If extravagant spending was one cause of the current economic crisis, then frugality has been an effect. Between July and the end of September 2008, consumer spending fall 5.1 percent--the biggest drop since the mid-70s. But old habits die hard. Consumers may have less cash on hand, but one way they're still acquiring stuff is through old-fashioned bartering.Craigslist says advertisements for people looking to swap goods and services rose have doubled over the last year, and sites focused on bartering are seeing a surge in traffic. One is U-Exchange, where members trade just about anything from cars for home renovations to restaurant gift certificates for electrician services. U-Exchange co-founder John Moore says traffic at the beginning of 2009 was up over 100 percent compared with a year earlier. Because of the economy, he says, "people are willing to dip their toes in the water and give [barter] a try."
It's hard to know if the surging interest in these sites is due to the economy or the growing popularity of online transactions. But economists who have studied bartering say it makes sense that people might turn to trading in tough times. "In the current situation, even short-term credit is difficult," says Bernard Yeung, dean of the National University of Singapore Business School. "Two parties that can find mutually agreeable and credible commitments would be happy to strike a deal." Still, the world of bartering is big, and navigating it can be overwhelming. Like buying a car from a dealership or buying items from eBay, bartering takes a little consumer finesse.
1. Pick the right place to barter. Not all bartering sites are alike. Some specialize in particular goods and services; it all depends on what you want and what you have to offer. If you're hoping to unload books or CDs that have been gathering dust in your closet--and gain some new ones--consider sites like Swaptree[http://www.swaptree.com], TitleTrader, and Switchplanet.com For the environmentally conscious, there's Freecycle and ReUseIt Network.
2. Be specific. What's the biggest mistake people make when bartering online? Moore says it's that they don't provide enough detail in their postings. "Compare it to online dating," he says. "You wouldn't just put down, 'man looking for woman.'" Market yourself. Be descriptive about the goods or services you're offering, and make sure people can find you in a search. For example, if you just write "handyman," only people who search for that word will find you. If you're seeking goods or services, be specific about what you're looking for.
3. Be wary of scams. One blogger who recently started using a bartering site says she completed a trade, but never received the item, and was unable to get in contact with that user. "Getting scammed so early was not encouraging and I decided that I would not participate in any more trades right now," she wrote on her blog. Rodney Wren, who sells collectible model cars online, says he's been using bartering sites for six months and hasn't run into any problems. He does, however, check sites for feedback from other users, and he even asks for references.
4. Don't forget about the IRS. If you trade bikes with someone on Craigslist, there's nothing to report to Uncle Sam. But other exchanges are considered taxable by the IRS. An example of a taxable barter, according to its website, is "a plumber doing repair work for a dentist in exchange for dental services." Both the plumber and the dentist would need to report those services as income. Moore recommends agreeing with your trading partner beforehand on a cash value for services traded.
5. Know the limitations. While online bartering might save you cash, it could cost you plenty of time. "It's the incidence of coincidence," says Krista Vardabash, director of marketing at International Monetary Systems, one of the two public companies that facilitate business-to-business bartering. Here's what she means: First, you must find someone who wants what you're offering. Second, that person has to be interested in exactly what you have. Online bartering sites make that more likely, due to the sheer number of people trading. But the process can still require a long wait.