The Incredible Starbucks Steel Gift Card

To refresh your memory, just before the holidays Starbucks launched a limited edition (5000 only) steel gift card priced at $450. The card carries a value of $400 and comes with some sundry benefits like free refill on brewed coffee and free drink on birthday.

That is correct. It costs you $450 to get $400 because Starbucks said it costs them a lot to make this steel card. While I called this egregious pricing, at least 5000 people did not think so. The card was sold out and worse was sold for much higher prices on eBay.

By last check there were 510 sold listings.

  • 70 odd listings were for just the empty card ($0 value) sold from $325 to $650
  • Most of the listings were with the full $400 value and sold from  $670 to $1250
  • Very few listings with $5 and $25 value and with no other values

What can I say about this?

Pricing on $0 gift card provides great insight on buyer perception. It appears keeping the full $400 value of the card helped increase its value among buyers. That is, when sellers left $400 on the card buyers bid additional $600 for that $400.

We can try to explain away why anyone would pay $650 for an empty card. But nothing in rational economics can explain why someone will bid $1.5 for each additional $1.

But I think the only reasonable point we can make from this data is – the left tail of human civilization has at least 5000 people, the left most has at least 510 people (those who won the auctions) and rightmost has 510 people, those who made a profit.  (Note: Subtract the 510, those who sold, from 5000 and add back those bought and you get 5000 in left tail.)

And you my friend, I know, is in the right tail, simply because you are reading this.

2 thoughts on “The Incredible Starbucks Steel Gift Card

  1. What’s so hard to understand? It’s a collectible item. Just like an old Star Wars toy is worth more unopened, the card is worth more unused.

    Like

  2. Rags – have you come across the works of Dan Ariely? His theories on irrational behavioral economics fit perfectly for this pricing scenario. I read your earlier post on Starbucks just before XMas and meant to comment but forgot to return.

    Great blog, of course. We need to catch up sometime soon…..🙂 My fault entirely in 2011-2012 but major changes are underway.

    Like

Comments are closed.