Americans are expected to get a lot of lattes in their stockings this year.
Starbucks on Tuesday said it expects customers will load $3 billion onto its Starbucks Cards this holiday season, fueling a considerable amount of gift-giving among neighbors and coworkers that will provide the coffee giant with a steady stream of revenue.
The busiest day for buying such cards will apparently be Thursday, the company said, suggesting that a fair number of such gifts will be of the last-minute variety. Customers acquired more than 46 million physical and digital Starbucks cards last year alone.
But it’s worth pointing out, again, just how important these cards are to Starbucks’ business.
Gift cards have become a ubiquitous part of gift giving on the holidays. The National Retail Federation estimates that some 46% of shoppers plan to buy gift cards this holiday season, making it the second most popular gift. Gift card sales are expected to total more than $28 billion and shoppers will spend an average of $48.62 per card.
Starbucks introduced its reloadable card in 2001, making it one of the earliest such cards in the business. The company said that it sold nearly 200,000 such cards in the first week alone.
But that doesn’t tell the full story. Starbucks cards, including new card activations, reloads of its existing cards, and “Stars” that customers earn from its loyalty program, totaled some $12.6 billion in the company’s most recent fiscal year.
Starbucks’ gift cards are essentially interest-free loans to the company from its customers. They are a powerful enticement for people to go into its shops, where they typically spend more than what is on the card. Or they may reload their cards so they can keep using them, which only continues to encourage customers to return.
Some customers don’t. Starbucks recorded some $164.5 million in “breakage” last year, meaning that the funds on some cards were never redeemed and thus recorded as revenue. That was up some 26% from the previous year.
These days, Starbucks is working to push its gift cards into more areas. Customers can send Starbucks cards over their iPhones, for instance. And now it’s adapted to a post-pandemic working world—customers can send their coworkers Starbucks cards through Microsoft Teams.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.