Barter limited by lack of standards

31 May 2000
More news

01 June 2000 | David Arminas

Bartering is set to take off, thanks to the Internet, but specialist barter companies must set universal standards, a financial expert has warned.

"If there is no action on minimal standards soon, it is going to get harder to complete barter deals," Bernard Lietaer, chairman of consultancy Terra Global Foundation and one of the constructors of the single European currency when he worked at the Central Bank of Belgium, told a conference on bartering in London last month.

These standards could be set for barter currencies, or trade credits, and Internet trading security, he explained.

A barter deal is when a manufacturer sells excess stock to a barter company in return for a combination of money and trade credits with that company, amounting to its wholesale value.

The barter company then sells on the stock for its profit. With the trade credits, the manufacturer can buy goods or services with the barter company or its clients. The benefit to the manufacturer is that it does not have to mark down or write-off its excess stock.

Trade credits are not transferrable, but Lietaer believes some form of universal credits could help raise the importance of barter by making it a more credible alternative to cash. "If barter firms don't standardise now it will cost 10 times more to do it in a year, 100 times more in five years," he said.

Bartering has traditionally been popular during global financial crises, such as in Asia in 1997 and Russia in 1998. Lietaer predicts similar crises within the next five years, likely to occur in China, the US or Europe.

Barter deals make up over 30 per cent of business transactions worldwide, worth around £400 billion a year, according to the US Department of Commerce. With electronic bartering, the market is expected to triple in size in three to five years' time.

The reputation of bartering being a last resort remains but is outdated, according to Alan Elkin, chief executive of barter company Active International. If barter deals can help, they should be looked at, he added.

"The industry has been largely fragmented and had some tainted images," said James Fierro, chief executive of Barter.com, a barter electronic trading exchange that is soon to be launched. "But the Internet makes a lower-friction transaction possible, in a more efficient, trackable, and therefore credible, way."

SMjun2000

LATEST
JOBS
London
GBP60000.00 - GBP70000.00 per annum + package
Bramwith Consulting
London
GBP300 - GBP320 per annum +
Bramwith Consulting
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE