21–30 of 107 posts
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.
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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 rec…
You've described accrual accounting. I believe publicly traded companies (including Starbucks specifically) are held to GAAP which includes accrual accounting; but private businesses can choose between accrual accounting and cash accounting (but, afaik, you can't switch willy-nilly).
Every so often, companies I've worked for have given me Starbucks or Amazon cards as rewards. I have no use for either of them, though, so typically I give them to someone else. Amazon cards are easy -- they go to my (adult) children. Starbucks are more difficult, though. I sometimes have trouble giving them away, then they get lost or accidentally thrown away. I bet Starbucks has made more money off me from that tha…
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)
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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 forget…
That's actually fascinating. I would never give a gift card as an actual gift to people, because that strikes me as being lazier and less thoughtful than just giving them cash.
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.
Uber and Lyft do it now. It ought to be illegal, or opt-in (with a discount to the customer). Delayed billing wreaks havoc on the majority of Americans who live paycheck to paycheck
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.
>delayed billing, which converted multiple separate song transactions into one bundled transaction to save on credit card transaction fees. Uber and Lyft do it now. It ought to be illegal, or opt-in (with a discount to the customer). Delayed billing wreaks havoc on the majority of Americans who live paycheck to paycheck