Starbucks is like a scrappy athlete. Just when it gets knocked down by some controversy or non-controversy — as in, not paying its share of taxes or rolling out allegedly sacrilegious cups at Christmastime — the company responds with robust sales and interesting programs within its corporate social responsibility agenda.
And let’s face it, much of the company’s success is because of gift cards. We have all been in a bind where we need a gift for that friend or relative — and on Christmas Day, if you were too lazy or overwhelmed to do your shopping, Starbucks is open on that very morning so you can gorge on those last-minute gifts. To that end, here’s one statistic that will leave you blanching, or blushing, as red as last year’s holiday cups: Business Insider estimated that 1 in 6 adults scored a Starbucks gift card during the holiday season last year. For a while, if you were generously inclined, you could even send your Facebook friends the gift of a Starbucks gift card.
Despite changes to Starbucks' customer loyalty program that make it far more parsimonious, which infuriated many of its customers, its gift cards -- and smartphone app -- remain a rousing financial success.
At one time you could work Starbucks’ system and score a free treat at any price for as little as $12 to $15. Now that figure has soared to $63. Customers may grumble, but they are still buying their morning Starbucks and loading their cards. Therein lies one of many reasons that, if Starbucks were a consumer bank, the amount of deposits in its gift cards would leave many banks and credit unions in the dust.
That should not be surprising considering S&P estimates that 41 percent of Starbucks’ customers make their purchase via one of its plastic gift cards; another 24 percent of those transactions are made with the company’s smartphone app. Take a look at these facts:
The amount Starbucks has scored, however, is dwarfed by PayPal, which boasts just over $13 billion spread across its customers’ accounts. PayPal does not pay interest on those balances, which has earned growls from plenty of bloggers, but the online payments behemoth claims that such a cushion is necessary in the event merchants fail to follow through on promised goods and services.
So is this some nefarious plot, in the tongue-in-cheek words of one writer, to put the U.S. banking system on a “Frappuccino Standard” and hose consumers? Probably not; Americans are increasingly gravitating toward electronic financial transactions, especially on mobile devices, out of the ease of use and improved security. But the trend has created a headache for many corporations as they sort out how to report this income, if at all. The Financial Accounting Standards Board (FASB), which seeks to improve accounting guidelines within the U.S., laments the fact that regulatory bodies, including the SEC, have failed to offer guidance on this front.
Image credit: Darren Barefoot/Flickr
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He is also the Director of Social Media and Engagement for 3BL Media. His previous work can be found at The Guardian, Sustainable Brands and CleanTechnica. Kaye is based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.