Today, more than 25,000 Australian businesses, ranging from airlines, caterers, doctors, lawyers, dentists, restaurants, hotels, and building contractors to retailers and wholesale businesses conduct more than $400 million of barter transactions every year.
The industry itself has many dichotomies. The size of competing exchanges varies enormously from Bartercard with 22,000 members through to Barter Network Australia with an estimated 200 members. The second largest competitor , BBX, lags behind Bartercard with only 1/5th of the membership base despite having been in business only 2 years less than Bartercard.
Detailed mapping of the sector is far from easy. Competitive analyses are traditionally conducted on the basis of average turnover and overall market penetration. Unfortunately the industry is hindered by the poor quality and quantity of official statistics, duplication of members between exchanges and the general lack of transparency of transactional and revenue figures. Further complications arise when reviewing those competitors who operate in specific niches (Contrabart) and those whose business aims may be in direct competition with the aims of their members (exchange owners potentially creating personal wealth through spending “newly created” barter dollars versus creating a stable, inflation-resistant marketplace).
Extreme care needs to be taken in examining the claims of the larger marketplace players and in drawing sector wide conclusions from them. The barter industry as a whole needs to be understood first and foremost in terms of the economic and social needs that it meets rather than the performance of existing exchanges.
Barter exchanges themselves are inherently complex. The traditional boundaries between being a service provider and a product provider are blurred and the roles required to manage customer expectations against the actual marketplace function adds to the complexity of operating a successful exchange. However, for the sector as whole, common drivers, structural trends and competencies can be identified.
The Australian barter industry has undergone major changes in the last 5 years, with consolidations of many of the smaller players being undertaken by ASX listed, Business Barter Exchange (BBX). From 2005 onwards the market has perked up in terms of increased trading volumes from existing members although new member acquisitions appear to be almost stagnant. In particular:
The markets average trade volume per member increased by almost 34% between 2003 and 2007 yet new membership growth was lagged behind at an average of only 2%.
Bartercard continued to glide along in first place, far outpacing others in terms of both membership numbers and trade volumes.
BBX remains second place in terms of trade volumes and revenues although not membership numbers.
A relatively new entrant, Empire Trade (formerly eBancTrade) has been actively involved in direct marketing to existing businesses already trading through Bartercard, BBX, Contrabart and A to Z Trade, successfully acquiring nearly 49% of those businesses canvassed as members – in under 2 years!
The industry has approximately 25,000 businesses out of the 790,000 total in the marketplace (or a penetration rate of 3%).
With the exception of one competitor, fee structures from all existing barter exchanges are relatively same (10%-12%); the only difference being whether they charge on the buy side, the sell side or both sides of the transaction.
With the exception of Empire Trade, nationwide barter exchanges sell via franchises and regional exchanges use direct sales forces.
Penetration of online technology in the industry is extremely low and primarily limited to the provision of customer-facing online statements and online directories. Unfortunately online directories are rarely used as they contain both all those currently accepting trade and those who are “on hold” (spending down or inactive) making it difficult to “pin-point” which businesses one should attempt to deal with.
Brokering and customer acquisition are all local office based activities, which has the potential to cause difficulties in the cross-pollination of members goods and services between adjacent areas, state and country-wide.
New entrants generally assume a pro-active role in seeking out new members and to rapidly build their customer bases however the lack of sales force, market awareness and/or poor opinions of existing barter exchanges tends to hinder their growth.
The need to reduce overall costs whilst meeting a broadening range of customer needs, franchisee needs, and the sometimes competing desires and priorities of both has required Bartercard and BBX to manage costs and activities within their businesses through a more co-ordinated, integrated approach and has forced them refocus on seeking to increase trade volumes from their existing customer bases which has, in turn, diverted their attention from seeking out new member acquisitions. This is a fundamental change for the leading exchanges, and generally for the sector as a whole.
Bartercard appears to present the greatest value in terms of ease of use and ease of spend (market-base), however in terms of technology it has historically lagged behind, with the use of regional brokers and offices both keeping its growth steady (in terms of new signups versus drop-offs) but restricting its growth in terms of areas competing for both sides of the transaction (and resulting commission income). As each franchisee tends to operate in a silo of local trading this restricts the exchanges ability to generate cross-country trades and for members to easily engage in trades themselves when travelling and/or online. Finding those members who are obliged to accept barter dollars is also often difficult within the exchange.
Franchised barter exchanges out-perform non-franchise exchanges.
Franchised exchanges with greater autonomy with regards to local advertising and public relations have higher levels of performance over those who are restricted by head-office policy.
Copying and distributing this article
Ormita provides free updates about the generic benefits of barter to those interested in local currency, community currency, countertrade, reciprocal trade, barter exchange, time dollars, hours and other forms of community trade vehicles.
You may freely copy and distribute this article provided that you attribute the author and/ or source as the Ormita Commerce Network.
About Ormita
The Ormita Commerce Network spans 5 continents, with direct representation in more than 17 countries plus additional partnerships in a further 59 countries. The business allows companies to exchange goods and services on a reciprocal trade arrangement.
Some of our Websites
Ormita Commerce Network Australia – www.ormita.com.au
Ormita Commerce Network Canada – www.ormita.ca
Ormita Commerce Network India – www.ormita.co.in
Ormita Commerce Network Mexico – www.ormita.com.mx
Ormita Commerce Network New Zealand – www.ormita.co.nz
Ormita Commerce Network United Kingdom – www.ormita.co.uk
Ormita Commerce Network United States of America (USA) – www.ormita.com
For Licensee, Franchise and Partnership Enquiries please visit : www.ormitacorporate.com
