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 introduction

Reviving an Old Trading Method in the New Economy: Barter,

as an Alternative Marketing Channel

Companies seek alternatives to cope with recent economic

difficulties in terms of credit and cash flow management,
valuing their perishable and underperformed assets or finding
new customers for their unsold products and services.

As being one of the oldest forms of trade, barter becomes an

alternative marketing channel to respond those multiple
requirements of companies. Although barter is a growing business
practice for companies, only a limited number of academic
researches available on the topic.

valuex aims to explore the mechanism of a corporate barter

system in a domestic market to provide insight. Along with the
process, the case specific enablers and difficulties are also defined.

A number of cross-industry barter trade alternatives are provided

and barter system is suggested to local companies, especially to
small businesses to manage their cash flow, while extending their
sales opportunities and marketing channels
 introduction

Synopsis

The barter process of a barter network company, valuex, as a

thought leader for corporate barter practice in the United Arab
Emirates (UAE). This case study is chosen to explore a barter system
which can help to the businesses to cope with recent economic
difficulties, as an additional marketing channel in generating
additional revenues by use of excess capacity and as a financial tool
for acquirement of budgeted activities without using cash. UAE
becomes one of the most important economic centers in the Middle
East Region with its diversified economy, open business
environment and economic and political stability as well as it s
uniqueness in terms of culture, traditions, business practices, values
and norms.

perishable
and under
performed
assets
finding
new
customers

valuex adding value to the businesses in:

• Providing cash savings for budgeted expenditures
• Creating new business opportunities
• Providing full banking service in terms of tracking and monitoring
the trade credits
 objective

To create a private currency that can be traded between business

networks

Leverages In modern era, even the unused/excess inventory can be traded

with products & services of value.

Any organization shall prefer to procure products & services on

Reduced barter and thus reducing the cash outlay. Cash spends are
Cash replaced by self made products. These new barter customers
can also become new cash clients.

New Barter expands horizons. Organizations that do barter in a network

Markets have higher chances of reaching new markets.

Increase The leftover or unused inventory can bring in products of

Sales value under barter exchange. Thus, Sales Increase & virtual
cash is generated.

Reduced
Leverages Cash

Increase New
Sales Markets
 process

Business Process

The process starts with signing an agreement between the new

member and the barter company. With this agreement the new
member accepts to follow valuex policies, procedures and code
of ethics and agrees to pay a membership fee and 7.5% commission
against purchases made through valuex. The new member shares
its excess inventory with valuex to include the new inventory to
the network offering list, in return valuex shares the networks
offering list with the new member for him to see the offers of the
other member companies. Once a member makes its first sale in the
network, a deposit of trade credits is shown in his valuex trade
credits account. When the member wants to redeem the trade
credit is earned from the network, contacts the Account Manager.

Although the online barter trade available in the valuex, allows

the members to see each others’ inventory status on business to
consumer (b2c) level.

Credit Access Cash New Sales New

& Liquidity Savings Channel Customer

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 account management

valuex acts as a third-party record keeper, similar to a

banker. Each month clients receive a statement indicating
recent transactions, current balance and any fees due. The
company follows the requirements of valuex

The members are given an online account which helps track

de bi t s and c r e di ts. Account s can be accessed on line
Transactions are settled primarily in the form of valuex trade
credits, which are equal to the local currency. All transactions
are recorded at fair market value. When the member sells their
goods and services to other member within the network they
earn trade credits which are deposited into their accounts.
Then the member has the ability to purchase goods and
services from other members utilizing trade credit in his
accounts.

Companies buy when they have a need; and sell when they
have capacity / inventory through valuex. A company would
need to create a new General Ledger account to record all
valuex Trade Credit transactions. Similar to a cash sale, when
a sale occurs, the revenue account is credited and the valuex
account is debited. When purchases occur the expense account
is debited, and the valuex account is credited. The valuex
account will equal the balance of member’s valuex
statement at the end of the month.

valuex networks credits do not expire, therefore unlike the

normal accounting procedures the Barter accounts are not to
be closed in the year end.

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 account management

To,
iTHNK Date - 02-09-17
Dubai, United Arab Emirates
INVOICE
Sr. No. Particular valuex Cash

iTHNK
1. Canon CIC QR CODE Buiding Wrap Branding / Signage AED 600/- AED 200/-

VAT 5% AED 40/-

Total AED 600/- AED 240/-

Amit Joshi
Contact: 052 662 7860 • [email protected] Anwar Sadat

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 marketing channel

Barter is utilized as a marketing channel to transfer the goods

and services to other clients through the barter network. When
company has excess capacity for a certain product or service,
this capacity is provided to the network.

Through barter members receive new customers as the

network company acts as a direct sales broker of the company
and searches in the network for the potential buyers. The
barter sales are not conflict with the traditional marketing
channels as they are limited with only the network members.

Especially for services as perishable assets, utilizing the excess

capacity is very important as if the space or time is not utilized
at the time of production the unutilized capacity is
perished forever.

If the plain take off with 50 empty seats it means the revenue
of 50 seats are lost. Service companies are using yield
management systems to manage the idle capacity and modify
the prices as per the occupancy rate. Barter system can be an
additional tool to support yield management system. If the
company knows its seasonal idle capacity, it can barter a
certain percentage of its off-peak times service offers.
BARTER
 sales and promotion tool

Barter can be used as a sales and promotion tool for external

and internal customers. Barter increases the utilization of
excess capacity while it is an opportunity in meeting new
businesses i.e. other network members and increasing the
exposure to the market therefore it increases the sales volume
and market share. Barter allows disposal of declining products,
which can be consumed by the network at a marginal cost.
It also helps in monetizing a perishable capacity, which would
otherwise be lost

It can also be used for a compensation tool. Companies can use

barter for bonus, sales incentive or part of a compensation
package i.e. movie tickets, air tickets, restaurant certificates
can be provided by the member for their internal customers i.e.
employees.
 financial tool

The companies to preserve cash for the budgeted expenses

utilize barter as a financing tool. It helps to maintain liquidity
and improve cash flows while purchasing necessary products
and services by using the excess or underperformed assets.

It can also be used as alternative credit option by utilizing the

network assets with their nominal value. When the business
needs to borrow money to launch a marketing program,
relocate its business, refurbish its premises etc. barter line of
credit may be easier to get rather than the bank credit. More
diversified the network is, easier to find what is needed for
those required activities.

Barter can also be used to liquidate the uncollectable debts.

The creditor can give the debtor company to the option to pay
with its product or service rather than cash. That product or
service is placed in the network and the trade credits can be
transferred to the creditor’s account that can be spent in
the network.

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 network members

valuex business depends on the number and versatility of its

network. If the network members are diversified in terms of
their industry or business line, options of offering gets
diversified and the possibility of finding a product or service to
fulfil the needs of members increases.

In the business to business context the members are suppliers

and buyers at the same time. The members are valuex’s
clients in cash conservation as they are buying the service from
the company in reaching the potential sellers; at the same time
they are valuex’s partners in fulfilling the requirements of
network as channel partners.

In the Middle East, valuex aims to build up partnerships with

companies mainly in media, retail, travel & hospitality,
automotive and any other business that carries excess
inventory or capacity.

Hospitality
Retail
 corporate solutions

Manufacturers Use Corporate Barter To Move Their Under

Performing Assets, Excess Inventory, And Perishable Products,
specifically larger companies that trade their products/services
primarily through valuex. Larger companies, primarily
manufacturers, will trade their excess inventory, rather than
continuing to sell through usual distribution channels wherein
they employ discounting; scraping and writing off the
inventory; going outside normal markets, going the auction
route; employing commissioned brokers or consigning the
inventory; donating the inventory to a charitable institution; or
selling inventories to liquidators for pennies on the dollar and
taking a substantial write-down.

Through barter the manufacturers move their inventory to a

valuex (title changes hands) for trade credits, usually at
wholesale value. Then the manufacturer spends the trade
credits, with the assistance of valuex, on a part cash/trade
credit basis to make selected needed purchases. The technique
is known as AR (accounts receivable) trading.To a lesser extent,
valuex will assist companies by brining two parties together
and collecting a cash fee for doing so. However, sometimes the
fee is paid in "like-kind" inventory in lieu of cash, which enables
the valuex to build a "bank" of inventory

Typically, barter appeals to a company for several reasons:

• To reduce inventory that isn't selling.
• To get a foot in the door with a new company.
• To boost production levels by tapping new markets.
• To reduce cash outlays.
• To have another method of collecting bad debt.

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 contract form

valuex contract
Name of "Offeror"(Entity initiating barter offer):____________________________________________________________
Address:___________________________________________ City/State/Zip:_____________________________________
Contact Name:_______________________________________ Title:___________________________________________
Phone:___________________________Fax:_____________________________E-Mail:____________________________
WHAT DO YOU ("OFFEROR") OFFER FOR valuex?
Describe product(s) and/or service(s):_____________________________________________________________________
Condition - If applicable: ( ) New ( ) Used Price: ___________________
If offering service(s), is this a flat rate or an hourly rate?_________________________
If hourly rate, how many hours are your offering?_____________________________
Applicable VAT (to be paid separately):_______________ __________________
If offering products:
• Manufacturer:___________________ Year:_________ Delivery Method (if applicable):________________________
• Model #:_____________________________________ Who will pay for delivery?____________________________
• Serial #:_____________________________________
How much is the monetary value of your bid to "Offeree" for barter?____________________________________________
Does your bid exceed the price of your item and/or service? ( ) YES ( ) NO
If so, how will you pay the remainder?____________________________________________________________________
WHAT DO YOU ("OFFEROR") REQUEST OF "OFFEREE" (valuex)?
What product(s) and/or service(s) do you wish to obtain from valuex? ________________________________________
___________________________________________________________________________________________________
Describe item(s) and/or service(s) in more detail to obtain a quote:______________________________________________
Delivery Method (if applicable):__________________________ Who will pay for delivery?_________________________

This agreement is between ___________________________

("Offeror") and _________________________,
("Offeree") who jointly agree to be
bound by the following terms and conditions when bartering products and/or services as outlined above.
1. It is understood by both parties that completion and submission of this form by "Offeree" to "Offeror" represents
the intent of "Offeree" to enter into a legally binding contract. Upon acceptance of the product(s) and/or service(s)
within the bid amount of "Offeror", "Offeree" agrees to submit payment for product(s) and/or services via barter
and other means (check, money order or credit card), as arranged. Each party agrees to inform the other of all
anticipated fees before commencement of any exchange of product(s) and/or services.
2. Both parties attest that they are freely/legally entering into this agreement and will abide by its directives and requirements.
3. Both parties will adhere to the price set by each as final. Both parties attest that the pricing for product(s) and/or
service(s) represents fair market value, to the best of their knowledge, within that industry.
4. Both parties represent and warrant that the product(s) and/or service(s) offered for barter can legally be sold by
them and their assigned agents or dealers and have full power to make this agreement. They also represent and
warrant that the product(s) and/or service(s) do not infringe upon any statutory copyright or upon any common law
rights, proprietary rights or any other rights whatsoever.
5. Each party shall indemnify, defend and hold harmless the other, its officers, trustees, agents assigns, and
employees, from and against any and all claims, demands, suits, losses, liabilities and costs, including attorneys' fees,
arising out of any alleged breach of the foregoing warranties or any alleged violation of copyright or other property rights.
6. Both parties agree to adhere to the delivery schedule as set by the parties. They further agree to deliver product(s)
and/or service(s) in good condition.
7. Both parties attest that all information included on this contract is true, to the best of their knowledge.
8. If a party opts to terminate the barter arrangement, that party agrees to compensate the other party fairly for any
product(s) and/or service(s) provided to date of termination notice.
9. valuex credits dose not expires

"OFFEROR" • CONTACT NAME SIGNATURE DATE

"OFFEREE" • CONTACT NAME SIGNATURE DATE

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 case study

In times of recession as circulation of cash drops, barter activity

grows exponential as an alternative form of currency

Background
In 1934 after the Great Crash, 16 businessmen met in Zurich to
create a mutual credit system among themselves.

This currency ran parallel to the Swiss Franc and was named the
WIR, instead of borrowing money from banks, businesses gave
credit directly to each other using the business-to-business
currency.

Operational Success
Within the first three months of operation WIR participants
grew to 1,700 and by the end of the first year 3,000. Today
there are 60,000 members and the volume of trade is
approximately $2 billion per year.

Long-term Impact
Quantitative studies using 65 years of high quality data, proves
that the WIR System is behind the robustness of the Swiss
economy. It was found that this mutual credit system
automatically expands during recessions and proportionally
retracts when there is a boom in the economy.
 barter on global level

Lufthansa has bartered real estate for media credits

and aviation fuel.

Honda, Kia & Subaru have bartered cars for media

trade credits.

Brazil with drill ships or platforms in return for stakes in

its oil fields in the Santos area, which KNOC would manage.

Chinese company will provide The Democratic Republic of

Congo roads and railways. Health centres, hospitals etc.
in exchange for a slice of Congo’s precious natural resources.

Recent trade agreement with Russia wherein Indian products

can be bartered for Russian defense imports.

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Start Trading
[email protected] • +971 526627860