Page last updated at 08:45 GMT, Thursday, 12 February 2009

Haggling and bartering gain appeal

By James Melik
Business reporter, BBC World Service

woodcut of people bartering by Olaus Magnus
Bartering was portrayed in an Olaus Magnus woodcut in 1555

As the global recession bites deeper, many are turning to bartering and the ancient art of haggling to ensure they get what they want at a price they can afford.

Bartering is trading in goods or services in exchange for other goods or services without any money changing hands, while haggling is parting with less cash than the original asking price.

In ancient times, before the advent of currencies, barter was the only form of trade. In some societies, it remains the accepted way of doing business.

Organised bartering is still used by many businesses and individuals. In these times of financial constraint, new schemes, made easier by the internet, are constantly being formulated.

Russian model

In the post-Soviet era, it was common for timber firms to trade lumber for logging equipment and farm workers to swap meat for fuel.

That practice kept some businesses afloat, but it also allowed them to defer the necessary changes to keep them competitive.

Russia's commodity-focused economy has been hard hit in the current economic crisis and the rouble has lost more than a fifth of its value since November.

HOW ASAC MODEL COULD WORK

A plant in south Russia produces combine harvesters which are shipped to a farm

The farm sends grain to Kazan, a large city on the banks of the river Volga

The local government offers vacant flats to the workers of a vehicle production plant

The factory produces large trucks which it sends to Namibia

Namibia sends bananas to customers in Russia

Cash collected from the bananas goes to the plant which produced the combine harvesters

German Sterligov, a businessman who lost his fortune on a failed presidential bid, has unveiled a new bartering scheme.

He says his Anti-Crisis Settlement and Accounting Centre (ASAC) is more advanced than the rudimentary barter trades so common in post-Soviet markets.

"Deals are hard to arrange and often fall apart," he says, "but our deals are arranged through the computer and goods are delivered on demand through a chain.

"In our system, goods move in one direction, which is a lot easier than the traditional barter system."

Mr Sterligov's system sees a cash payment being paid on the last transaction, with that money going to the first link in the chain.

He founded Moscow's first commodity exchange in the 1990s and admits that for his new system to work effectively he needs tens of thousands, if not millions, of companies to register.

"In times of crisis, barter offers a means to avoid the often fruitless search for bank loans and other forms of financing," he says.

His ideas have been greeted with mixed reactions in Moscow.

Sergei Ryabov of Titan-Agro says "in times of crisis, all means are good", whereas financial lawyer Sergie Voltishkin says the current crisis offers an opportunity to make businesses more efficient and "not throw us back into the Dark Ages."

Childhood bartering

On a more modest scale, John Moore and Barb Di Renzo in the United States started the free site U-exchange four years ago.

People who have heard of bartering are now willing to dip their toes into the water to see what it's all about
John Moore, founder U-exchange

"We've been bartering since we were children," Mr Moore says.

"Although we weren't aware of this at the time, our parents bartered with us on a daily basis.

"You could have dessert, but only if you ate all your vegetables. If you did well on your test, you could get that new shiny red bike," he reminisces.

"U-exchange aimed to give people an opportunity to get what they want without using cash."

It can be anything from services, items, vehicles, permanent home swaps and holiday home exchanges.

"Buying and selling is not allowed and cash can only be used to even up a trade."

The increase in traffic since February 2008 has been incredible, with page views increasing almost three-fold to more than a million hits.

"Since the credit crunch, people have become more creative. Even though the economy is slow, people's wants and needs remain the same," Mr Moore says.

Three children on sandy beach
Holiday bargains can be negotiated after a bit of confident haggling

"With the economy slowing down, people who have heard of bartering are now willing to dip their toes into the water to see what it's all about. We have seen this happening in the UK, USA Australia and Canada.

"One thing we've noticed is an increase of permanent home swaps between the UK and vacation homes in Spain."

Mr Moore points out that bartering is 100% legal.

"What is illegal, is failure to record business barter transactions when filing income taxes," he says.

Bargain hunting

Hunting for a bargain is endemic across the world and finding one can often entail a bit of good-humoured haggling.

Certain cultures regard haggling as an essential part of the shopping experience, but the ancient practice is not so prevalent amongst shoppers of the developed world.

The first time people come across haggling is often when they go on holiday and start purchasing souvenirs in a market or exotic souk.

However, haggling can start even before you leave home.

stall holder in bazaar food stall
In some cultures it is an insult to pay the asking price without haggling

As families cut their leisure budgets, holiday firms and hotels are reeling and many are willing to offer discounts to confident hagglers.

The Research Group, a market-research firm, says 72% of American consumers have haggled in the past four months, compared with 56% a year earlier.

Professor Richard Zeckhauser at the Harvard Business School, believes haggling is beneficial to a struggling economy.

"Retailers set prices well above costs," he says.

"Most businesses would rather have a sale at a lower price than have no sale whatsoever."



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