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Farexchange

From Australia to Mexico, Farexchange trades in everything from cameras to paint brushes and property to jewellery and it all began because it couldn't sell golf bags.

A small Keith golf bag manufacturer has been transformed into an international trading company - using the oldest method of business known to man. From making one product, the company transformed itself into a barter conglomerate that today trades worldwide in everything from real estate and rum to furniture and toilet rolls.

Caddie-Bag makes top-of-the-range golf bags and it was a highly-successful niche-market company that was named STV small business of the year in the late 1990s. But, as the global economy began to turn downwards and demand for luxury goods fell dramatically, it became close to impossible to find buyers for 200 designer golf bags.

That was when managing director David Foubister came up with his idea. He said: "With little or no market, I was faced with either mothballing the business until things picked up or spending a fortune on marketing.

"We had the manufacturing and distribution rights to the product, but we had no product awareness and no marketing infrastructure. It struck me that there was no point spending thousands of pounds trying to find buyers when there were only about 2,500 places in the UK where our bags could be used."

Mr Foubister came up with the idea of approaching golf clubs and golf hotels and offering to swap golf bags for room rental and time on the golf course. Initially, he approached some of the leading golf hotels in the North-east and found acceptance for his ideas. Mr Foubister said: "We went to the golf hotel and told them we could offer them a 200 golf bag for just 25% of the cost in cash.

"They had to agree to offer us the remaining 75% in rooms, green fees and other services and leave it up to me to sell those. That was clearly good business for them - they could either sell the bags or use them for prizes in competitions or raffles. And they had empty rooms that were costing them next to nothing to give to me in exchange."

Mr Foubister managed to trade the rooms in the United States for other products he thought he could sell - again for 25% in cash and the rest in kind - and his farexchange barter business was born. Mr Foubister said: "Caddie-Bag was not actually my first venture into barter. While working solely as a consultant, I once bartered a 386 computer for a fishing rod.

But it was Caddy-Bags that gave me the idea to set up farexchange."

Today, in his showroom, the level to which the business has developed can be seen by the goods he has on offer. Side by side with tins of paint and varnish, sitting on furniture he has bartered, are Olympus cameras, watches, jewellery, T-shirts and ties. Drinking a cup of Australian coffee - part of a deal involving golf bags - he said: "We have more than 100 partners in farexchange today and that is growing, but we also do deals with other companies including barter companies in North America where this kind of business is quite mature.

"About 50% of the Fortune 500 (the US's largest corporations) do barter business and countries have been trading arms for oil since the stuff was discovered. At the moment, the farexchange website has more than 1,000 products on offer."

He added: "The US barter companies tend to find people who want to trade one product against another and charge a fee for putting the deal together, but farexchange is not like that. We make a product and that has allowed us to build up an inventory of goods which we now trade worldwide. When I sell a product I take 25% in cash and the rest in goods, but when I buy I pay totally in goods. We can also make profits from splitting up large orders we have bought and selling parts of them more expensively. At the end of the day we generate cash, but we also build up an inventory of goods that is like cash in the bank."

He continued: "Barter is a bit like doing business with Monopoly money and you have no distribution costs - particularly if a lot of your business is in things like hotel rooms and radio air time. But while you are doing this, you are building a strong balance sheet."

Last year, farexchange generated a turnover of about 2million but Mr Foubister is confident the current year will see that increase threefold. He added: "There is an idea that barter is about trading luxury goods at a time when there is a lack of demand, but I can assure you we trade everything from toilet rolls to paint. And, if you think about it, if you deal a lot with hotels - things like toiletries are good barter business."

With all the complexity of a Milo Minderbinder deal in Joseph Heller's novel Catch 22, farexchange has just completed a $500,000 (324,600) deal with Mexico.

The company is trading T-shirts, handbags and some building materials from the UK and denims from Canada in exchange for real estate in Mexico.

But, as part of the deal, the Mexican partner is acquiring rum from Jamaica which it will trade for the title to some building sites in Florida which will then be owned by the Keith company. Mr Foubister said: "We end up with 20 Mexican timeshare properties each worth about 25,000 (16,200) and 13 Florida building plots valued at 15,000 (9,700) each.

"If none of our members are interested in them, we can always trade them for hotel rooms."

Hotel rooms and other leisure products remain a major part of the company's business.

"There was a massive downturn in the number of US tourists coming to the UK last year, in the wake of September 11 and the recent foot and mouth outbreak. That meant there were a lot of hotel rooms empty in London and elsewhere and we managed to pick up a lot on very good deals.

"There are about six times as many US tourists who come to the UK as travel the other way and, in spite of the downturn, we managed to do about 250,000 in hotel business with the US this year. That was very good business for us, but also very good business for the hotels, including some hotels in the North-east, who were trading us rooms they could not let."

Farexchange has been offered some seemingly weird barter deals since it was set up - and still manages to make a profit on them. Mr Foubister said: "I was once asked for 5,000 bath towels, a mushroom slicer and a ferret. I could not find a ferret, so I did not trade." However, he said was once offered 40 crates of paint brushes which he had managed to trade with Canada before he had even agreed the deal.

"While the farexhange members trade all round the world in a wide range of commodities, about 50% of our business is still in the UK hotels and leisure market. Things like hotel rooms are always easy to trade because there is a permanent market for them.

"The secret to this business is that, while we can build up an inventory with goods like plots of land in Florida, we always look to trade for something that our members are interested in or than we can trade on quickly." He added: "We never buy something that is going to be difficult to move."

Anyone interested in further information about the company, can visit its website at www.farexchange.com and enter using the "tellmemore" user name and "UK" as a password.

"Anyone interested in our assistance should, in the first instance, please email david@farexchange.com quoting reference SENSCOT and giving as much project detail as possible."

For further information, contact:
David Foubister
FareXchange
Isla Bank Mills
KEITH
AB55 5DD
Tel : 01542 88 66 42
Fax : 0845 280 3108
Website: http://www.farexchange.com/

 


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Contact SENSCOT
Company Registration No. 278156. Scottish Charity No. SC 029210