arm is producing a package of promotions that will leverage the hamburger chain's Official World Cup sponsorship in an innovative fashion--via mobile phones.

  The promotion? McDonald's will become the only nationwide retailer in China to accept text-messages on mobile phones as coupons for free food. And what better place to test this than the world's largest wireless market, with more than 160 million subscribers?

  Implication: The campaign will show that the wireless industry isn't just about connecting phone calls, but can be used in personalizing consumer lifestyles.

  It also demonstrates how technology is undercutting advertising's old guard...as McDonald's, paying millions for sponsorship rights, is intent on finding new innovative ways to connect with the consumer marketplace.

• San Antonio (TX) headquartered Clear Channel Communications, the largest U.S. radio broadcaster and live-entertainment promoter (1,200 radio stations, 135 live-entertainment venues, 18 TV stations and 770,000 outdoor displays) has created a new unit, Clear Channel Advantage. Their goal? To push the concept of one-stop ad buying more aggressively.

  This one-stop ad buying, also known as "cross-platforming," recently saw Home Depot agreeing to air ads on Walt Disney networks (ABC, ESPN and Lifetime) and to develop a line of Disney paint for children's rooms. In exchange Disney agreed to buy maintenance products for its theme parks, retail stores and offices from Home Depot.

• When negotiating a trade, valuation of the goods acquired is most important. Do you know the eight different valuations at which a trade can be made? On page 49 of the FastStart Program I, they are all listed for you.

• It looks like a modest recovery for the economy...as corporate debt is still hanging over the economy. Moody's Investors Service of New York has downgraded the credit ratings of 5.7 non-financial companies for every one it upgraded.

  It all revolves around the fact that corporate profit levels have declined sharply in the past two years, so companies have less cash available to cover debt payments. Cash flow, as a percentage of debt outstanding, is at its lowest level on record. (The heavy debt load also means a reluctance to invest in new equipment which holds back a recovery.)

  Reinforcing this picture is the recent news of corporations cutting back on their stock buybacks, i.e. repurchasing their own stock. From the late 1990s corporations were averaging $40 billion per quarter in stock buybacks. In the first quarter of 2002 it was less than $20 billion and the second quarter is shaping up to be around $12 billion, according to Richard Peterson, chief market strategist at Thomson Financial Securities Data.

• Brick and mortar retailers (and politicians) that favor sales taxes on e-commerce purchases have a new arrow in their quiver: the economy. Aggregate state revenues are expected to see a combined budget shortfall of $40 billion this year.

  This squeeze on state revenue likely will lead lawmakers to approve, possibly as soon as next year, collecting taxes on sales via the Internet. (Behind the scenes, 40 states have joined together in the Streamlined Sales Tax Project.)

  Note: While the issue of e-commerce taxes for consumers gets most of the press coverage and attention, according to Forrester Research it's really the business (b2b) community that will pay, as they account for more than 90% of e-commerce.

• The incredible size of the U.S. economy ($10.5 trillion GDP) is such that its annual growth, from 3% to 5% a year, more than duplicates Russia's entire GDP of $380 billion. (Our neighbor to the south, Mexico, has a $600 billion economy.)

• Last month's net.marketing conference in NYC reported that the web drove $30 billion in direct marketing sales last year and is projected to grow 35 percent a year, reaching $130 billion in 2006.

This Issue's Glossary of Terms:

Bid Back:
Trading back a portion of properties bid on, but not yet acquired, to balance equities. (Sometimes referred to as an overtrade.)

Bill of Sale:
The letter of agreement used to consummate an acquisition of merchandise.