Starbucks Gift Cards: A Christmas Gift for the Bottom Line

Give someone a Starbucks (SBUX) – Get the Starbucks Corporation report gift card counts as a thoughtful holiday gift, even if it’s kind of a lazy choice.

Even non-coffee drinkers can buy a cookie, pastry, or maybe a coffee-free crema frappuccino. It’s not overly thoughtful or creative, but it’s easy, most people will be at least slightly happy to receive the gift, and, well, buying a Starbucks gift card fulfills your obligation to holidays for people for whom you need to buy gifts, but are not ready to make a lot of effort to buy.

Starbucks has turned this ubiquity into a huge business that culminates just before Christmas. The company, of course, has a positive effect on being one of the convenience gifts of the season.

As customers finalize their holiday shopping, Starbucks is anticipating the busiest day for Starbucks Card purchases on December 23, citing the continued popularity of gift cards as one of the most popular gifts during the holiday season. Last year, more than 46 million Starbucks cards, which include physical and digital cards, were purchased in the United States and Canada during the holiday season. Starbucks predicts that nearly $3 billion will be loaded onto Starbucks Cards from October to December this year.

A coffee chain gift card might be a bit of a lazy gift, but it ticks all the boxes. And in a year of supply chain and inventory issues, Starbucks gift cards will likely continue to be popular. It’s good for the coffee brand in more ways than one.

Gift cards drive sales

Businesses, including Starbucks, love gift cards because they drive traffic to stores.

You might not be a frequent coffee drinker or even a regular visitor to one of the Seattle chain stores, but when you have a gift card, chances are you’ll use it. .

And once you choose to visit a Starbucks, chances are you’ll spend more money than you’ve been offered.

In fact, survey data shows that unused balances on gift cards were constant over the five-year period between 2013 and 2018.

“First Data’s 2018 Prepaid Consumer Insights study found that the average consumer spends $59 more than the original value of their gift card, up from $21 a year ago,” reported Pymnts.com.

Starbucks customers don’t like to overspend, but they’re likely to spend more than the face value of their cards or neglect to use the full balance.

Consumers give Starbucks loan and free money

When a consumer purchases a gift card, they are essentially giving a business an interest-free loan. Starbucks is getting an additional $3 billion in cash that it can use to generate revenue while consumers redeem their gift cards.

The free loan portion certainly helps the bottom line of the business, but people who don’t spend all of their cards are literally giving Starbucks free money.

“Customers purchase the cards, providing cash to Starbucks, and they are recorded as revenue once they are redeemed,” Restaurant Business reported. “The company recognized $130.3 million in ‘breakage’ revenue, or funds from cards that are not redeemed, in its latest [2020] fiscal year ended September 27.

Starbucks isn’t unique when it comes to customers leaving balances on gift cards or forgetting to redeem them at all. More than half of Americans (51%) have left value on a gift, according to a Bankrate survey.

For Starbucks, gift cards are kind of a win-win-win-win situation. First, if a customer buys a gift card in person, they’re probably also buying a drink and/or something to eat. The second win comes from the fact that the company can then hold the money until the card is redeemed.

The third win occurs when the gift recipient actually uses the card, as there is a good chance they will spend more than its value. And, of course, the final earning opportunity occurs if the customer uses only a portion of the gift card balance and then forgets about the card, allowing Starbucks to (eventually) recognize that balance as revenue. .

Starbucks ended fiscal 2021 with just under $1.6 billion in unclaimed gift cards on its books. That’s an increase from $1.45 billion at the end of fiscal 2020.