Thread by @wishzen

How Starbucks Became a Bank will Change your View on How to Make Money

~ THREAD ~

We all know Starbucks It's everywhere.

Across the world we count on it for Strong Coffee & Fast Wifi to power our over-stimulated days.

Consistent.

They're friend that's always early no matter what.

You'd think their primary business is coffee right? Wrong.

Here’s why.

From 1971 when Starbucks opened in Seattle (hometown shout out) thru early 2000s, they saw steady growth.

With internet, came people working from home for the first time.

The need for a place to gather, meet and work outside the home became crucial.

Fast forward to 2008, the world was in financial crisis.

Starbucks was as bad as any company.

1. The company had grown too fast & become sloppy

2. People were reluctant to spend (even $5) on things they didn't absolutely need

In 2009, Starbucks made two changes that turned a struggling company into a global powerhouse once again

1. It brought back longtime CEO Howard Schultz as its Leader
2. It introduced the Starbucks Card

Both had massive impact, but only #2 can be quantified

How the Starbucks Card works:

- Instead of paying with Cash or Card, you can add money to your Starbucks account.

- You can then pay with your app whenever you want to place an order.

- Customers earn extra points when depositing to and paying with their Starbucks app.

Because of Starbucks’ crazy loyalty, millions of customers worldwide aren't afraid to deposit $50 or $100 in their accounts.

They know they'll use it.

Trust here is Key.

At any point, Starbucks now holds ~$2 Billion in Unused Deposits

This is $$ customers haven’t actually spent on coffee.

In comparison, 80% of US Banks have less than $1 Billion in Cash Deposits

Effectively, Starbucks is getting a $2 Billion loan at 0% interest

Because Starbucks isn’t required to act like a Bank (Customers can’t withdraw cash)...

The company does not have to keep certain level of reserves.

This means they have $2B at any time to:

-Invest into high-returning assets
-Spend on growth
-Acquire other companies

More importantly, Starbucks now has LEVERAGE

Instead of relying on convincing more humans to buy $3-5 cups of coffee to fund expansion.

Starbucks can now take more risks they could dream of because of the cash its own customers lend them.

An unheard-of income stream & current business model.

Goes to show what the power of
1.Customer Loyalty &
2.Leverage

Can do for a business

Next time you start your day by scanning your App for a who-knows-what-the-fuck Frappuccino…

Give a little hat tip to Starbucks for swindling us all into giving them near-infinite LEVERAGE

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