WHAT IS CORPORATE TRADE
Corporate Trade refers to one of the three major market segments of the barter industry with its primary focus being larger, one-off transactions.
Differing from the retail and community currency barter segments; corporate barter exchanges typically use media / advertising outlets as leverage.
A typical transaction goes something like this:
Company A has an overstock of a certain inventory. The down-side to having any over-stock are as follows:
If sold in the cash marketplace at a discount it may devalue the entire product line – either by creating a perception that the product is a “discount” brand, or by creating friction with existing customers who purchased the product at full market value and now see a discount occurring.
There are costs created by warehousing, moving and managing excess inventory.
It may depreciate further in value depending on the time taken to move the stock [especially where things have an expiry date and/or are seasonal in nature or have a “model” year [i.e. fashion, vehicles, electronics etc].
Excess inventory is a liability on a balance sheet.
Rather than selling these products at a discount for cash, a Corporate Barter Exchange will often offer full market value to purchase these products and, in return, give trade credits.
These trade credits can be used to purchase large advertising campaigns, thereby turning something perishable, into a new source of referrals [more customers = more referrals], and leveraging the value of the stock for media buys.
Because of the size of the transactions, and the method of disposal of this inventory by the barter exchange itself, most media buys are not settled on a pure barter basis, but usually require part of the payment in cash.
Corporate barter exchanges differ from retail barter exchanges insofar that:
They value, negotiate and contractually purchase stock or capacity from each member – often warehousing the inventory themselves.
The risk of depreciation of inventory is transferred from the seller to the corporate barter exchange. If the exchange cannot move the inventory fast then it may end up with expired, or last seasons, stock on its hands.
The corporate barter exchange directly markets each item that it purchases and often will sell these on the cash marketplace [cash conversion] and it will pool its cash resources to bulk-buy media at a discount equivalent to 50% or more of the available market-price.
Most transactions are independent of previous transactions and the entire cycle is settled, generally, within a defined time period.
Corporate barter is a good concept for the seller, but is also fraught with risks. What happens if the barter exchange doesn’t get media at a beneficial rate? What if they give you barter dollars and offer nothing in return? How will they sell your product – what methods are in place to ensure that they do not actually end up competing against you in the cash marketplace?
These questions aside, there are many respectable corporate barter exchange operators out there and they offer many creative solutions for businesses with impaired assets.
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Ormita provides free updates about the generic benefits of barter to those interested in local currency, community currency, countertrade, reciprocal trade, barter exchange, time dollars, hours and other forms of community trade vehicles.
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The Ormita Commerce Network spans 5 continents, with direct representation in more than 17 countries plus additional partnerships in a further 59 countries. The business allows companies to exchange goods and services on a reciprocal trade arrangement in order to expand their reach, access new customers, improve their buying power, monetise excess or unsold capacity and improve profitability.
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