Starbucks Reported Over $200 Million in Annual Breakage Revenue in 2024

Companies like Starbucks, Amazon and Nordstrom push their gift cards so hard for a reason:

They make hundreds of millions of dollars per year collectively from something called "breakage".

Starbucks and Amazon, to name a few, have billions of dollars in unredeemed gift card liabilities.

Some gift cards are given as presents and never used. Some gift cards are lost. Some gift cards have low balances and customers can't be bothered using the balance.

Starbucks, for instance, pushes gift cards heavily as they are tied to the companies' Rewards system.

If you've ever gone to a Starbucks, you've likely noticed that the company features a batch of gift cards right near the register.

As of the end of the 2024 fiscal year, Starbucks reported a total of $1.87 billion in unredeemed gift card liabilities.

Every year, the company will realize a chunk of this amount in revenues - this term is called "breakage".

In 2024, for instance, Starbucks realized $207.6 million in "breakage" - $187.6 million from company-operated stores and another $20 million from licensed stores.

So, let's say that you buy a $50 Starbucks gift card for a friend and they never use it.

To start, you are giving Starbucks a $50 interest-free loan, as the money has been given to the company but not been used. They can invest that money to earn a return - if you are talking about billions of dollars, this is a significant sum of money.

After a period of time, this $50 will be realized by the company as revenue (instead of a liability).

For Starbucks, the company makes about $200 million per year in "breakage" - free money that is literally given to them.

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Amazon, as mentioned, also benefits from "breakage". As of the end of the 2023 fiscal year, Amazon reported nearly $3 billion in unredeemed gift card liabilities. This means that Amazon likely makes $100 million per year plus in "breakage".

Other companies that make millions of dollars per year from "breakage" include Nordstrom, Target, The Cheesecake Factory, Chipotle and Walmart, to name a few.

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You might want to check to see if you have any unredeemed gift cards lying around your house, as you are just enriching billion dollar companies if you do.

Filed under: General Knowledge