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BARTERING for Toy Business Growth
by John Strabley, CEO, IMS-International Monetary Systems s toy retailers continue to look for ways to expand their businesses, many are taking a fresh look at bartering as an opportunity to unload excess inventory, fulfill operational needs, expand their reach, and find the funds necessary to sustain and grow their businesses—all while conserving cash flow. Nowadays, retailers and manufacturers have less cash to spend, making barter’s cashless system of trading goods and services especially appealing. It’s easy to get started. A toy or gift business lists goods for trade through a barter exchange. In return, the business receives a trade credit based on the dollar value of the goods offered. It can then use those trade dollars to “purchase” items or services offered by other members. It’s a simple exchange, but as a result, businesses can access a rich, varied network of actively bartering members. Trade dollars can be used for a variety of merchandise and services, including advertising, office supplies and equipment, cleaning, accounting, renovations, printing, travel, and dining. Melinda Gardner of Ted’s Toy Store in Cincinnati values the flexibility and variety of services offered in her barter network. Gardner barters the entire inventory for business and personal needs, using trade dollars for expenses such as signage, business printing, repairs, travel, and dental treatment. Gardner finds barter especially useful during seasonal slow periods when cash flow is limited. Trade also brings in new customers who, in turn, tell their cash-paying friends about the store. Barter’s benefits extend beyond conserving cash—it’s also a valuable business strategy for increasing sales. In fact, companies are currently generating thousands of dollars in sales annually through barter networks. Barter exchanges bring new buyers and sellers together, creating the potential for a new customer base for retailers. By heightening the visibility of their products to potential customers, many retailers in turn see an increase in their cash-paying customers. Robert Reinhardt, managing partner of New to You Kids in Green-
SPECIALTY TOYS & GIFTS
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field, Wis., trades all manner of toys, clothing, and furniture from the children’s resale store. Reinhardt has paid for dining gift certificates through barter that he then used in customer promotions, as well as rewarding employees. He has also used trade for cleaning services, supplies, advertising direct mail coupons and shopper coupons, travel, and repairs. “I believe the majority of the business we get with barter is business we probably wouldn’t get otherwise,” sayIs Reinhardt. “It’s another great avenue for marketing.” Companies using barter also turn what otherwise would be less valuable capacity into a tool they can use to their advantage. After all, most businesses have excess capacity—a professional person has empty time slots, hotels or airlines have empty rooms or seats, restaurants have empty tables, and retail toy stores have unsold seasonal or discontinued merchandise. Purchasing power created through “barter leverage” creates value in the barter network and is one of the reasons bartering actually thrives when the economy is slow. For example, if companies sell any products that have a keystone markup—a pricing structure in which their wholesale cost is half of the retail selling price—they acquire each of their trade dollars for a cash outlay of only 50 cents. Then, when they make a purchase using trade dollars, they essentially pay half price for everything they buy. Barter leverage allows toy companies to generate new business, conserve cash, and convert excess inventory and capacity into needed goods and services. Bartering may sound like a different way of doing business, but toy retailers are embracing it as a valuable addition to their business models. And just like toys, it’s fun. ● John Strabley is CEO of New Berlin, Wis.-based IMS-International Monetary Systems, one of the country’s leading barter organizations. For more information, visit www.imsbarter.com or call (800) 559-8515.
FEBRUARY 2014