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The Honolulu Advertiser
Posted on: Monday, August 1, 2005

Group rekindles art of barter

By Dan Nakaso
Advertiser Staff Writer

Mark Swoboda, co-owner of Sensually Yours, wasn't sure what to do with barter dollars when he joined the Nimitz Highway adult gift shop in May. Now, he acquires display signs, flooring and even restaurant and gift certificates from other participants in the ITEX barter group.

Rebecca Breyer | The Honolulu Advertiser

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Trent Bateman, the owner of Mountain Thunder Coffee Plantation in Kona, bought half a dozen forklifts from O'ahu using the barter currency he generated through his coffee sales.

Mark Swoboda and Shelley Rose, co-owners of the Sensually Yours adult lingerie and gift shop, paid for their store's new signs and porcelain floors with their ITEX barter dollars. And Honolulu attorney Grant Kidani had solar panels installed on his Wai'alae home and pays for the upkeep on his swimming pool and his law office's salt water aquarium through his ITEX account, among several other regular barter transactions.

They're all part of an organization of 300 Hawai'i companies that belong to the Bellevue, Wash.-based ITEX Corp. bartering group, which oversees $5 million per year in bartering in Hawai'i.

ITEX celebrated its 10th year in the Islands in January and recently merged with Hawai'i's only other barter group — the much smaller BXI organization — which will add another 40 to 50 Island businesses to ITEX when the merger is completed in September.

"People forget that all business started in barter," Kidani said. "It goes back to when there was no money. Smaller businesses have a harder time understanding or justifying it. They don't realize that larger, more sophisticated businesses trade every day, whether it's vehicles for a company's fleet or a donation in exchange for promotional considerations."

Most ITEX members use barter for only 1 to 5 percent of their gross sales, said Joe Lopez, the local ITEX franchise founder and owner. Whatever ITEX dollars they earn through sales goes into their individual ITEX accounts. Their bartering purchases come out of the same ITEX accounts, similar to a standard checking account.

It normally costs $595 just to join ITEX, although Lopez has waived the fee through the summer. Even without the initial cost, bartering through ITEX can be more costly than regular transactions.

ITEX members have to pay normal taxes on every barter sale and report the sales as income. Both buyers and sellers also each have to pay ITEX a 5 percent commission on the value of every transaction plus a monthly membership fee of $20 in cash and $10 worth of ITEX dollars.

Several members said the benefits outweigh the fees because bartering preserves their much-needed cash and lets them move merchandise that would just sit idle.

Bateman, for instance, saw sales jump 10 percent immediately after he joined ITEX about five years ago.

"I have more coffee than I have money," Bateman said. "So I just considered it a no-brainer. Every pound of coffee we trade is a sale we wouldn't have had otherwise. ITEX attracts new faces, new people we wouldn't otherwise see. This way, I can move more inventory and turn it into trade for other items that you would have otherwise had to use cash for."

With only a handful of Big Island ITEX members, Bateman usually has to turn to O'ahu to cash in his ITEX dollars. But he's had little trouble getting what he needs.

"We bought air conditioners for our factory," Bateman said. "I've bought forklifts. I've gotten wine on trade. We get our coffee labels made on trade. We've gotten T-shirts made on trade. We can use restaurants in Honolulu and hotels in Honolulu. These are all things I would have had to use cash for."

The list of ITEX members is maintained by Lopez, who limits the number of similar businesses and is constantly recruiting new kinds of companies that other members want.

"We have auto mechanics, doctors, dentists, attorneys, contractors, florists, linen supply companies, ladies' boutiques, restaurants, auto parts stores — a little bit of everything," Lopez said. "The network grows in the directions it needs. If somebody needs uniforms, I've got to go find somebody that supplies uniforms to fulfill the niche in the group."

Lopez has also kicked out businesses that have received complaints from other members about their service or trade practices.

"Joe polices the membership pretty well," Kidani said. "They don't want trouble."

Lopez pays his cleaning lady in ITEX dollars, as well as his auto mechanic, dentist and chiropractor. He invests in art using ITEX dollars and sells them for a profit, which goes back into his ITEX account.

Lopez also pays for his printing needs and haircuts through ITEX and even wrote an ITEX check in December for part of his down payment on a new house in Kailua.

"In the hottest real estate market in Hawai'i I was able to buy a house with trade dollars," Lopez said. "If it's done right, every one can use barter to benefit."

Swoboda didn't know what to make of the thousands of dollars he found in Sensually Yours' ITEX account when he came in as a partner and CEO in May.

"Like so many others, I was totally unfamiliar with the practice of barter," Swoboda said. "I was a little bit leery at first until I started using it and realized you can get all these things done without laying out any cash."

He learned that Rose sometimes gives out ITEX dinners or massages as employee incentives. Then Swoboda and Rose bought new display signs from fellow ITEX member Aloha Signs & Graphics and spent $10,000 worth of ITEX dollars on 5,000 square feet of new flooring. They also used ITEX dollars to give restaurant and night club gift certificates to models who participated in Sensually Yours fashion shows.

Rose has been an ITEX member for more than five years and generally likes the barter system. But she gets irritated at some businesses that jack up their prices for ITEX trades or — as in the case of the flooring — limit the amount of ITEX dollars that can be spent.

As a retailer, though, Rose said ITEX members who come to her store typically spend hundreds of ITEX dollars when they would probably buy far less using cash.

"They usually have so much to spend in their account that that's how much they end up spending," Rose said. "It is certainly more."

Unlike other business owners, however, Rose has not used her ITEX account to take care of her personal purchases.

"I'd definitely like to use it more," she said. "I could. I should. But I just haven't."