Starbucks claims $181M in revenue from unused gift cards (2022)
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Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#2Because the credit we load into account "expires". That's the trick they use to make money.
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#3Because the credit we load into account "expires". That's the trick they use to make money.
From Starbucks' web site:
"We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#4Because the credit we load into account "expires". That's the trick they use to make money.
From Starbucks' web site: "We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
So how is it revenue? Sounds like a liability
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#5Earlier quoted context omitted.
From Starbucks' web site: "We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
So how is it revenue? Sounds like a liability
It is revenue, because Starbucks received the money already. It's not profit, because they have no idea how much will they spend on whatever the customers will buy with those gift cards
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#6What a nice little interest-free loan for them!
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#7Earlier quoted context omitted.
So how is it revenue? Sounds like a liability
It is revenue, because Starbucks received the money already. It's not profit, because they have no idea how much will they spend on whatever the customers will buy with those gift cards
That's not how accounting works. Revenues are not recognized until they are earned. It doesn't count as revenue until it's either used (someone buys a coffee) or it's deemed likely to never be redeemed.
The latter calculation is likely an aggregate across all cards, not based on a per-card level prediction.
Breakage refers to the portion of gift card balances that remains unspent by customers, which is eventually recognized as revenue by the issuing company. It is calculated based on historical redemption patterns and the probability that a gift card will never be used. The recognition of breakage revenue, however, doesn't affect a customer's ability to use an unexpired gift card. The card's value remains intact and can still be redeemed for goods or services, regardless of the breakage revenue recognition by the company.
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#8Earlier quoted context omitted.
From Starbucks' web site: "We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
So how is it revenue? Sounds like a liability
While the card is not used they can invest the money and the interest earned is a financial revenue.
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#9Earlier quoted context omitted.
From Starbucks' web site: "We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
So how is it revenue? Sounds like a liability
Companies bet on something like 2-5% of "breakage". That is the main profit motive behind gift cards. There are various claims of using them as marketing and a system to refund people without letting them out of your loop, but the major reason anyone pays what they do to a certain company to sell gift cards (almost nobody does it themselves anymore) is to get that breakage profit.
Gift cards are a subsidy from forgetful people to a business. Industry research also shows that people prefer to receive cash as a gift, but prefer to GIVE gift cards, because they are marketed as a "more thoughtful" gift, as if putting a brand name on some cash is thoughtful. Gift cards are an exclusively selfish gift.
Re: Starbucks claims $181M in revenue from unused gift cards (2022)
#10Earlier quoted context omitted.
From Starbucks' web site: "We do not charge any activation, service, dormancy or inactivity fees in connection with your Starbucks Card. Your Starbucks Card has no expiration date nor does the value on your Starbucks Card ever expire."
So how is it revenue? Sounds like a liability
The balance is a liability. When some portion of that liability balance is deemed to be unlikely to ever be realized, you debit the liability account, and credit the revenue account.