Trade You

Every day Brian Sheehan receives one of his North Hollywood restaurant’s most important staples free of charge. Well, not exactly free, but Sheehan pays no cash for the roughly $70 worth of fresh baguettes, sunflower seed buns and focaccia he gets from a Marina del Rey bakery.

Instead, Sheehan transfers credits equaling the value of the delivery to the bakery. In turn, Normandie Restaurant & Bakery owner Josette Leblond uses the credits to buy art for her cafe, for example, or to hire a singer to entertain customers. All without money changing hands.

In Southern California, more than 7,000 businesses like Normandie and Sheehan’s Eclectic Cafe engage in cashless barter as an alternative to the dollar-driven economy. About 60 barter exchanges operate here.

Besides acting as banks for credits traded, the exchanges serve as marketers, trumpeting the goods and services of participating businesses to others. Though some exchanges have been around for decades, it’s only in the last few years that their popularity has increased here and nationwide.

“A lot of businesses have a hard time understanding it at first, but once the world of trade clicks in your mind, you understand the benefits immediately,� said Sheehan, who shaved 15% off his restaurant expenses last year by bartering. His zeal for trade has led him to join three exchanges, thereby increasing the pool to which he can market his restaurant.

An exchange works like this: Members accumulate credits in their accounts by offering other members free goods and services. They can then spend those credits with any member they choose. An exchange can help cash-poor businesses stay afloat by cutting their costs, and can also provide them with a captive audience to which to market their wares. Exchange operators make their money off dues and per-trade fees.

“It’s a group of businesspeople that have said, ‘Whenever possible, we are going to do business with each other,’ � said Tom McDowell, executive director for the National Assn. of Trade Exchanges, a Cleveland-based umbrella organization of about 100 trade exchanges nationwide. “It’s like your own personal chamber of commerce.�

The concept appears to be clicking with business owners. All three exchanges Sheehan belongs to have grown substantially in the last few years. One of them, Malibu Business and Professional Exchange, picked up 100 of its 700 members last year.

“We’re in the middle of a growth spurt,� said owner Carol Ornelas, who opened the exchange 18 years ago. “And I think it’s because we provide people with a new economy with spendable income they wouldn’t have had without us.�

Another barter group, American Commerce Exchange, or ACX, in North Hollywood, added close to 130 businesses to its ranks last year, says owner Mark Tracy, boosting membership to 650.

The national association estimates that membership in trade exchanges nationwide has grown more than 7% in each of the last three years, with nearly 430,000 businesses in the United States and Canada now participating.

Some exchanges have grown so much they’ve stopped trying to expand. Trade American Card in Orange, for example, is satisfied with its 2,000 participants, most of whom are Orange County business owners. “We’re not looking for the numbers anymore,� said Mike Ames, who founded the exchange 30 years ago. “We’re looking to increase quality.�

Ames hopes to increase the ranks of more stable chain businesses and services. “You have to be careful who you bring into a barter economy,� he said.

The current interest in barter defies conventional wisdom that the allure of barter drops as the economy improves.

Indeed, during the last 30 years, industry observers say, economic boom has generally meant bust for trade exchanges as businesses that had taken to bartering to stretch their capital during recession turn again to cash when good times return. But the current economic upturn has shattered the mold.

“The numbers have grown because we have established a level of credibility that we didn’t have in the early years,� McDowell said. “People don’t view barter as an underground economy anymore. They view us as another business tool.�

Susan Groenwald of the International Reciprocal Trade Assn. agrees.

“It’s another method to bring customers in the door,� said Groenwald, board secretary for the Chicago-based umbrella group that coordinates trade among 130 exchanges worldwide. “I think it’s probably because of the changing business climate. Competition is fiercer, and I think that businesses know they have to be more creative to make it work.�

Restaurateur Hali Rosen may have stretched the bounds of creativity and bartering as far as they can go.

A couple of years ago her Trilogy cafe, which she had hoped would be a popular lunch spot for Westside lawyers and office workers, “was sinking fast and about to go under,� she said.

Rosen said she was inspired to remake her restaurant after watching a Sally Jesse Raphael show on TV about female impersonators. She decided to replace the restaurant’s wait staff with singing female impersonators who would also stage floor shows.

To make it work, Rosen said, she needed to quickly boost clientele and word-of-mouth, so she decided to join the West Los Angeles office of International Trade Exchange, a nationwide chain of franchised barter groups that operates four regional offices. Rosen concluded that joining an exchange in her neighborhood would provide an instant market of local businesses to advertise her new look.

The move worked, she said, giving Trilogy “our first bump of business that really got the word-of-mouth out on us.�

Business is going so well that Rosen is planning to move to a larger space. And she plans to do much of the contracting and interior decor work at the new place on trade. “Barter is really an incredibly marvelous tool,� Rosen said.

Barter neophyte Carmen Wylie agrees. The owner of Carmen’s Skin Care Clinique in Woodland Hills said her decision four months ago to join ACX and the Malibu exchange has provided her a steady string of customers to book on slow days and has allowed her to cut advertising expenses.

Wylie never seriously considered joining a barter group until she was contacted by a telemarketer from ACX.

The call was part of an aggressive marketing plan ACX owner Mark Tracy launched in February to bring in new businesses to satisfy members who wanted more variety in their choices of where to spend their credits. Specialty salons were among the requests.

The flip side, however, is that not every business that wants to can automatically join an exchange. ACX no longer admits chiropractors, dentists or photographers. On the other hand, Tracy said, it can’t get enough restaurants, hotels and florists to join.

“It’s all about supply and demand,� he said. “If you have something people want, they’re more likely to trade with you.�