• Seattle Post-Intelligencer, New York Times, Ad Age , Tuesday, November 11, 2008 11:15 AM

My daughter and I stopped at a Starbucks for a couple of "tall" -- that would be small, of course -- teas yesterday and I admit I thought twice about my purchase when I was handed back less than $3 from my $10 bill. It wasn't my first time in Starbucks, by a long double-shot, and I've been dutifully re-reporting the fiscal difficulties it has been facing for many months now. For some reason, though, I had a palpable feeling yesterday that maybe I could have waited until I got home to brew the very same Tazo Chai tea leaves the barista was steeping for me. Indeed, delayed gratification is sometimes all the more satisfying, as Democrats will tell you this week.

About the same time as I was sipping my tea, Starbucks was announcing that same-store sales dropped 8% in the fourth quarter, and that net income dropped 97%. Still, according to the P-I subhed, "Coffee firm's execs shrug off steep decline, see better days." Admittedly, my musing - palpable as it may feel - is nothing if not anecdotal. But I've got to agree with an analyst with whom P-I reporter Andrea James spoke. She says that Starbucks CEO Howard Schultz and his minions have donned "rose-colored glasses."

Their optimism is "based on cost-cutting, flat sales in October, a strong response to customer-loyalty promotions and the popularity of new items," we're told. But I've got a feeling that they'll have to sell an awful lot of oatmeal to overcome the tug of the New Frugality (see yesterday's column).

Ad Age's Emily Bryson York reports that Schultz stresses that Starbucks has "focused on ways of delivering value to consumers without devaluing the brand." Initiatives include a reduced-cost gift card at Costco, and a "gold card" launched nationally last week. Cardholders pay $25 per year and receive 10% discounts on purchases, free WiFi and special offers. Schultz says the product surpassed expectations fivefold in its first week.

In the Times, Brad Stone writes: "many people are abandoning the product, if not the lifestyle that goes with it."

I'm not sure what the second part of that sentence actually means, although it references an earlier allusion to "an affluent urban and suburban way of life." Nor do I entirely comprehend what retail consultant Patricia Edwards means when she tells the P-I's James: "You sell $4 cups of coffee, not $500 dresses. You're not on the same playing field relative to other luxury retailers."

The implication, I suppose, is that we'll scrimp on the little stuff first. But Stone ends with a quote from analyst Michael Silverstein, who says core Starbucks customers have budgeted for their daily fix of java and "it is one of the last things that they will ever give up."

But budgets depend on dependable income, and that's not so dependable anymore. The Wall Street Journal reports today that job losses in the retail sector -- usually the last resort for employment in troubled times -- have outpaced those in other troubled industries such as automotive manufacturing and financial services.

Let's add media and marketing to the list of troubled industries .

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