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Let’s Make a Deal: Recession Turns Buyers into Barters

Cash is still king, but in this new rough-and-tumble economy, a form of old world commerce—with a high tech twist—is taking a seat at the royal table.

Fueled by the Internet, bartering is booming. As more people are laid off, see their paychecks cut, or just want to save a few bucks, they are swapping their skills and stuff for what they want and sometimes, what they desperately need.

Damon Molder has been bartering his skills repairing computers for about eight years now—once for a tattoo—but since he lost his job as an executive assistant for a gaming company in July, the stakes have risen. No longer able to pay rent on the room he shared with his partner in a town outside of San Francisco, the couple has been staying with various acquaintances ever since, often in a tent in the yard. He’s currently living with a family in Fairfax in exchange for cleaning and organizing their house. So after tidying the family’s garage, he posted an ad on Craigslist to trade his computer savvy for junk hauling.

Even though Damon recently landed a part-time job, he knows he will need to continue to barter and is willing to do just about anything to stay afloat.

“If it’s legal for me to do, then I am setting aside my pride,” he said.

Damon is among a growing tide of Americans who are using the Internet to make cashless deals. From homespun and low-tech such as BarterBart to the spit-polished Joe Barter, Web sites that offer the modern-day equivalent of pre-monetary commerce are seeing their users multiply. Nationally, Craigslist’s barter section posts grew by 100 percent between January 2008 and January 2009. SwapThing had 3,458,572 listings for everything from LPs to handyman expertise—more than double the number on the site last May.

Barterers needs and desires run the gamut. Some like Damon are struggling to make it. Others are trying to live well with less by trading professional photography for designer handbags, Ipods for Wiis, and Brazilian waxes for massages. One hopeful seeker was offering baked goods to an attorney who would review her severance package. An owner of a “brand new unopened Hickory Farms ‘party planner’” was looking to swap for multi-colored candles or a small black lamp.

Though the appeal of bartering is the absence of money, barter exchanges have become a $12 billion industry, according to the International Reciprocal Trade Association. Bartering exchanges often charge for membership, include a transaction fee, or both. Web sites often earn revenue from advertising.

Although novice barterers are joining the ranks in record numbers, the practice is old hat to others, particularly small business owners. When Lisa Bach decided to start a business selling organic snacks and cleansing juices in San Francisco, she had $68 in her pocket. For everything else, she bartered.

Fifteen years later, juice blends and shots of barley and wheatgrass are standard fair in health conscious cities and Lisa’s business, Juicey Lucy, has found a comfortable niche. A ten-day cleanse delivered to a customer’s door goes for $970—but success hasn’t stopped her from bartering. She says that by swapping juice for services, she has never had to take out a loan, not even during the thirteen years she owned a café. Although she wouldn’t have traded in her bartering experiences for cash commerce, she has learned how to avoid pitfalls along the way.

Here are some tips from Lisa and other sage barterers:

1. Assign a dollar value.
Putting a price tag on the goods and services can be difficult, but it will make the transaction much less complicated and help ensure that both sides get a fair deal.

2. Be specific.
Know exactly what you expect and what is expected of you and communicate it clearly. Sometimes a short contract that details the trade is the best way to make sure both parties get what they want.

3. Treat it as a business transaction.
Have a conversation with your potential trade partner. Ask questions. If it’s applicable, review samples of work or request references.

4. Consider Uncle Sam.
Barters are hard to track, which makes them hard to tax. If you swap an item for an item, that’s generally not considered taxable. But trading professional services should be reported as income. A taxable barter, according to the IRS Web site, is “a plumber doing repair work for a dentist in exchange for dental services.” To be safe, check with your financial advisor or accountant.

5. Find the right venue.
While there are lots of sites that cater to all things, there are also some that specialize in particular goods and services. Many sites are devoted to books, video games, music and/or movies. Try Swaptree, TitleTrader, Switchplanet, BarterBee, Peerflix, and Paperback.com.

Bartering has become big business, but economists warn that it will wane. A recession can drive seekers to the bartering table, but when the economy improves, most will take the easier route and buy rather than trade.

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