Starbucks Takes Gift Card Money From Customers ?? – Inc Magazine

“Plenty of Starbucks customers have been serving as a very generous lending partner--without even realizing it,” this is the sub-title text to an article published today by Inc. Is this true? Does Starbucks borrow money from their customers’ accounts without their knowledge? All this and more in today’s video.

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https://apple.news/A_jOAXOJUToKyWdCHZd3wCQ
https://www.ksmcpa.com/blog/recognition-of-breakage-revenue-under-the-new-revenue-recognition-standard

The Inc article goes on to say:

Starbucks is smarter than you think.

Over the years, the company has invested heavily in its mobile app. Customers grew to love the user-friendly experience. They loved the customization features. And most of all, they loved the rewards.

But I recently discovered a unique strategy, Starbucks is using to pull even more value from its mobile customers: By using those customers as a very generous lending partner.

Here’s how Starbucks’ plan works.

Until recently, if you wanted to use Starbucks’ app to pay in-store, you had to load money onto the app first. Starbucks refers to this as your digital Starbucks card--think of it as a gift card for yourself. Under the new loyalty program, whenever you pay with your preloaded digital Starbucks card, you earn two stars for every dollar spent. These stars can then be used later for rewards, like free drinks.

And if that wasn’t enough, continues Patel, “a significant portion of these ‘coffee deposits’ end up going unused.” Since Starbucks digital and physical gift cards have no expiration date, Starbucks uses historical data to estimate how much the company expects will never be redeemed. The company describes this as “breakage,” and according to Patel, Starbucks generated $141 million in revenue from it in 2019In a recent piece for The Motley Fool, investor Neil Patel highlighted that as of March 29, Starbucks’ customer prepaid balances (unused account balances sitting on either digital or physical gift cards) amounted to just over $1.4 billion.

That’s a $141 million donation to Starbucks, Inc. claims, but is this true?

This is not as sinister as Inc makes it out to sound. In fact, it is commonplace in the retail industry, with companies holding gift cards with prepaid balances. Yes, it allows them to “float” with extra cash in the bank, but honestly, as much as $141 million sounds like a large number to you and me. For a company with annual revenues over $25 Billion, this is less substantial of a number.

Starbucks is more concerned about reducing the credit card processing fees, paying VISA, Mastercard, American Express, etc. every time you swipe your card. These fees easily surpass $250 million per year for Starbucks.

By reducing the number of individual credit card transactions and grouping them into a single weekly, bi-weekly, monthly, etc., transaction “deposit,” they save significantly in their merchant processing fees.

The Inc article also misinterprets the law, remember I’m not a lawyer, this is not advice, blah, blah, you get the point. Anyways, they misunderstood an update to accounting regulations that allow companies like Starbucks, Amazon, BestBuy, Home Depot, Dunkin, basically any retailer with large deposits of gift card balances to include a percentage of unused balances as income for that year on the presumption that the gift card will never be used. This is referred to as breakage.

There are many, very boring rules on calculating this number, but from many of the examples, I have read show between 5 – 10%.

So no, Starbucks is not keeping the money if it goes unused like Inc is claiming. In fact, almost all States with the US have what is referred to as unclaimed property laws where unused gift card balances are given to the State for “safekeeping” after X number of years. For example, Virginia, New Jersey, New York have their law set at five, Pennsylvania is two years, which is varies throughout the country.
⚠️ ⚠️ ⚖️⚖️ I am not a lawyer, CPA, tax advisor, realtor, financial advisor, etc., I have absolutely no licenses/certifications in anything related to these industries, I am just a dude on the internet. So, in full disclosure: the information I provide here is for “entertainment purposes only!” You should seek counsel from competent and certified individuals if you have questions. I may receive commissions when you use my affiliate links. starbucks rewards inc magazine neil patel seo dunkin donuts business

Видео Starbucks Takes Gift Card Money From Customers ?? – Inc Magazine канала The Steven Carlson Show