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

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December 21, 1999

In this week's report. . .

  • Catalog houses barter their excesses
  • Special report....fourth in a five-part series
  • More input on the AMEX question
  • Japanese refinery barters for oil products
  • New business and consumer web sites for trading
  • Bartering "here and there"

 

Barter Plays Role Moving Catalog Houses' Excesses

The president of Children's Wear Digest, Philip Klaus, Jr., when interviewed in Catalog Age, divulged that one of the major problems faced when selling merchandise via catalog is overstocking.

"One of the toughest parts of the business is managing the inventory. We are always weighing the increase in inventory with its potentially higher sales, versus the risks of overstocks and mark-downs."

He went on to explain that less than 15% of the items are repeated in each successive catalog. And after 18 months only four items remained from the first 148 items in the original edition.

With $65 billion worth of products sold each year through the nation's 9,000 mail order catalogs, barter is one of the intelligent ways that visionary major catalogers move their excess merchandise.


Special Report From BarterNews
Fourth of a Five-Part Series

All Barter Deposits Are Not Taxable Income

Every January, as required by law under TEFRA, all of the approximately 500 organized trade exchanges in the U.S. provide the IRS with statements showing the total amount of barter credits deposited into each and every member's account during the previous calendar year. However, some of these barter deposits may not be taxable income.

(Your trade exchange also provides this information to you in the form of 1099Bs, "Proceeds from Broker and Barter Transactions.")

Here is a look at another one of the five kinds of barter deposits which are sometimes improperly taxed. You may want to file this important information and show it to your own tax advisor to determine how to report your trade dollar income.

Account Transfers

As a trade exchange member you may have two or more accounts, or sub-accounts, and thus move credits back and forth between these accounts. In this scenario you'd be taxed twice on the same barter dollars-once when depositing them into your primary account, and again when moving them to a second account.

Although account transfers are not taxable, the IRS will expect you to pay a tax on (what appears as) all deposits...because they don't realize certain credits fall into the non-taxable category.

In order to avoid paying taxes on non-taxable income you will want to discuss this with your tax preparer. When we publish the fifth article in this series we will give you more specific information on how you may report these items.


Follow-up On Previous Question:

Would American Express' entry into the commercial barter business be beneficial to the industry?

Frank Crombie, CEO of Barter Express Corporation: "I note with great interest your most recent commentary on the possibility of American Express entering the barter space.

"As an exchange owner, my focus is not on who may be a potential competitor. Moreover, my concern is with what the market landscape will look like. We can all address the issue of aggregation and consolidation, but does this mean that just because we have grouped together that collectively we have any better idea of what the future of the industry will bring? Or do we simply confront it as a bigger entity?

"I encourage the American Expresses of this world to enter our domain to drive innovation. We seem to have missed that ultimately what will drive the success of the barter marketplace is a business model that adapts to current business philosophy.

"The industry must become mainstream in its reach and positioning. When this occurs we will truly have a parallel economy that complements cash. Only then will the credibility and funding have real relevance."

(What's your opinion? Send along to: bmeyer@barternews.com )


Major Oil Refiner Acquires 37% of Products Through Barter

Showa Shell, Japan's fourth largest oil refiner and the Japanese arm of Royal Dutch/Shell Group, is expanding its barter efforts. The company reports that some 37% of the gasoline, and other oil products, it sells are acquired from rivals' refineries and storage sites closer to its retail outlets. Last year barter agreements totaled 25% of sales.


"The internet is not just a new way of doing business...it is a completely new paradigm of economic activity."

Brian S. Wesbury, economist
and author of The New Era of Wealth

Wesbury says the U.S. has entered a new era of wealth that is still in its infancy. No longer is it just a world of diminishing returns, where a piece of machinery is a depreciating asset of limited useful life.

In the new age of increasing returns, Wesbury contends, a computer, while a piece of machinery, is really an appreciating asset. Because every day another software or online application is invented, and more information is constantly added onto the World Wide Web.

The building blocks of our current environment are technology, globalization, fiscal policy, and low inflation. Wesbury believes that as long as we do not repeat the mistakes of the past, the boom will continue. "The new era," he claims, "is for real."


Here And There...

  • Australia's Bartercard (cover story BarterNews issue #39) reported another record year with total trade volume reaching $610 million in 1999. Approximately 700 new clients are coming onboard monthly. Bartercard has established locations in Europe, the Middle East, Asia, and Canada.

  • IRTA's executive director, Robin Maini, chose not to renew his contract with the International Reciprocal Trade Association, which terminates December 31. (He will remain in that position, at no cost to IRTA, through January.)

    Maini has accepted a position with BarterTrust.com and will be in charge of Canadian operations for the new company. He will begin moving forward the first of the year, and plans to establish four or five offices there ASAP.

  • More and more, venture capitalists who used to work in conjunction with broad investment syndicates are going it alone. And, now, the larger of these funds are not only investing in early-stage startups, but also in later rounds. This new approach is referred to as "life-cycle financing."

  • Thanks to a barter deal there now are computer terminals in the Colorado Rockies, so one doesn't have to miss a desired trade or an on-the-slope stock quote while skiing! In exchange for exposure on trail maps and in various resort printed materials, DLJdirect will be providing four Colorado resorts (Vail, Beaver Creek, Breckenridge, and Keystone) with the stock services.


Coming soon. . .

  • Intellectual capital...a highly liquid, tradable commodity
  • New Business and consumer web sites for trading
  • Special report....fourth in a five-part series
  • Changes within barter industry associations (NATE and IRTA)
  • Bartering "here and there"

 

We welcome your comments, questions, and observations.
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