It’s no secret that companies worldwide are starved of cash and credit and are after alternative methods to survive the current economic maelstrom. Share markets alone shed USD $29 trillion (AED106.53 trillion) in value in 2009 and banks are nervous about lending given the volume of questionable assets some carry. “We do well in good economic times and we see a huge increase in demand for our services in downward cycles,” Mr. Bagga says. “In the last six months, our business has grown dramatically.”
This is because this traditional way of doing business creates a solution that fits in recessionary times. His company, BizXchange, was started in the US in 2002, came to UAE in 2007 and by 2009 the UAE operation alone grew by 600%.
The concept of bartering is not new, especially in lesssophisticated economies. For instance, Pepsi and Russia joined forces when the soft-drink behemoth won marketing rights in Russia in exchange for ships full of vodka. Or the case of Mercedes- Benz that traded buses for USD $44m of Ecuadorian bananas, and Thailand that offered rice in lieu of Russian fighter jets. The International Reciprocal Trade Association (IRTA), the regulatory body, estimates that 30 per cent of the world’s business is done on a barter basis, industry insiders call it “modern trade.” Afterall over 65% of Fortune 500 use barter to maximize their bottom line.
By becoming a member of BizXchange, a commerce model without cash environment where products or services are bought and sold between members and transactions are settled in the form of BizX Trade Credits, equal to the local currency, overcomes the challenge of bilateral trading. BizX is a performance based business that makes its revenues, mainly from management fee, based on successful member transactions, so a win-win situation for all parties involved.
So how does it work in real life. A hotel, for example, with 20 per cent of rooms unoccupied could sell this “excess inventory” to other BizX members. The otherwise unsold room now has a new customer, and is paid for with BizX credits. The hotel now could purchase goods and services available on BizX, for which they would normally pay cash for such as advertising, vehicles, furniture at its convenience. Aside from increasing occupancy, which is always positive, the hotel also slashes cash expenses, whichcould substantially increase profitability.
Mr. Bagga founded Barter Business Exchange in Toronto at age 22 with less than USD $10,000 in capital and eventually sold to Network Commerce for USD $45 million. He founded BizXchange in January 2002. Since then, the company has conducted over AED 1.5 billion in trade and has been awarded Inc. Magazine’s Inc. 5000 Fastest Growing Private Companies in the United States for the last three consecutive years. Brokering trades has netted this 39 year old Canadian citizen of Indian origin a reputation in global alternative trade circles and a title of “global expert on barter”.
Currently, BizX is entering the Real Estate industry as a solution provider to stimulate business and enable transactions where otherwise may have been difficult or impossible. This could positively impact the local economy suffering from the collapse in this sector. BizX is working with developers to create liquidity where traditional banks are unable or unwilling to do so. Where previously they had to spend cash, through BizX, developers can offset budgeted expenditures in various categories including construction, media etc by selling (or renting) their own assets. Direct benefits are simple: 1- Saving Cash Resources (less bank financing) and 2- Guaranteed sales (BizX as a new sales channel).