Posted on November 17, 2011 by Dennis Salazar

Bartering Organizations – The Ugly Side of Sustainability

Sustainability, when defined as something that by design reproduces itself indefinitely and never ends, is a worthy objective in almost any facet of life or business. However, I have found absolutely nothing that lives on forever the way a barter dollar does. Regardless of what you are told, this gross and corrupt example of sustainability is not for the benefit of the buyer or seller but for the organization sponsoring the program. I can’t say bartering is not good for anyone, but I can tell you how awful it was for us.

The Pitch

We were told how bartering can help turn inventory when you sell, and how it enables you to make purchases without cash when you buy. It all sounded like a great deal, and who could possibly resist an opportunity for immediate sales to eager new customers?

The salesperson was quick to reduce the enrollment fee of $200 to a bargain $100 because he wanted us to see “how wonderful the program can be.” The monthly fee to belong (whether you buy and sell, or not) and even the commission (6% when you sell and 6% when you buy) seemed reasonable because as a new member, you really don’t understand the true costs or how quickly they accumulate.

The Reality

As soon as we signed up, the orders started coming in. We were thrilled that the other members really wanted our green products. But that wasn’t the case at all. It did not take long to realize the people calling us were stuck with dollars and looking for a way, any way, to get rid of them. Realizing how the dollars were quickly accumulating, I asked my sales support person for help. The 6% commission we owed the company was adding up, and I was having a difficult time finding ways to spend the dollars that we were “earning.” Keep in mind, these earned dollars I speak of are not gifts, awards or even free. They are real dollars that have been converted from sellable product you bought and paid for (with cash) into dollars that accumulate with no obvious way to use them.

Furthermore, when we found something we could buy, the purchase price of the items we were buying seemed inflated while our selling prices were not. My rep advised me confidentially to raise the price of our products enough to cover my “selling costs.” In other words, he was suggesting we inflate our prices to cover the commissions we had to pay him and his company. It became obvious that he and his company did not care whether members received value, because the more the product sold for, the greater their commission.

The whole thing was beginning to sound messy and fishy to me, so we put our account on hold, which essentially means we stopped selling. BTW, it took almost two years to get rid of the dollars we were stuck with. And I won’t even go into the details of a non-member selling reconditioned electronics as new or an organic beef vendor who was offended when I asked for his certification.

Our Mistake

As new, inexperienced business owners, we have made several mistakes, but joining a barter company was definitely one of our biggest. If the barter company’s success was determined by buyers’ and sellers’ satisfaction, they would probably go broke, but in this case, the house (bartering company) always wins regardless of who loses. The best part of this scheme is that each transaction will reproduce itself indefinitely. When we finally found places to spend the dollars we had, they did not evaporate or disappear. Those dollars now belong to another member who paid a 6% commission for making the sale (to me) and will pay another 6% when he eventually finds someone else to unload them on.

Imagine if I sold a corrugated shipping box and was able to collect a commission if the box was resold. Or it was a reusable container and I was able to collect a small, reasonable commission each time the container was reused?

Sour Grapes?

Not really. I can complain in great detail about their endless turnover of sales support reps or the ridiculously inflated prices some members charge for their products under the blind eye of the barter company. I can also tell you about service-providing members (landscapers, plumbers, printers, etc.) who won’t even return calls if you leave a voice mail message and mention you are a barter member. I learned this is because most of them have accumulated dollars they can’t unload and/or have also put their accounts on hold.

Shame on me, because I forgot the most basic and true advice any of us have ever received, which is if it sounds too good to be true, it probably and usually is. I also now know that good things really do come to an end, but bad things can indeed go on forever.