BARTER: dealing by an exchange of goods. This was the original mode of dealing before the use of money and is still very common wherever money and banking facil ities are scarce. The country dealer is often obliged to take eggs, butter, etc., as pay for sugar, starch and soap, and when he can move the produce quickly and well, and is not paying too much for it, the barter seems to give a double profit, because he makes something on the sale of the groceries and something on the sale of the produce. But it is often a great snare for the following reasons : First, the produce may move slowly and so tie up capital, even if it does not result in loss by deterioration of quality.
Second, the belief that there is a double profit in barter, leads the dealer to pay a higher price for goods taken in trade. There is really no double profit. For keep ing, handling and selling groceries, one profit is realized ; for receiving, shipping and selling produce, another profit should be earned—and the dealer who performs both for a single profit, is doing half his work for nothing.
Third, it requires all the average man's judgment and ability to run a grocery properly, and those who try to combine with it the business of buying and shipping produce, and its freights, sales, drafts, returns and commissions, generally find out that they are not masters of both, but that one eats up the profits of the other.
Fourth, barter leads to a competition in buying which is worse than that which "cuts" in selling, for the dealer who cuts the prices of his groceries, generally stops before he gets to cost, because he knows just where that point is, but the buyer who competes on produce does not know the price at which the goods will sell in the city and is often easily led into paying more than he can realize after all the charges are paid.
No dealer can afford to do two transactions for one profit ; few are capable of managing a double business, and when goods are sold below their value or bought above it, it is well to let others control the market.