Eli5: How do stores benefit from selling gift cards?
In: 2
Starbucks turns out to be the monster of gift card sales. From the lastest earning call…
Starbucks projected $3 billion in holiday gift card spending in 2021 as they’ve become ubiquitous gifts. Customers purchased 46 million cards in 2020, totalling $12.6 billion in gift cards for the year.
https://www.businessinsider.com/starbucks-says-over-1-billion-is-sitting-on-cards-2022-5
Starbucks cards are bigger than the entire gift card industry, according to CEO Howard Schultz. Customers put billions of dollars on cards each year as an interest-free loan to the chain. Tens of millions of dollars in gift cards are never claimed and recorded as revenue.
Starbucks just revealed that a whopping $1 billion is sitting on Starbucks gift cards unused. Interim CEO Howard Schultz told investors in a second-quarter earnings call that the cards are used by over 120 million people.
Gift cards can be a boon to retailers, as recipients often don’t use the full amount. This essentially gifts free money to the card issuer as nearly 40% of 18 to 29-year-olds lose their gift cards before they can spend them, and around 25% of 30 to 64-year-olds do the same. In 2020, that amounted to $164.5 million on Starbucks gift cards that was never redeemed. That money was recorded as revenue, essentially a gift to the chain.
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