It's a Giant Swap Meet As Firms Barter More
WEARING a sweater rather than a suit and carrying a pool stick for an afternoon game with friends, Lance Lundberg looks more like an MBA graduate student on vacation than the successful entrepreneur he is. Mr. Lundberg has taken a centuries-old commercial practice - bartering - and turned it into a thriving multimillion dollar business.
Lundberg is president of ICON International Inc., a New York barter-finance firm that is one of only a handful in the nation dealing in corporate barter.
With projected revenues of $120 million this year, ICON has grown rapidly by doing what barter-entrepreneurs of ancient history did - make a crafty trade here and an advantageous swap there. Only in ICON's case, the traders and swappers include some of the largest companies operating in the United States.
Here's how a typical deal works: Say a company has spare merchandise it can't sell at regular prices. The firm can exchange its products for "trade credits" with ICON. The credits can be redeemed for a broad array of items, from advertising time on Cable television networks to merchandise in ICON's inventory.
For example: Sharp Electronics Corp. needed travel packages to reward its top US dealers under a company incentive plan. Sharp went to ICON and traded excess electronic merchandise for 50 berths on a luxury cruise liner in the Mediterranean.
Barter transactions in the United States are valued at roughly $20 billion annually, according to the US Commerce Department. Corporate barter, as a segment of all barter, is growing rapidly, according to the International Reciprocal Trade Association, a trade group in Alexandria, Va.
Excluding "countertrade" - the practice whereby multinational companies buy overseas products to offset their export sales in a country - "pure barter transactions in the US are now running at about $7.65 billion annually," says Paul Suplizio, who heads the IRTA. "Barter trade has been growing at a rate of about 8 percent annually since the 1970s, and closer to 10 percent in recent years," he says. Some surveys show barter is a component in 6 percent of all US export transactions. Barter deals are considered sales for accounting purposes.
A number of Fortune 500 companies, including General Electric Company, Pepsico Inc., Ford Motor Company, and Boeing Company, now have departments that facilitate barter. Media firms have long traded ad slots for goods. What Lundberg and others like him have added to the mix is complex deals involving manufacturing capacity, commercial real estate, jet aircraft, and financially "distressed" assets.
A 1980 graduate of the Harvard Business School, Lundberg raised seed money for his firm in 1985. Large barter firms besides ICON include Barter Corp. in Oak Brook Terrace, Ill., ITEX USA Inc. Great Falls, Va., and Tradewell in New York.
Many of ICON's deals are conducted in privacy, since firms seldom want to alert the world that a product may be overproduced and not selling. Some transactions have gained major attention, however, such as a complicated real estate deal involving Lufthansa Airlines, a broker-dealer real estate firm, and a women's shoe company. The transaction - which ultimately involved a swap of excess real estate space for advertising credits - gained ICON an award from the Real Estate Board of New York a year ago.