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[15 comments]

Steel This Starbucks Card, Part Two

December 5, 2013

When Starbucks introduced its limited edition stainless steel Metal Card in 2012 at a price of $450, I was among the few (15 percent) on RetailWire who thought the company would not sell the 5,000 the coffee chain offered for sale on Gilt.com. I was wrong.

This year, the coffee chain is back with card at the same price ($400 is loaded onto the card for purchases), but it's making it even harder to get them. As was the case last year, you can't buy the card in a Starbucks or on the company's site. You'll have to go to Gilt.com (www.gilt.com/starbucksrose) at noon EST tomorrow and order one of only 1,000 being sold.

Last year, according to Starbucks, it took about six minutes for 5,000 cards to be sold. With only 1,000 available this year, that timeframe should be cut substantially.

According to the coffee company, roughly 10 percent of adults in the U.S. received a Starbucks gift card last December. Cliff Burrows, group president of the Americas, Europe, the Middle East and Africa for Starbucks, told USA Today that the company's cards are the most "gifted" item in the country. By making the Metal Card even harder to get, demand may actually intensify.

"If something is hard to get, it takes on irrational value," Steven Addis, a brand consultant, told USA Today. "By making it even harder to get, the irrationality goes up."

The Metal Card bestows upon its holder Gold Level status, including free refills and other perks. Each hand-assembled card, according to Starbucks, "features a gorgeous artisan rose base metal with rose colored coating, laser-etched with traditional Starbucks lettering."

FINANCIALS:     [NASDAQ:SBUX] [ ]

Discussion Questions:

What do you think of Starbucks issuing only 1,000 Metal Starbucks Cards this year vs. 5,000 in 2012? Are there opportunities for other retailers to make better use of forced scarcity programs?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you agree or disagree with Starbucks decision to make only 1,000 Metal Cards this year versus the 5,000 it sold in 2012?

Comments:

Disclaimer: While I do drink coffee, I am not a Starbucks coffee fan. That being said, I am an admirer of what they have done with the brand and the loyalty it generates.

By further limiting the card, Starbucks is generating a great deal of publicity for the company and its gift cards. While only a thousand people with have the "honor and privilege" of owning the limited edition card, the publicity will likely drive greater awareness and sales of its regular gift cards. Great marketing. The question is, will they only offer 500 cards next year?

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Steve Montgomery, President, b2b Solutions, LLC

The scarcity tactic works. It reminds me of times in the past when I had to search and search for a certain child's toy during the holiday season. And how about some of the recent iPhone launches? A certain percentage of the consumer population always will want something that is exclusive to a small percentage of shoppers. I don't think it will work for every brand, but Starbucks has surprised some by proving it works for theirs.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

I think this is a great promotional advantage for Gilt. In fact, Gilt has more to gain from offering Metal Starbucks Cards than Starbucks. Purchasers who have the wherewithal to invest in this card will have to do so at the Gilt site and who knows what else they will learn and desire regarding the luxury products offered by Gilt.

Can't wait to hear what my RetailWire colleagues think about this. But I see a substantial lift for Gilt revenue and some brand equity reinforcement for Starbucks. Both companies are winners, but Gilt's win is greater.

As for other retailers...maybe Amazon stainless steel card and Dunkin' Donuts? Nah....

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Joan Treistman, President, The Treistman Group LLC

I'm not sure that there is much of a market for a $450 Starbucks card. It's more of a marketing ploy/collectors item.

I think scarcity drives marketing attention/PR for some items, but really isn't much of a driver for sales.

Not much opportunity here other than PR.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Issuing a very limited number of cards adds to their allure, and let's face facts, this is more about publicity than profit. Taking in an additional $400,000 is not going to have any impact on Starbucks' bottom line.

People want something that sets them apart from the crowd, a status symbol. This is a relatively inexpensive one, if you can get it.

Starbucks is one of the few companies who could pull this off. This promotion/publicity stunt fits its brand image.

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Max Goldberg, President, Max Goldberg & Associates

Starbucks is in the rarefied air of businesses that can promote this, and sell out. There are enough high-end consumers, who love this stuff, and will snap them up quick. It makes for a cute (boring) conversation with their other friends at cocktail parties...trust me, I have personally been there.

Who wouldn't want this type of press, and Starbucks knows what they are doing. There are other high-end retailers who do mystery gift bags, and offer exclusive gifts that will do well this year.

Now if I can find a way to sell edible golddust-filled pumpkin rolls for only $999, I'd be the talk of the town.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

What is more exclusive than owning a Metal Starbucks Card? Nothing to status minded Starbucksers.

The Starbucks aura expands into other human perceptions, builds upon itself and creates the illusion that being a special member in the Starbucks fraternity is a badge of superiority. I say "humbug" - but it works. I wonder who will get card #1 when Starbucks offers only one card in a future year?

The future will see more marketers try to duplicate the self esteem and the status that Starbucks creates, not only with its privileged card, but every day via its cherished cups of Starbucks that are available to everyone - with bucks. What company doesn't long to build for such a success story?

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Gene Hoffman, President/CEO, Corporate Strategies International

If in fact Starbucks sold out all 5,000 Steel Cards last year, and they plan no increase in price, it is unclear why their strategy is to issue just 1,000 cards this year. If they have a step-up plan for the first 1,000 subscribers, and then offer others the opportunity to weigh in on a "scarcity" program, they might have a useful platform in the New Year.

Most individuals, outside of Washington D.C., understand Economics 101 - scarcity works, and pricing and demand can be driven higher. Retailers understand this concept, and with the right promotional pull, they can and should make it work.

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Roger Saunders, Managing Director, Prosper Business Development

Kudos to Starbucks for ratcheting up the "I gotta have it" factor with this year's limited edition card. The media coverage and word-of-mouth publicity around this tactic will be incredible, helping Starbucks and Gilt stand out at an important time of the year.

This type of scarcity marketing is most effective when the brand, brand story, and product offering are all aligned to consumer desire.

For example, our proximity to Detroit has allowed us to observe the rise of a new American-made watch brand, Shinola. These guys are building a great brand around beautifully handcrafted timepieces, while relating to the the Motor City manufacturing reputation.

In launching the first timepiece this summer, there was a waiting list that far exceeded the limited edition run of one thousand watches, instantly creating an allure factor.

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Jeff Hall, President, Second To None

I cannot help but chuckle knowing NFC-enabled smartphones and tablets cost $450 but demand for a flat metal gift card is off the charts.

Starbucks demonstrated that closed loop gift cards is the true loyalty card. It appears branded transactions engage customers and the scarity release of the $450 card is proof-positive.

Ed Dunn, Founder, (Stealth Operation)

Starbucks is the "pied piper" for coffee drinkers. Whatever they do, their customers must have. This is great marketing for them. Next year I suspect they will offer several thousand more at a higher price after this year's lure of only a few.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

It depends, obviously, what one means by "make use of" (scarcity): obviously it has no value as a revenue generator, since the very idea of limiting supply works against that. So the value lies wholly in the publicity generated; Starbucks is one of those fortunate few - along with Amazon, Nordstrom, Walmart, etc. - whose every move seems to flutter pulses, so it's a natural fit. But the list of such companies is short - and even here, would the idea of a "limited edition" Walmart item generate anything other than laughs? - and the world would soon tire of hearing about it if the practice were to become more widespread.

'notcom'

Exclusivity is a key driver of luxury purchases. Neiman Marcus always sells its wacky and luxe Christmas gifts as soon as its catalog comes out. Nobody needs his and hers blankets, but they'll sell.

The Starbucks card was a guaranteed blockbuster last year, and again this year it's achieving its desired result - loads of publicity. Coffee as luxury item? Absolutely.

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Cathy Hotka, Principal, Cathy Hotka & Associates

Let's face it, if you could get the kind of publicity and margin that a $500 SBX card produces, for the cost of a few cents of metal alloy...this is what great merchants do.

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Peter J. Charness, SVP America, Global CMO, TXT Group

This is awesome PR, if nothing else. It got all of us talking about it, right?

As evidenced last year, out of the millions of Starbucks customers, there's a small sliver who are super fans and spending some money to become an elite customer isn't a big deal. Just $50 extra, and you may get a few extra drinks at no charge as a result.

To spend down the $400 on the card, it could take as little as 2 months for someone who buys one of the fancy lattes every day. It sounds like a fun gift, too, for the special Starbuckist in your life.

Scott Sanders, Director of CPG Analytics, Pivotstream

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