Square Learns Painful Lesson From Money-Losing Starbucks Deal
- Payments business needs bigger merchants, but not too big
- Large chains have too much leverage on prices, fewer needs
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Square Inc.’s documents for its first public share sale paint a clear picture: the payments company got the raw end of the deal when it partnered with Starbucks Corp. three years ago.
Every time Square handles a payment for Starbucks, it loses money. That resulted in losses of $27.9 million last year, according to the filing. The quid pro quo was that the coffee company was going to promote Square’s mobile-payments application, but it never took off and the parties later amended the agreement.