Is Starbucks a bank?

Business models are always difficult to grasp. The core difficulty that I’ve been relentless at trying to understand myself and then explain to others for about 15 years is that often; the product is not that important.

Take Starbucks; how would you define their business? It’s not coffee (only about 30% of their sales is coffee). Is it a restaurant? Sure. Is it a real estate business in the way they manage and monetize their locations? Of course, that too.

But when being asked this question, always look at the money. Starbucks has millions of recurring customers worldwide that have one thing in common: they have a Starbucks fidelity card with preloaded funds. Whether on a plastic card or their app, Starbucks has $1.5 billion in liabilities outstanding, which you can translate into customers happily lending more than a billion and a half to the company at a 0% interest rate. This is more than most of what the U.S. banks hold!

And it gets better when you learn that typically, 10% of this pre-stored money is never used… (I let you do the maths 😎)

(If you want the “bank” discussion, jump at 7:00 ⤵️)