LITTLE ROCK — Kirby Walker, owner of Noodles Italian Kitchen in Fayetteville, joined Local Trade Partners LLC in January mainly to help out his longtime friend Rolf Wilkin, who had just started the trade exchange.
But membership has been a “100 percent win” for his restaurant, Walker said.
Fellow members can pay for their meals using the exchange’s currency, called “trade dollars,” which Walker has used with other members to pay for services like landscaping, copying, auto repair and maintenance, and painting.
“We’ve found basically there’s something there for virtually everything you need,” he said.
Since its inception onDec. 6, Fayetteville-based Local Trade Partners has signed up 221 member businesses with a new member joining almost daily, Wilkin said recently. He said trade exchanges are seeing a lot of growth in these tough times because they help people save cash.
“The bad economy is helping people see the value of trading goods and ser-vices,” said Wilkin, who also is the founder and owner of Eureka Pizza. “A lot of businesses trade, but it’s usually a one-to-one trade, like someone can cut my grass and I can give them pizza.
“But the neat thing about a trade exchange is it gives you really cool flexibility that you really don’t have with a oneto-one trade. You can buy a lot of things for your business, but you can also take your family to Bordino’s or a Naturals game.”
According to the International Reciprocal Trade Association, an industry group, the barter or trade exchange acts as a broker and bank. When members sell their goods or services, they earn credits using an internal currency known as barter or trade dollars, equal in value to cash.They can then use the trade dollars they’ve earned to buy goods and services from other member businesses.
BarterNews, a journal of the reciprocal-trade industry, states on its website that the nation’s more than 500 trade exchanges have a collective membership of about 450,000 businesses, including retailers, service providers and manufacturers.
An advantage of a local exchange is that it supports businesses within a community, Wilkin said, and membership in Local Trade Partners is mainly limited to businesses in Benton and Washington counties. However, it uses software that gives members the option of trading nationally or globally for items such as vacation rentals.
Members pay a one-time fee of $249, and are chargeda 5 percent transaction fee in cash when they buy or sell. The exchange records all transactions.
“Our goal is to make it really simple and really userfriendly for local businesses,” Wilkin said.
A list of members is posted at localtradepartners.com.
While member businesses range from law firms and pet sitters to body shops and veterinarians, the largest category is restaurants.
Kenn Flemmons, owner and president of Southern Barter Exchange Inc. in Little Rock, said restaurants also make up a big portion of his group, which has more than 600 members. It mainlyserves central Arkansas and cities such as Hot Springs, Conway, Cabot and Pine Bluff, but has clients in 19 states.
Restaurants always do well in trade exchanges, Flemmons said, partly because people have to eat, and also because the overhead is the same no matter how many customers are in the restaurant.
To feed a couple using trade dollars, he said, the only expense for the owner is the food, and the trade dollars can be used for services such as carpet cleaning or advertising.
Southern Barter Exchange, with a staff of five, has been in business since 1982. There’s a $99 joining fee, and a 12 percent transaction fee on purchases.
Flemmons said he’s definitely seeing more businesses interested in joining, “because money is tight, and barter is a way to get things done when you don’t have money. A lot of people who didn’t have time for us in the past suddenly have time to hear what we have to say.”
Gary D. Ferrier, chairman of the economics department of the University of Arkansas at Fayetteville, confirmed that trade exchanges grow during bad economic times.
“Participants may be trying to conserve cash, or may simply not have the cash to perform market transactions,”Ferrier wrote in an e-mail. “The former are typically small businesses with cashflow problems; they may enter into a direct exchange - goods/services for goods/ services, or indirect exchange - goods/services for credits that can be redeemed later. The latter are typically individuals out of work or cashconstrained.”
Commonly exchanged services are auto repair and home repairs, he wrote, though recently there has been an increase in barter for health-care services and restaurants.
The only drawback Flemmons sees to membership in a barter or trade exchangeis that in order to succeed, members have to know what services are available, and then develop a habit of thinking about trade before they spend cash.
“If you think about it after the fact, it’s not going to do you any good.”
He said a member wrote a check for a $2,800 phone system, not realizing several member businesses could have provided the same service for trade dollars.
“If you’re expecting it to do wonderful things for you without you having to put out any effort, it’s not going to work for you,” Flemmons said.
Members of a trade exchange must keep a few things in mind to stay in the good graces of the IRS. Trade dollars earned through a barter exchange are considered taxable income, just as if the product or service was sold for cash, and must be reported on tax returns. Barter exchanges also must report this information to the IRS.
State, county and city sales tax - as well as any tips - are paid in cash at the time of purchase. Wilkin said trade customers are charged the same prices for goods and services as customers paying cash.
Walker, the owner of Noodles, said about 1 percent to 2 percent of his business is conducted in trade dollars.
“From what I’ve found, the trade dollars themselves are just another form of currency,” he said. “It functions the same way in your business. You have 220 other places to spend your money. The only place [members] can spend them is within the group, so it’s increasing your sales, and a 1 percent to 2 percent increase is awesome.”
Business, Pages 65 on 07/18/2010