On Saks and Starbucks: Demanding Value in Tough Economic Times
Retailers now have to accept that we're not in the mood to pay for 'luxury' goods.
It may sound counterintuitive given the state of the economy, but the power of discretionary spending has never been higher. Consider the thousands of Americans losing jobs every day. For most of them, unnecessary expenses are the first budget items to be cut as they tighten their belts and look for more work. Even the still-employed know, with few exceptions, that there is no such thing as job security anymore. In an economy like this, every household penny has to go farther. As a result, where we spend our discretionary dollars and what we spend them on can have serious impact.
Last fall, high-end retailer Saks Fifth Avenue slashed prices by 70% in an effort to jump-start the holiday shopping season. The move set off a domino effect. Neiman Marcus and Barney’s quickly followed suit, then brands with their own retail outlets joined the fray. They had to, or shoppers would have steered clear of their stores in favor of savings offered elsewhere.
This trend isn’t limited to high-end retailers. Computer purchases are often discretionary items, with consumers buying a second or third machine solely for their kids. As a result, manufacturers in the tech industry are cutting costs, too. Dell’s $250 Netbook, for instance, represents what Wired refers to as “a race to the bottom.” Lesser known makers of HDTVs are cutting their prices in the hope of wooing value-conscious consumers.
Wherever you look in the discretionary spending sector — cruise trips, hotel stays, airline travel, wireless services, broadband, even the cost of Blu-Ray DVDs — prices are dropping because so few consumers are willing to shell out for things that ultimately won’t put food on the table or keep a roof over their head.
At first glance it might seem like the conditions are ripe for those whose finances are a bit more rosy to make a killing, but the fact is we all stand to gain. Sure, many formerly premium stock prices are low, which can be enticing to those with a few thousand dollars they’re willing to risk today for a big payoff whenever the country recovers. But the cash-flush aren’t the only ones with power here. When discretionary spending is tight all over, those willing to spend discretionary money have a greater say in the industries seeking their money.
Take the entertainment industry, for example, and the movie industry in particular. Ticket prices have remained fairly stable, but the cost of popcorn has gone up. And the quality of the movies being offered? Please. I give you He’s Just Not That Into You as an example of how Hollywood isn’t that into providing value for your entertainment dollar. Despite being roundly drubbed by critics and moviegoers alike, the movie was still the #1 box office draw.
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Katherine Berry writes about current events and culture at Electric Venom.
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26 Comments
1. G Alston:Ms Berry –
Didn’t you already write about starbucks already?
Starbucks got to be where it was because it had (and has) great coffee in the time when your typical coffee was the giant can of folger’s watery goat pee at the grocery store. For unknown reasons people liked it. It almost single-handedly introduced the wonders of decent coffee to the entire nation.
A great number of people don’t like basic black coffee or the simple lattes. Until starbucks came along there wasn’t really much of a choice; e.g. freshly brewed variants that disguised the coffee like Mocha were essentially unheard of.
About the only thing wrong with starbucks is that it’s not unique any more. Things have changed since 1980. There are now lots of places that have upgraded the quality of coffees they sell. Starbucks has been having a bit of trouble for a while now. Losing ground (heh) to independents and upgraded coffee in general. They have been victims of their own success. They did special music deals with the likes of McCartney viz exclusives attempting to drive traffic a bit. Attempting to get more business. Attempting to get back customers that went elsewhere.
The troubles starbucks is having has very little to do with your snarky “barista” comment. If barista was a made up nonsense name or some sort of idiotic trademark attempt, you might have a point. But it’s what they call them in europe. Starbucks referred to their workers by the traditional name. Despite your silly attempts to paint things otherwise, there’s not a blasted thing “trendy” about starbucks and there hasn’t been for 15 years. Even when they TRY to be trendy it’s not been working recently. You sound as if you just discovered halfway decent coffee last year.
The rest of your article isn’t any more coherent.
Feb 22, 2009 - 1:09 am 2. Emma:Did Starbucks steal your prom date or something? Why are you singling them out twice in a row?
Feb 22, 2009 - 4:39 am 3. Sara for America:When we spend those dollars, we’re effectively saying: “Yes, I think this is good. More, please.”
Really? OMG. Do you think this blog is read by first graders?
Feb 22, 2009 - 5:18 am 4. vivo:“With so many people struggling just to keep a roof over their heads and food on their table, consumers are supposedly searching for good values in return for their leftover money.”
And, American have always lived beyond their means. Just ask the credit card companies. That’s what kept the economy booming. They are not going to change those habits. So, the economy has nowhere to go but UP. Just give it some time. Young people will lead the way, while older people will be thrifty.
Feb 22, 2009 - 5:27 am 5. Delia:Starbucks coffee SUCKS. I can make a better cup of java half asleep.
PUHLEASE.
Let those m-fers go away. I’m sick of them being on every GD corner. DIE Starbucks DIE.
Feb 22, 2009 - 6:15 am 6. bvw:Yes, I agree with Emma! Katherine Barry has a G.R.U.D.G.E against Starbucks.
Starbucks makes great coffee. Katherine is like unto Barry Obama’s hectoring — “Yea Thee shalt drive smaller cars and turnst thy heat downeth! SO I DO ORDER THEE!”
Feb 22, 2009 - 7:19 am 7. bvw:Miss Berry is like unto a Delia also as an Obama! Such a sweet bloom of the rose is Delia!
Feb 22, 2009 - 7:21 am 8. bvw:And unto G Alston hast Truth given blessing!
Feb 22, 2009 - 7:24 am 9. G Farmer:Saks reduced prices?????
Please even th stuff at the Outlet Off 5th the merchandise was still too expensive.
Ross Dress For Less rules!
Feb 22, 2009 - 7:48 am 10. Delia:7. bvw,
Obviously you don’t know how to make a good cup of coffee on your wittle lonesome.
Here are some hints:
A. Use a coffee maker that uses a charcoal filter for the water reservoir.
B. Grind your own fresh, organic, dark roasted beans per pot of coffee.
C. Use a gold plated permanent filter WITH a paper cone filter.
D. Drink black or with cream/sugar/flavored-syrup and enjoy.
Once you’ve perfected making a really great cup of coffee you’ll scoff at Starbuck$ too. -And, since I live near the Seattle area I CAN judge.
Feb 22, 2009 - 10:42 am 11. Brian C.:Once you’
$tarbuck$ is about glitz and image, nothing more. Dunkin Donuts makes far better coffee and sells it for far less.
Feb 22, 2009 - 11:15 am 12. bvw:Delia, I can make a good coffee, I already have the charcoal filtered artesian well water and a gold plated filter and use a paper cone. I had my own expresso machine and simple burr grinder. I can get the beans. But for all that I STILL CHOOSE to go to Starbucks and enjoy the mess-free convenience of a coffee that comes pretty close to the best I can do at home.
And it isn’t easy to do a great cup at home either. For one thing — a good grinder is going to be close to a kilobuck or more. The expresso machine can be cheaper, but without the quality grind, you can not match a Starbucks.
I can work on my own cars too, but a good dealership does it cheaper and better. The can afford the major cap equipment and tools I can not as an individual justify. And they pay to have their technicians trained in the state-of-the-art. I know the difference between a hobbyist and a professional.
There will be a few hobbyists in any hobby as good as an average professional. But a good professional in a professional shop in any field should easily be able to out-do any but the rarest hobbyist.
With cars and with coffee.
Feb 22, 2009 - 1:07 pm 13. Delia:12. bvw,
I dare ya to compare a cup of my coffee to Starbuck$. I’ll even throw in some of my homemade cinnamon buns that are better than “CinnaBon”.
Feb 22, 2009 - 1:29 pm 14. G Alston:11 — “$tarbuck$ is about glitz and image, nothing more. Dunkin Donuts makes far better coffee and sells it for far less.”
I don’t have the slightest idea what Dunkin Donuts sells (never been in one) but most people at starbucks seem to be buying espressos and/or drinks based on these. I don’t know that there’s any real reason to buy Plain Jane coffee there, and I don’t think I know anyone who does this. I really doubt that the chain you mention does espresso drinks. 1 oz of beans and 1 oz of water for espresso makes it more expensive by definition. It would help if you were comparing like to like. Instead, it comes off much as I perceive Ms Berry’s assertion that road apples and apples are also synonymous due to the common term “apple.”
If your taste buds prefer watery American “coffee” rather than the traditional drink (espresso) then yeah, knock yourself out over at the donut shop. But to claim that starbucks is merely image due to the dysfunction of your taste buds seems silly.
Feb 22, 2009 - 2:40 pm 15. Marc Boyd:My favorite coffee is Kroger brand whole bean 100% Columbian. The roast is just right, consistent, and flavorful. Beats Starbucks for fresh black coffee any day. I have a Krupps coffee mill which does an excellent job ($30 or so). Beans are stored in an air tight container and ground just before brewing. We have a filtered coffee maker and use pure well water. Chlorine will kill a good coffee so we are glad we don’t have or need it.
Feb 22, 2009 - 3:14 pm 16. greg:Problem with your logic is that you’re presuming Starbucks woes are entirely macroeconomic when they are purely internal. I mean, Howard Schultz published his infamous Valentine’s Day lament about the decline of Starbucks over two years ago.
Case and point is that Peet’s Coffee & Tea — who taught Starbucks everything they knew in the 70s — is still selling $4 lattes and just posted a 21% increase in quarterly profits:
http://www.forbes.com/feeds/ap/2009/02/12/ap6047653.html
Meanwhile, the AP mentioned in a recent story that neighborhood cafes with “fancy baristas” are also posting double-digit growth:
http://www.chron.com/disp/story.mpl/business/6263405.html
Your McDonald’s, Starbucks, and economy case falls apart in the face of these data points and invalidates your assumptions.
Feb 22, 2009 - 4:48 pm 17. Paparon:Mc Donalds makes the best coffee. Starbucks is a bitter brew.
Feb 22, 2009 - 7:10 pm 18. Sgt Bazz:Remember Starbucks putting liberal messages on the back of their cups? Well, doing so and putting your hat into the political ring brings consequences. For me, that meant no longer getting my money. McD’s is better anyways, and cheaper to boot.
Feb 22, 2009 - 8:14 pm 19. JFM:I hope you all boycott them and their political agenda. Serves them right announcing they were libs.
Starbucks is all about using the fair trade scam (yes, read my comment to the preceeding Strabucks article for a demonstration) in order to make rich white kids to pay 5$ for a 50c coffee.
Feb 23, 2009 - 1:39 am 20. Peg C.:I’ve been a Starbucks’ customer for at least 20 years but I agree, it is lousy. Occasionally you can get a good latte, but the “coffees” are bitter and bad, and lattes are a hideously high-priced luxury. I’m done with them on a regular basis. And ditto on their political agenda.
The fact that Starbucks has had to close 100s of shops (and will no doubt have to close more this year) proves they are a luxury, not a necessity, and there were way too many in NYC and elsewhere. They have become an expensive joke that many in this economy are finding they can easily do without.
As an aside, we are going back to brewing our own coffee at home and mothballing the Keurig. K-cups are very convenient but ridiculously expensive, and our discretionary income is going towards paying off credit cards rather than luxuries.
Feb 23, 2009 - 3:09 am 21. Dougf:“Did Starbucks steal your prom date or something? Why are you singling them out twice in a row?”
Umm, maybe because they almost perfectly represent something that the writer believes is dying as we speak. Namely to put it crudely — the More Money(borrowed at that) Than Brains model for economic growth and stability. Hard to defend something that is just so clearly WRONG and has had so many deleterious effects.
Always personally thought that Starbucks was a complete rip catering to the self-absorbed, so I consider myself to have been way ahead of the curve. Frankly I hope that they and their ostentatious consumption addicts disguised as customers both continue down the road to personal ‘revelation’. You know the one where $4.00 is a daily wage if you are lucky. The one in which most of the World really lives.
Faster Please. Much much faster.
Feb 23, 2009 - 5:14 am 22. Hanoi Paris Hilton:BVW, I’d say that any specialized automotive technician is likely to have forgotten a whole helluva lot more than you’ll ever learn about car mechanics. But, Jeesh, what can a “barista” (gimme a break!) learn new about brewing a pot of coffee after the first day on the job.
David Brooks, in his BoBo thesis says that a $4 cuppa coffee is right up their with a $75 garden trowel as a deluded, but superbly PC indulgence.
Feb 23, 2009 - 6:15 am 23. PISTON HONDA:ALL COFFEE SUCKS, I DON’T CARE WHO MAKES IT. I AM AN OVALTINE MAN.
Feb 23, 2009 - 8:26 am 24. Katherine Berry:Wow, a whole column on the efficacy of leveraging discretionary dollars within an economy in which elastic demand drives value and… you folks honed in on the mention of Starbucks.
S’okay. I’m laughing at you all the way to the bank.
Meanwhile:
“Did Starbucks steal your prom date or something? Why are you singling them out twice in a row?”
1) No. I didn’t go to my prom because I was doing time in juvie. (Take that all you “oh, such a suburban housewife perspective” reactionaries.)
2) I, actually, enjoy Starbucks. I go for a latte now and then as a treat. But I, being determined to see our family’s way out of debt (which includes our mortgage), know the difference between indulging in a treat and “me time”. As in: “me time” shouldn’t cost a thing. If it does, it’s some company’s time.
3) And, yes, I resent the fact that so many Mommies — and, let’s face it, outside of NYC and LA that’s the bulk of Starbucks’ customer base these days — view their trip to the Green Mermaid as an “indulgence” because, truth is, they’re getting RIPPED OFF.
Oh, and since I’ve got another PJM column coming up soon, you might want to be aware: I think it *might* mention the word coffee. So, go ahead: start preparing your knee-jerk responses which have nothing to do with the point of the column.
Feb 23, 2009 - 7:43 pm 25. Judy, NYC:starbuck’s coffee is the worst. searingly bitter and you’re lucky if it isn’t sour as well. feh. lounging around, however, having even bad coffee and a billion calorie piece of cake, reading the newspaper in cushy chairs and working on your laptop without being pushed out of your seat is very nice. those high prices are not for the coffee.
Feb 24, 2009 - 8:16 pm 26. TalkinKamel:Starbucks coffee tastes like battery acid. I’ve always found the chairs hard and uncomfortable, and usually taken up by soccer moms, Goth gals, Goth guys, anime fans collecting weird Japanese dolls and people working on their laptops. Get a home office, guys. And put away the cell phones.
And Ross Dress For Less rules!
Mar 1, 2009 - 8:44 pm