To understand how barter works and what is the economics of this business is.Let us understand this with a simple example, say a deal between a home decor manufacturer (product: table lamp) and a media company. ABC & Co, the manufacturers of home décor products agrees to sell Table Lamp (200 units @ 2500/- piece) worth Rs 5 lacs and take media space worth Rs 5 lacs. The transaction fee that he has to pay Corporate Barter is 10% when he buys back for this value. To simplify this transaction, let’s compare the deal, both ways, a general one and a barter one, as below:


Product  : Table Lamp
MRP      : INR 2500 / unit
QTY       : 200 Units
Trade Discount  :40%
Net Realised Amount  : Rs. 2500 x 200 – 40% trade discount : Rs. 3,00,000/-
Net Landing Cost of Pdt : Rs. 1000 x 200 – Rs. 2,00,000/-
Actual Profit : Rs. 1,00,000/-

Barter Transaction

Product : Table Lamp
MRP : INR 2500 / unit
QTY : 200 Units
Barter Amount : 200 x 2500 i.e. Rs. 5,00,000/-
Net Landing Cost of Pdt : Rs. 1000 x 200 – Rs. 2,00,000/-
Barter Profit : Rs. 3,00,000/-
Expenses by ABC : 10% Commission on Barter Amount of Rs. 5,00,000/-

i.e. Rs. 50K + GST (Cheque Pay-out)


ABC company would evaluate the following to understand that have they struck actual profit in the deal or not.

1. What if the media was bought on 100% Cheque. What would have been its cost?
a. Let us assume that if media was bought in cheque then ABC would have paid Rs. 3,50,000.
b. In this case the pay-out is Rs. 2,00,000 + 50K (to Corporate Barter)
c. Thus the deal is benefitting the client ABC.

2. What are the other benefits which they have incurred?
a. The product shall be supplied to new clients and new markets which will create new clients / customers for ABC.

3. Is the deal adding value to their eco-system ?
a. Yes it is, since new customers will come to ABC for the after sales service and can turn to be the future potential customers.

Corporate Barter would evaluate the following to understand that is it making value for their eco system.

1. Is the product offered by ABC desired by any other member / members of the system.
a. Corporate Barter will check in its system and offer the Table lamp to its clients for Promotional Offers, Marketing Activity & Corporate Gifting.

2. Will they be able to trade it further ?
a. Yes it will be, as this is product is adding value to the network clients.

THE DEAL WORKS OUT FOR BOTH ABC & CORPORATE BARTER.. Thus a winning balance is created