What do companies such as Amazon, Sainsbury’s, and your mechanic all have in common? Bartering. Business bartering is happening at all levels and it’s big!
Every year hundreds of thousands of companies worldwide use bartering to earn money on unwanted or underused assets.
What is business bartering?
The basic premise of bartering is that a business will use an unwanted or underperforming asset to secure goods/services that they do need. In the corporate world, this is often arranged through dedicated barter companies or online platforms which specialise in purchasing and remarketing assets from other businesses.
Business bartering has been around for a while (Pepsi conquered the USSR by exchanging the soft drink for vodka in 1990), but the pace is rapidly increasing.
Now, at barter exchanges across the world, professionals in various industries are trading their services for goods, services or “trade credits” which can then be used to pay for business expenses. The increase in popularity of bartering has allowed barter firms to flourish. Client firms swap what they don’t want or need for something they do — frequently media services. In addition to swapping goods and services for media, companies can use the trade credits they receive from the bartering intermediary to exchange for freight, travel, waste management, and equipment.
Bartering became more popular largely in response to tighter credit and budgets. Businesses were looking for new ways to create or capture value. In some cases, bartering is seen as a way to steer around the restrictions imposed by cash and credit and is also used as a method of expanding channels and finding new customers.
Leading electronics firms have bartered discontinued stock, placing it in leading hotels in exchange for media and trade credits — gaining a potential new client in the hotel group in the process. Food manufacturers have bartered excess inventory in exchange for media credits or trade certificates allowing them to purchase other services such as hospitality and cleaning. Lufthansa has bartered real estate for media credits and aviation fuel.
What should you consider before deciding to barter?
Companies considering bartering should consider three questions:
- Are there services for which you could barter to reduce your own costs or capacity?
- Do you have any underperforming or non-strategic assets that could gain you value through bartering?
- What other ways could you benefit from bartering? Could a barter deal expand your reach, credibility or brand recognition in the market?
Look at your company as a whole and think about how you could use bartering to reduce costs or for other benefits such as enhancing revenues and building brand awareness.
Once you’ve established whether bartering could benefit your business, you can then think about links that you could build from existing contacts or new links that you need to build to enable you to start making these deals.