(The following article
was provided to us prior to the announcement of IMS acquiring NTA.)
Barter Industry Faces
Schacht, National Trade Association President
In the last decade, there has been a
significant change in the marketplace. Due to mergers and
acquisitions, margins for many retail categories have shrunk so much
that we have seen the demise of many of those retail categories in
the small business arena.
Even though new retailers are
coming-in and going-out of the marketplace all the time, tighter and
tighter profit margins are making barter a less attractive option
for them. The growth of the Internet and globalization have also
made competition very intense forcing most companies to either
increase productivity or go out of business.
As Bob Meyer pointed out in
BarterNews, �We used to think we didn�t need chiropractors,
podiatrists, and massage therapists. Now they�re keeping us in
According to the New York Times
(2/20/05), small manufacturers are also struggling or going
out of business. �It used to be so simple. Big manufacturers with
powerful brands called the shots. The only decision retailers had to
make was whether or not to stock the manufacturer�s product. Then
came the rise of Wal-Mart and other big box retailers which turned
that power relationship on its head.
�Manufacturers now had to play by the
retailers rules�not only about prices but even about product design
and production methods. Companies, particularly smaller suppliers,
simply can�t match the prices offered to the big chains by overseas
manufacturers and thus have gone out of business. The bigger
manufacturers have felt compelled to move the bulk of their
production overseas, or throw in the towel.�
This changing landscape presents
tremendous challenges for the retail barter industry. Our changing
business environment along with more demanding clients, requires
that we make some fundamental changes in the way we do our business.
As always we must find the new
opportunities in this changing environment. I believe that the
increase in the number and the types of service businesses that have
recently come into the marketplace represents one of these new
opportunities. We, of course, have to learn as much as we can about
these new business service categories so we can effectively present
them and sell them to our clients.
To make any real change in our
business, of course, requires that we first see the urgency of the
problem. Once we know we have an urgent problem, here is the action
I think we should take to continue building a viable barter
First of all, we must continue to
drill deeply into those business categories that offer both high
gross margin for sellers and high demand from buyers in the
marketplace. We must go out and find the excess capacity, excess
time, or excess inventory in all of these categories in order to
build our trade volume. At NTA these categories are media, travel,
restaurants, excess inventory, and a myriad of business services.
More importantly, we must improve on
selling the products and services within those categories to our
clients. Our brokers must view themselves as inside salespeople, and
not as customer service people.
We must sell what we have, not
simply offer what we have available.
This shift from a service organization
to a selling organization has made the fundamental difference in our
media department. Without any increase in the number of clients who
buy media, our media department volume is up 25%...merely because we
have gotten better at selling the media we have to the same number
The next thing we need to do, however,
is a more radical step for most of us in the retail barter business.
While we are building our trade volume, we must also aggressively
build a base of cash customers to buy our media, our travel, and our
Barter markets are shrinking, and we
have nowhere to turn but to cash markets if we want to do sizable
trade deals in those arenas where trade is most active. There are
two important reasons for us to build cash customers.
As most of us know, the best way to
trade with media, travel, and even restaurants is to use a ratio
model, instead of the cash fee model. In using the ratio model,
however, we produce no cash revenue from these business categories,
and really have no choice but to liquidate our trade profit into
cash through a growing portfolio of cash customers. Which leads us
to the first reason: If we don�t, it will be difficult to meet
payroll and have enough cash to run our companies.
The second reason we need this cash
track is that there are incredible opportunities to buy both excess
media inventory and product inventory at very favorable prices. Many
media vehicles, for example, which no longer barter or which are
holding too much barter in their account, will offer cash rates on
their excess inventory for as little as twenty to twenty-five cents
on the dollar.
While we can sell this media to our
cash customers, we can also trade that media at its full retail
price to clients who are highly leveraged in their trade dollars. We
cannot do this, however, unless we develop a strong base of cash
customers. The successful integration of cash customers and trade
customers is absolutely critical to us and will result in more trade
volume, more trade revenue, and more cash revenue for our business.
The integration of cash markets and
trade markets must be done carefully and responsibly. We should
neither create additional trade deficits, nor should we interfere
with our trade clients� cash business, when we sell their products
or services to our own cash markets. This new integration of cash
and trade can be a boom to our business, but if not done properly it
has the potential to destroy our business.
I have never thought it is a good idea
to build our business in a vacuum, and I always try to spend time
reading the books of some of our great business leaders. (Since I
don�t hang out in their social circles, I at least have access to
their books.) In the past, before I�ve taken the company in new
directions, I�ve often found the support I�ve needed from these
NTA, for example, would not be sharing
ownership with employees today if it wasn�t for a book I read in the
early �90s called The Great Game of Business by Jack Stack.
This book, about the great benefits of sharing ownership with our
employees, was extremely helpful to me in building a strong, loyal
Though I have always tried to find and
nurture strong leaders within our company, I had never thought of
the idea of actually developing a leadership culture until I read
Noel Tichy�s best-seller in the late �90s called Leadership
Engine. Today NTA enjoys the benefits of a leadership culture
thanks to Tichy�s book.
The book that is perfect for our
business today is called Leading Change by John Kotter. He is
the major contributor of articles published in the Harvard
Business Review, and his current book is a best-seller that can
be ordered online or picked-up at any bookstore. The book, of
course, is about the challenge of implementing change in a company
While our challenge today is great, it
is not insurmountable. We only need to create our plans and execute
them. If we let the realities of the marketplace instead of our egos
guide us, I believe we can still build highly successful businesses
in the barter industry.