How does corporate barter differ from commercial barter?

While retail barter exchanges allow small businesses and individuals to trade products and services with each other, corporate barter transactions are primarily conducted on behalf of large companies - in many cases, publicly-traded companies - and involve millions of dollars worth of goods and services. The corporate barter company helps such firms use their under- or non-performing assets (obsolete or excess inventory, under-utilized plant capacity, unwanted real estate, etc.) to finance all or part of the cost of products or services (e.g. advertising) they need. Today, corporate barter has become a worldwide fact of life. Corporate barter companies are experts in acquiring billions in media and other products and services that the clients then to use their trade credit to purchase.

What other benefits does corporate barter provide?

Today, corporate barter has become much more than just a way of disposing distressed goods. It not only provides innovative financial solutions to corporate problems, it can expand a company's advertising and marketing clout. Corporate barter has evolved to where it not only solves a variety of financial problems, but also is a powerful marketing tool. In addition to obtaining full value for obsolete or surplus goods, corporate barter can be the answer to:

• Minimizing losses from perishable goods;

• Reducing storage costs for old inventory;

• Extending geographic distribution;

• Entering new markets;

• Generating incremental sales;

• Decreasing negative cash flow and generating positive cash flow;

• Utilizing excess production capacity;

• Expanding marketing/advertising budgets;

• Tapping into illiquid assets;

• Reducing corporate purchasing costs;

• Obtaining equipment and capital assets;

• Acquiring or divesting owned or leased real estate;

• Increasing export business.

What kinds of services/products can be purchased with corporate barter trade credits?

There are many different ways in which barter deals can work, the simplest being a straight exchange of goods/services for trade credits that can be used to purchase advertising media and/or other available goods and services (such as travel, hotel rooms, air freight, long distance telephone, etc.). Let's take, for example, a computer company that wants to reward their top salespeople with an incentive trip, but budgets are tight. Working with a corporate barter company, the computer firm is able to pay for a cruise vacation with excess computers that are piled up in its warehouses. Or, an audiotape manufacturer has 100,000 excess audiotapes worth $ 1.00 each wholesale. Instead of liquidating them for 20 cents on the dollar, the manufacturer is paid $ 100,000 in trade credits, thus receiving his full wholesale price. These credits are used to pay for his company's annual sales meeting at a resort and convention center.

Where do corporate barter companies remarket goods?

One key to making corporate barter work is clear communication with the client to be sure the barter company understands any remarketing guidelines up front. There are many ways corporate barter companies can remarket goods. This flexibility means your corporate barter company can avoid any conflicts with or disruption of your normal chain of distribution. Some of the most common remarketing channels include:

• Close-out chains

• Mass merchandisers

• PX and military supply outlets

• Institutions: prisons, nursing homes

• TV Shopping networks

• Direct response to consumers

• Premium and incentive houses

• Company stores

• Overseas export

• Private label

How do I select a corporate barter company?

You should also make sure that the corporate barter company is a member of IRTA and adheres to the IRTA Code of Ethics which includes a code of conduct for corporate barter companies. In addition, the Four A's have established a checklist guide for selecting a reputable barter company and recommend that the following criteria be met.

• The corporate barter company must have a professional, in-house media buying staff with agency-trained personnel.

• The corporate barter company should welcome the participation of the client's agency in planning or reviewing media schedules and is prepared to provide for full agency compensation on gross media.

• The corporate barter company should have a track record of successful performance with major clients for at least five years and will furnish client, agency and financial references.

• The corporate barter company buys in accordance with agency/client-approved plans rather than pushing pre-owned syndicated shows or time bank inventory, and can deliver any required market, daypart or weight level.

• The corporate barter company can track the media buy while the flight is in progress to assure full delivery of media weight. Any preemptions are made good during the same flight with spots of equal or greater value.

• The corporate barter company should demonstrate the ability to buy and deliver requested schedules during second and fourth quarters as well as first and third. It should also demonstrate the ability to buy and deliver network and affiliated stations, as well as independents, particularly in the top 50 markets.

• The corporate barter company can calculate media costs based on negotiated rates (Media Market Guide, SQAD, or agency cost-per-point) rather than on Standard Rate, Card Rate or other arbitrary cost data.

• The corporate barter company is willing to commit in writing to delivering the specific media schedule agreed upon, not merely to offer "best efforts".

• The corporate barter company has demonstrated the ability to market merchandise to end-users, not merely closeout companies. This is vital in controlling distribution of bartered products so they won't conflict with the client's present marketing activities.

Can a small business be involved in corporate barter?

Yes. There are opportunities for smaller companies that have excess inventory or services to take advantage of the many benefits of corporate barter. Corporate barter can in many cases provide small business with real cash-flow savings.

How is the value of under performing assets determined?

In many cases the company's financial officer has already made the determination. Corporate barter can return as much as 4 times the cash value of merchandise or even full wholesale in a trade credit.

How do I determine if corporate barter is for me?

If you have an undervalued asset and budgets for media and/or goods and services conversation with a corporate barter professional can evaluate the potential benefit to your company.