Why Starbucks Operates Like a Bank | WSJ The Economics Of
TLDRThe video script delves into the economic powerhouse that is Starbucks, highlighting its growth from a small Seattle cafe to the world's largest coffee chain. It underscores the company's innovative use of technology, particularly its mobile app and gift cards, which have revolutionized customer transactions and contributed significantly to its revenue. The script also touches on Starbucks' unique culture, emphasizing its direct relationship with employees referred to as 'partners' and the challenges posed by recent unionization efforts. The video paints a picture of a company that, despite its global success, remains committed to its founding values and the coffeehouse experience.
Takeaways
- 💰 Starbucks has a significant amount of value loaded onto gift cards, with around $3 billion between October and December.
- 🏦 If Starbucks were a bank, it would rank as the 385th largest in the country due to the money loaded onto gift cards.
- 📈 Starbucks uses the money from gift cards upfront as revenue, which can be a liability if the cards are not used.
- 📱 The Starbucks mobile app and gift cards play a crucial role in the company's bottom line and technological evolution.
- 🌟 Starbucks has grown from a small Seattle cafe in 1971 to become a global coffee giant, second only to McDonald's in market caps.
- 🚀 The introduction of espresso by Howard Schultz, who took over the company in 1987, transformed Starbucks into the brand we know today.
- 🍹 Starbucks offers over 170,000 different varieties of drinks, which are complex to make but often come at a higher price.
- 🎃 The creation of signature drinks like the Frappuccino and the Pumpkin Spice Latte has contributed to Starbucks' global phenomenon.
- 🧊 Cold beverages have become increasingly important for Starbucks, accounting for a significant portion of their revenue.
- 📲 The founding of Starbucks' mobile app in 2009 was a key moment, and by 2021, mobile orders accounted for nearly a quarter of all US transactions.
- 💼 Starbucks holds about $2.4 billion in cash from customers who have uploaded money to be used later, exceeding many American banks' deposits.
- 🔑 The company owns a significant amount of data from its mobile app and gift card usage, providing insights into customer behavior.
- 🚗 Drive-through and mobile order options have become increasingly important for Starbucks, especially during the pandemic.
- 🤝 Starbucks is committed to creating a connection between its baristas and customers, even in drive-thru settings.
- 🏢 The company's internal culture emphasizes a strong relationship between management and employees, referring to workers as 'partners'.
- 🔄 Starbucks faces challenges with unionization efforts, particularly after stores in Buffalo voted in favor of it.
Q & A
How much value was loaded onto Starbucks gift cards between October and December according to the script?
-Approximately $3 billion of value was loaded onto Starbucks gift cards during that period.
What would be Starbucks' rank if it were considered a bank based on the value loaded onto gift cards?
-If Starbucks were a bank, it would be the 385th biggest in the country.
How does Starbucks utilize the money loaded onto gift cards before any products are purchased?
-Starbucks gets to use the money upfront as revenue before a single product is purchased.
What is the significance of Starbucks' mobile app and gift cards to its bottom line?
-The mobile app and gift cards play a crucial role in Starbucks' revenue, with mobile orders accounting for nearly a quarter of all transactions in the US and a significant amount of cash being held in the form of gift cards.
What was the role of Howard Schultz in the evolution of Starbucks?
-Howard Schultz, the then marketing director, bought the company from the original owners in 1987 and began expanding Starbucks outside of Seattle, introducing Americans to espresso.
How many different varieties of drinks does Starbucks claim to make today?
-Starbucks claims to make more than 170,000 different varieties of drinks.
What is the significance of the pumpkin spice latte in Starbucks' history?
-The pumpkin spice latte became a global phenomenon, significantly contributing to Starbucks' popularity and sales.
How has the importance of cold beverages evolved in Starbucks' offerings?
-Cold beverages have become increasingly important to Starbucks' revenue, leading to the introduction of various cold drinks like iced coffee, nitro iced coffee, and cold foam.
What was the impact of Starbucks' mobile app on its business model?
-The mobile app, founded in 2009, acted as a digital flywheel, with mobile orders accounting for nearly a quarter of all transactions in the US by the end of 2021.
What percentage of all transactions at Starbucks are done with a Starbucks card?
-Approximately 44% of all transactions at Starbucks are done with a Starbucks card.
How does Starbucks' internal culture reflect its relationship with its employees?
-Starbucks has a strong internal culture built on a relationship between management and employees, referring to its workers as 'partners' and providing them with shares in the company through the Beanstalk program.
What is Starbucks' stance on unionization as mentioned in the script?
-Starbucks is committed to maintaining a direct relationship with its workers, viewing unions as intermediaries and stating that they believe in being better together as partners without a union.
Outlines
💳 Starbucks' Gift Card Economy
The first paragraph of the video script delves into the significant financial impact of Starbucks' gift cards. It highlights that between October and December, approximately $3 billion is loaded onto these cards, which is a substantial sum that could rank Starbucks as the 385th largest bank in the country if it were one. The script explains that this money is treated as upfront revenue, even before any purchases are made. It also touches on the fact that a portion of this money may never be used, turning into a liability for Starbucks. The paragraph sets the stage for exploring the role of technology and the mobile app in the company's financial success and overall business strategy, starting from its humble beginnings in Seattle to becoming a global coffee giant second only to McDonald's in market cap.
📱 The Role of Technology and Mobile Ordering in Starbucks' Success
The second paragraph focuses on the evolution of Starbucks and the integral role that technology, particularly the mobile app, plays in its operations and growth. It mentions the early adoption of the mobile app in 2009, which has since become a key component of the company's strategy, with mobile orders accounting for nearly a quarter of all transactions in the US by the end of 2021. The paragraph also discusses the significance of virtual gift cards and the data that Starbucks collects from its app users, which is a valuable asset for the company. Furthermore, it touches on the shift in business priorities towards mobile and drive-through transactions, especially during the pandemic, and the importance of maintaining customer connections and the company's internal culture, even as it faces challenges such as unionization efforts in some locations.
Mindmap
Keywords
💡Starbucks
💡Gift Cards
💡Mobile App
💡Espresso
💡Frappuccino
💡Pumpkin Spice Latte
💡Cold Beverages
💡Digital Flywheel
💡Drive-Through
💡Unionization
💡Partners
Highlights
Starbucks has had around $3 billion of value loaded onto gift cards between October and December.
Starbucks would rank as the 385th biggest bank in the country if it were one, due to the amount of money on its gift cards.
Starbucks uses the money from gift cards upfront as revenue before any product is purchased.
Many gift card programs have a significant number of unused cards, which can become a liability.
The role of Starbucks' mobile app and gift cards is crucial to its bottom line and technological evolution.
From a small cafe in 1971, Starbucks has grown into a global coffee giant, second only to McDonald's in market cap.
Howard Schultz's acquisition of Starbucks in 1987 led to its expansion and introduction of espresso to Americans.
Starbucks handcrafts each beverage to order, leading to over 170,000 different drink varieties today.
The complexity of Starbucks' beverages contributes to higher prices but also complicates the work for baristas.
Starbucks' signature drinks, such as the Frappuccino and the Pumpkin Spice Latte, have become global phenomena.
Cold beverages have become increasingly important to Starbucks' revenue, leading to the creation of various cold drinks.
Technology, particularly the founding of the mobile app in 2009, has been a key factor in Starbucks' dominance.
Mobile orders accounted for nearly a quarter of all Starbucks transactions in the US by the end of 2021.
Starbucks holds about $2.4 billion in cash uploaded by customers for future use, exceeding many American banks' deposits.
Starbucks owns a significant amount of data from its app and mobile ordering, providing insights into customer behavior.
With the rise of mobile payments, Starbucks has shifted its business priorities towards alternate pickup options.
Drive-thrus have become increasingly important to Starbucks' bottom line, especially during the pandemic.
Starbucks is committed to maintaining a connection between its baristas and customers, even in drive-thru and mobile app orders.
Starbucks' internal culture emphasizes a strong relationship between management and employees, referring to workers as partners.
Starbucks faces challenges with unionization efforts in some locations, impacting its direct relationship with workers.
Starbucks asserts that its success is built on partnership and shared values, opposing the introduction of unions.
Transcripts
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