Posted on: Wednesday, October 27, 2004

Business of bartering rising

By Rob Kaiser
Chicago Tribune

CHICAGO — Like any eatery, the Fireside Restaurant and Lounge faces a bulk of expenses every day before it serves a single customer.

The electricity must be on. The building must be kept up. Cooks, servers and bartenders must be in place.

Any customer beyond the first is significantly cheaper to serve since the overhead is already covered. Yet, like most restaurants, Fireside still has empty seats.

To fill them, Rich Wohn, the Chicago restaurant's owner, hit upon an old idea that continues to gain popularity: bartering. He has traded food and drink for everything from a new wooden floor to a fax machine to a truckload of flour.

"You're seeing a lot more people trading now," Wohn said.

Evolving from one-to-one trades among businesses, bartering now mainly takes place through large exchanges where businesses receive trade credits instead of cash that they can spend on a multitude of items from other firms. Even large corporations are increasingly using barter networks rather than handing excess products over to liquidators.

Bartering among businesses reached nearly $8 billion in 2001, the latest year the International Reciprocal Trade Association tracked bartering activity, and is believed to be growing more than 10 percent annually.

Better information flow about what's available for barter, new barter networks abroad and connections between various barter networks have all contributed to its growth, said Scott Whitmer, the association's former president.

"Barter is becoming more mainstream," said Whitmer, who also owns the Florida Barter exchange.

Still, predictions in recent years that the Internet would revolutionize bartering haven't come true. Most business owners who barter still rely on exchange brokers to help identify and facilitate trades.

Chettha Saetia, whose Chicago business makes luggage, briefcases and computer bags, said he must devote time to completing trades, but it usually saves him money.

Saetia's company, McKlein Co., sells about $80,000 worth of excess products annually on barter exchanges.

Without the exchanges, Saetia said, "we would probably have to go to a liquidator and get rid of them at 10 cents on the dollar."

With his trade credits, Saetia usually has his catalogues printed and buys folders and magazine advertisements.

While Saetia and others often sell their excess inventory at retail prices, they also usually pay retail for what they buy at an exchange.

"You're not going to get the sale prices you do with cash," Wohn said. "Cash talks."

While more businesses are joining barter networks, business owners often have to wait for specific items or strike out. Wohn wanted to buy a van to use for catering. He put out word on bartering networks and found one, but it took three months.

Bruce Cohen, who owns the Bonnie Flower Shop in Chicago, said he joined a barter network to attract new customers. He has used trade credits to get his windows washed, repair his car and get dental work done.

"It allows me to use funds that I wouldn't have normally," he said.

Still, Cohen warns, businesses need cash to function.

"You can't survive on barter alone," he said.