The cost of bartering

davidlivermore | September 10th, 2009 2 Comments

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I’ve done my share of bartering throughout my years of globetrotting. Often it takes place when I’m trying to negotiate with an international client or affiliate. But just as often it’s wrangling over a taxi fare or persuading a hawker at a local market to sell me more for less. I’ve often enjoyed the challenge of making sure I don’t get “taken” and seeing if I can get a good deal.

But bartering sometimes involves more than just the amount of money exchanged for goods and services. I saw this poignantly in India a few years back. I was traveling with another American colleague and one night, our original itinerary shifted and we had to find a hotel. I paid 400 rupees for a taxi ride that probably should have been 100 rupees but we had already been waiting 20 minutes. Then at the hotel, the manager quoted us the equivalent of $10 per room. Again I agreed without bartering.

Afterward, my American colleague and I had dinner with Sanjay, a prospective client we had been courting. During dinner, my American colleague told Sanjay what a sucker I was that afternoon. He said, “Dave only tried to get the taxi fare down once and gave up when the driver said ‘No’. Then he didn’t even try to barter with the hotel manager at all. It’s not much money but you know if the price started at $10 it probably should have cost $5 at the most. We definitely could have gotten him down to $7.” Sanjay just shook his head and said, “Yes. You must be careful.”

I’d love to tell you there was some intentional strategy behind why I didn’t jump into bartering that night but the truth is, I was tired and an $8 taxi ride and a $10 hotel room didn’t seem like it was worth fighting. But I stumbled on a far more lucrative treasure than the few extra dollars we might have been spared through bartering.

At the end of that trip, Sanjay agreed to partner with us. A few years later Sanjay said to me one night, “Do you know when I decided to work with you?” I guessed it was during the initial presentation I made to his leadership team. But he said, “No. It was that day you didn’t spend time bartering down the taxi fare and hotel room. Then I knew you were a good man I could trust.” Shaving off a couple bucks from a taxi ride and hotel stay might cost far more than it saves. Sanjay knew well that $10 for a hotel room wasn’t an extravagant price for me. While these prices were above the baseline, many times taxi drivers and hotel staff only earn what little extra money they can get foreigners to pay.

By not bartering, I had the dual benefit of securing the contract and offering dignity to the people serving me. Of course we need to be alert to when we’re being exploited and there are times it makes sense to barter. But think carefully about the cost upon yourself and others before you get too excited about the great “deal” you got. After all, is paying “top dollar” to vendors and service providers in developing countries really such a high price to pay?

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