Starbucks is a Bank that Sells Coffee
I came across this video (embedded below) from The Wall Street Journal recently. It’s a part of their series entitled The Economics of. I’ve always found Starbucks interesting from an operational perspective, so this was insightful, and I wanted to share.
A few takeaways and highlights:
Starbucks, in the fourth quarter of 2021, loaded about 3 billion dollars onto gift cards and mobile. If Starbucks were a bank, they’d rank as the 385th largest in the country. That’s a LOT of Pumpkin Spice!
As stated in the video, that 3 billion is immediate revenue. Yes, it does turn into a liability when someone comes in and orders their Grande Flat White, but as the video mentions, not everyone who loads a gift card actually uses it. I know I have some that are hanging around that will likely never get used, you’re welcome JCPenney!
Starbucks launched the pay-by-app program in 2009, that’s pretty early on for such an integrated use of technology. By the end of 2021, 24% of transactions were done on mobile. I go to Starbucks several times a month, and I cannot recall the last time I used anything but my phone to order and pay. It’s incredibly convenient, and works as intended every time.
The relationship between Starbucks and its partners is changing, as are so many relationships in the workplace these days.
The Starbucks mobile app is an example of seamless tech that works well. In contrast, I attempted to return an order to an online retailer a few days ago. I printed the label out, attached it to the package, and then went through several failed attempts requesting a package pickup with a courier because their website wouldn’t function properly.
I know Amazon has spoiled us with the ability to return via QR code at Kohls or Whole Foods, but when the vendor’s website doesn’t even work, that’s next level. It was frustrating and the exact opposite of walking into a coffee shop and scanning my phone. Starbucks is much better at gaining repeat business by reducing friction between our money and those cake pops that are for the kids. Sure, for the kids, right?
*Yes, that’s what I’ve been ordering lately. My daily coffee is prepared at home, with a Bodum burr grinder and Melitta pour-over.