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Starbucks gets prepayments for goods and services and just has a neat bit of accounting and marketing gimmick around it. Besides being a sensationalist take, it
by alexdoesstuff 3y ago
Starbucks gets prepayments for goods and services and just has a neat bit of accounting and marketing gimmick around it. Besides being a sensationalist take, it's also misunderstanding what makes a company into a "bank".
You can't withdraw your balance in cash, as you can with a bank account. You can't transfer your balance to someone else like you can with a bank account. And, unlike a bank, your Starbucks gift card balance expires after some period of time. Can you imagine your bank telling you that all the money in your account is theirs because you haven't used the account in a few months?
- jfim 3y ago> And, unlike a bank, your Starbucks gift card balance expires after some period of time. There are many jurisdictions in which gift card balances do not expire, such as California.
- bagels 3y agoPeople still lose them and never redeem them.
- alexdoesstuff 3y agoActually true in a technical sense. At least for Starbucks, their gift cards don't expire anywhere globally. In accounting terms though, the company still reduces the value of its gift card liability every year by about 10-15% [1], and claims that this is based on historical data. Now clearly, there are circumstances in which banks do something similar and close accounts of account holders that are unknown. However, if that occurred at even one hundredth of the Starbucks breakage rate, all regulatory hell would break loose on the bank. [1] Starbucks reports breakage of around $212.7m in FY22 ($181.1m in FY21). Their liabilities to Stored Value Cards are $1,641m and $1,596m respectively, coming out to a breakage ratio of 13.0% and 11.4% respectively.
- throwaway2037 3y agoBesides being a sensationalist take Anything from fool.com is as bad as forbes.com these day -- in my eyes. They pump out so much sensationalist garbage that masquerades as good investment advice. Fifteen years ago, they were really impressive -- the original authors.