Starbucks claims $181M in revenue from unused gift cards (2022)

In one of my businesses, hotel booking, i also sell gift cards and market them agressively in festive seasons.1 year validity. 45% goes unclaimed, its now 20% of total profit (all legal here, expiry date in a large font)

The interest free loan is more like $1B dollars. This $181M is the breakage, the left over gift card balances that are unlikely to be redeemed and they are recognizing as revenue. e.g. The $2 left on a $20 gift card that someone doesn't bother redeeming.

They also get another $1B of deposits from people loading money onto their app to pay for drinks. Starbucks is basically sitting on the equivalent of a small banks deposits at any given time.

> It is revenue, because Starbucks received the money already.

I initially upvoted your besieged comment because that seemed to make sense, and well, it was the actual title of the piece (Starbucks Claims $181M in Revenue From Unused Gift Cards and Loyalty Credits) and appeared to be quite unambiguous in the article ("Starbucks reportedly claimed $181 million in revenue from money on gift cards and loyalty accounts that customers didn’t spend in fiscal year 2021 — a figure that amounted to about 1% of its sales and 4.3% of its net income during the year.").

However, following a twinge of remorse and uncertainty after downvoting rahimnathwani's reply, a quick search revealed that he is correct:

How to Properly Recognize Gift Card Revenue[1]: "Companies cannot recognize revenue upon the initial sale of a gift card because of a key revenue recognition principle that states that revenue is recognized when or as an entity satisfies a performance obligation by transferring a promised good or service to a customer."

Balancing act: how to account for your restaurant gift cards[2]: "Gift card purchases are generally classified as a deferred revenue liability. The cash received from the sale is paid upfront but does not qualify for revenue recognition as no goods or services have been exchanged. Gift card purchases are recorded as deferred revenue and subsequently recognized as revenue as the gift card is redeemed in the future."

Happily the window was still open to undown, but the experience was a great lesson in not racing to judgement or downvoting.

[1] https://www.leapfin.com/blog/how-to-properly-recognize-gift-...

[2] https://www.bakertilly.com/insights/balancing-act-how-accoun...

That seems...sleazy.

It's also a way for them to save on credit card processing fees by trading the fees of multiple (relatively) small drink purchases for one fee for the gift card purchase.

An often overlooked innovation of iTunes was delayed billing, which converted multiple separate song transactions into one bundled transaction to save on credit card transaction fees.