When we were kids, trading things we owned for something more personally meaningful, but of equal value, was the most natural thing in the world. We bartered our toys, our magazines and our baseball cards. Barter was the original form of trade, pre-dating currency and serving as the building block for what evolved into today's economic system.

Yet what has evolved today into corporate trading sometimes makes some brand marketers hesitate. For some companies, corporate trading remains a bit mysterious. They can't immediately see how they can get more from last year's inventory, turn an older property into something more valuable and find working capital savings from assets they were ready to write off.

Well, they can, and in fact, the trading process is simpler than ever. Today, trading merchandise and real estate for advertising and other goods and services has become an important tool for thousands of companies. Many major corporations, including ConAgra, Sara Lee and Molson have used corporate trading to address particular needs.

Approximately 75 percent of Fortune 500 companies have used corporate trading at one time or another since its inception in the late 1950s. In total, the corporate trading industry generates more than $7.5 billion in sales annually, according to the International Reciprocal Trade Association. Trading credits for media time and space is the most popular form of credit utilization, with more than $1 billion in media time and space being purchased annually through corporate trading.

Corporate trading can be an effective tool for companies in many situations, such as when they:
 â€¢ Have excess or slow-moving inventory from which they would like to derive value.
 â€¢ Have outdated inventory on which they will likely take a loss.
 â€¢ Have a building or other real estate, or capital equipment that they would like to sell, but which isn't worth today what they paid for it.


Selling Your Asset
Here's how corporate trading works. First, the trading company meets with the client to fully understand the asset under discussion. It will research the true market value of the asset at that time and prepare a purchase proposal detailing how much it is willing to pay for the entity, and in what form - whether it is all trade credits or, in some cases, whether there will be a combination of cash and trade credits.

At the same time, the client and trading company will agree on any restrictions the client might have for the re-selling of the merchandise. Once price and terms are agreed upon, the trading firm prepares a purchase agreement. When signed, the client is paid, and title, or title and possession, for the goods are passed on to the trading firm.

Getting Value
Let's assume the client plans to use its credits for partial payment of its expenditures for advertising. First, the trading company gets a media plan from the client or agency of record complete with the client's normal rates, and negotiates with the individual media suppliers to accept credits as partial payment for the time or space being secured. It submits the media buy with the cash and trade payment details - also known as the cash/trade blend - to the client or agency of record for approval. Once approved, the media buy is executed and the trading company provides industry-standard post-delivery information and verification.

Media is but one outlet for the use of trade credits today. Non-media trading has become a critical part of credit usage and encompasses a wide variety of goods and services, including raw materials, capital equipment, shipping, warehouse supplies, printing, travel, long-distance services, roofing services, paper and corrugated, hotels and myriad other essential business needs.

Non-media trading is a bit more specialized and thus not offered by all trading firms. Those that do often present the client with the choice of working with the trading company's vendors or with the client's existing suppliers. It is important to note that any trade acceptance is contingent on the client's best-negotiated rates. It should never cost a client more to do business with trade credits as part of the equation than it would to pay completely in cash. If it does, the true value of the trading proposition, and of the service being provided by the trading firm, is compromised. If the trading firm does not guarantee that the client will not pay more than it has in the past, the client should look for another trading partner.

Picking Partners
If trading appears to be a solution for your company, how do you select the right trading company - the right partner - with which to work? Like anything else, there is no substitute for due diligence and for doing some basic homework. Speak to the company's media-buying staff and ask about credentials. This is no different from hiring a media-buying firm.

You want to know that you will be dealing with media professionals who are agency trained, not people who are simply trying to move the media they might own regardless of your marketing goals. You need to get a sense of their process and for the clients with which they work.

Also, ask for examples of the media available to you to ensure that high-quality options are available for consideration. Find out if there is specific media that cannot be purchased in a trading relationship. In addition, ask for client references and case studies. You want to know you are in good company and, more importantly, understand how the process has worked for other companies.

Determine how willing the trading company is to involve your agency in the process. The trading firm should be 100 percent willing to review media specifics with your agency. The company should be willing to guarantee the media buy they will make for you and ultimately offer proof-of-performance verification.

The trading company/ad agency dynamic is sometimes a sensitive one. The client must make sure that its agency understands the decision to use trading and should make it clear within and outside the organization that this is a corporate initiative that will create important value for the company.

Today, media services are usually contracted a la carte. You may choose agencies under different corporate umbrellas because you are confident that each will provide the best expertise. The same is true when selecting a trading company. The trading firm is not replacing the agency; it is simply bringing different skills to the table.

What's Next?
Beyond the credit usage itself, another question to explore is what happens after your goods are acquired by the trading company. Find out where the company plans to sell your merchandise. This is an often-overlooked part of the process. It is important to set clear guidelines on where the goods can and cannot be sold to maintain the brand image and integrity that has been created for the company. 

Martin Grant is executive vice president, client development, for Argent Trading LLC, an international corporate trading company based in New York. For more information, e-mail: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or call 646-227-5606.