Why a start-up coffee company is now accepting Starbucks gift cards

The new normal.
The new normal.
Image: AP Photo/Terry Gilliam
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As of Jan. 9, Los Angeles-based coffee start-up Tonx, which hand-picks, roasts, and delivers fresh coffee beans to customers’ doorsteps, began accepting a new, and rather unexpected, means of payment: Starbucks gift cards. Simply provide Tonx with a valid gift card number and security code (here), and the company will exchange the balance of your card for an equal amount of credit for Tonx’s subscription coffee delivery service.

“It’s that simple,” Tonx co-founder Tony Konecny told Quartz. “People can literally exchange their gift card balance dollar for dollar.”

It may seem odd that any company, let alone a Starbucks competitor (albeit a small one), could springboard off the coffee giant’s gift cards, but that’s exactly what Tonx intends to do. The value on Starbucks cards can only be used to buy things at Starbucks or be transferred to other Starbucks cards, so Tonx’s plan—at least the skeleton of it—is to amass a large gift card balance of its own.

The approach makes sense when you contemplate the size of the Starbucks gift-card program. Some $4 billion was put on the cards last year worldwide, and an incredible 10% of Americans received a Starbucks gift card over the holidays. The chances are that a good deal of that money is sitting unused. Over $650 million remained in Starbucks card balances at the end of last year, the company said in an earnings call last month. All Tonx wants to do is leverage a bit of that dormant cash.

Tonx’s promotion doesn’t appear to be a sore spot for Starbucks—at least not yet. “Honestly, we’re just humbled by the strong participation in our gift program, and this just validates that further,” a company spokesperson told Quartz. “I definitely wouldn’t say we’re deeply concerned about it.” Tonx did suggest that Starbucks’ coffee is overpriced and should be swapped for Tonx’s “home-brewed, fresh-roasted” offering, but also admitted that it, like much of the coffee industry, owes a great deal to the coffee giant.

Konecny wouldn’t share precisely how the company intends to make use of all that Starbucks credit. “We’re going to do something a little bit more sophisticated than buy a thousand slices of banana bread,” he said. But, he added, ”If we had to buy a thousand slices of banana bread, it wouldn’t be the end of the world.”