The Starbucks Gift Card business is HUGE.
As stated, it accounts for 41% of all sales across the company.
To contrast, the next largest gift card programs are Gamestop and AMC.
Their gift card programs are 15% and 10% of sales respectively.
Starbucks has made their giftcard a flywheel for their business.
A flywheel in business is a series of small actions that exponentially increase the momentum of a product or service.
Starbucks has absolutely mastered this.
Their strategy is four-fold.
1st is initial purchase.
It's a co-workers birthday or anniversary.
Your stop by Starbucks and pick them up a $25 gift card.
But because you're in there, you also pick up something for yourself.
A $25 sale became a $35 sale.
2nd is Gift Card Spend
So your co-worker goes to Starbucks a couple times and spends the $25.
But because no one spends EXACTLY the amount on their card, your co-worker gets an extra item.
They spend an extra $5.
3rd is breakage
Breakage is an industry term for unused gift cards.
Everyone knows that some gift cards will never get spent.
Starbucks knows this too and they plan for it.
The company makes $155M in pure profit off of unused gift cards.
4th is the float of $.
When you buy a Starbucks gift card, you give Starbucks money w/o getting anything in return.
You know who else you give $ for nothing in return? The bank!
Starbucks acts like a bank.
They invest the money & receive interest.
Just like a bank does.
So by the lifecycle of a $25 gift card can bring as much as $45 to Starbucks.
At the end of 2021, they reported $1.6B in gift card sales that have yet to be redeemed.
Starbucks used their flywheel to perfection.
Now they do more revenue than McDonald's!
So what can we learn from this?
Find your flywheel!
There are revenue centers in your business that you may have no clue are there.
Examples of flywheel revenue centers:
Retail Sales --> Gift Cards
Real Estate --> Repurpose Excess Space
Wood Working --> Sawdust Sales
Net 60 Invoices --> Net 30 invoices
DTC Sales --> E-Mail List
As stated, it accounts for 41% of all sales across the company.
To contrast, the next largest gift card programs are Gamestop and AMC.
Their gift card programs are 15% and 10% of sales respectively.
Starbucks has made their giftcard a flywheel for their business.
A flywheel in business is a series of small actions that exponentially increase the momentum of a product or service.
Starbucks has absolutely mastered this.
Their strategy is four-fold.
1st is initial purchase.
It's a co-workers birthday or anniversary.
Your stop by Starbucks and pick them up a $25 gift card.
But because you're in there, you also pick up something for yourself.
A $25 sale became a $35 sale.
2nd is Gift Card Spend
So your co-worker goes to Starbucks a couple times and spends the $25.
But because no one spends EXACTLY the amount on their card, your co-worker gets an extra item.
They spend an extra $5.
3rd is breakage
Breakage is an industry term for unused gift cards.
Everyone knows that some gift cards will never get spent.
Starbucks knows this too and they plan for it.
The company makes $155M in pure profit off of unused gift cards.
4th is the float of $.
When you buy a Starbucks gift card, you give Starbucks money w/o getting anything in return.
You know who else you give $ for nothing in return? The bank!
Starbucks acts like a bank.
They invest the money & receive interest.
Just like a bank does.
So by the lifecycle of a $25 gift card can bring as much as $45 to Starbucks.
At the end of 2021, they reported $1.6B in gift card sales that have yet to be redeemed.
Starbucks used their flywheel to perfection.
Now they do more revenue than McDonald's!
So what can we learn from this?
Find your flywheel!
There are revenue centers in your business that you may have no clue are there.
Examples of flywheel revenue centers:
Retail Sales --> Gift Cards
Real Estate --> Repurpose Excess Space
Wood Working --> Sawdust Sales
Net 60 Invoices --> Net 30 invoices
DTC Sales --> E-Mail List