Welcome to the club!  We’ve seen hundreds of new online tea shops pop up since we launched our operations in the U.S. in late 2004.  In the past year, our offices received several inquiries each week from someone planning to launch a tea website (or add teas to their existing website) by the end of the year.  The market for specialty tea in the U.S. has exploded in the past 10 years and the pace of growth is only accelerating.

All of this action is either really good news or really bad news depending on your perspective.  The good news is that specialty tea is hot!  New tea drinkers are born or converted each day and old tea drinkers are rapidly moving “up market” to better quality teas.  Tea is currently experiencing the same growth pattern seen previously in the markets for wine, nutritional supplements, and coffee.

As great as this good news is, the bad news is that the specialty tea trend is not a secret.  In the last few years, the U.S. market has attracted leading tea retailers from around the world with chains from Asia and Europe entering the market with aggressive growth plans.  A number of U.S. tea companies now have multi-million dollar war chests, thanks to venture capitalists or angel investors.  Even many regular grocery stores now sell reasonably good quality loose leaf teas.  Online aggregators like Amazon.com allow the customer to browse the tea collections of dozens of tea merchants in one convenient, trusted location. A quick search for “loose tea” yields 2,686 results on Amazon.com.

The key to success (as in most businesses) is differentiation.  Why would someone buy from you instead of someone else?  In the physical retail world, the experts always tout “location, location, location”.  But what about online where Grandma’s Tea Room in Walla Walla, WA is just as easy to get to as Amazon.com?

Name recognition?  If you haven’t already developed a large customer base, you’re quite a few years behind on this one.  Do you have the marketing budget to make up the distance?

Trust and security? The tea merchants with physical stores and an online presence certainly have the advantage there.

Customer service?  Not many new web operations can manage to ship orders the day they are received and have someone answering the phones 24x7x356.

Design or marketing?  Do you really have the six-figure design and marketing budgets to compete with online tea merchants already doing several million dollars a year in business?

It may be that you yourself are the difference maker.  Maybe you grew up amidst the tea gardens.  Maybe you regularly travel to the source countries.  Maybe you are a tea scholar and can offer a compelling educational experience.  Many of the entrepreneurs behind the existing online shops have incredible personal resumes or long histories with tea, and this is clearly a great start at creating an online presence that stands out from the crowd.

If you are not already a tea master and the brutal reality of this David and Goliath tale leaves you feeling depressed, you may just need to be a little more creative.  The truth is that the market really doesn’t have much use for another under-sized, under-funded, “me-too” online tea shop.  But that doesn’t mean there isn’t a wealth of opportunity hiding a few steps off the beaten path.

So what is your niche?  I’ll leave that to your entrepreneurial spirit and creativity.  The reality is that in the past 50 years, the stream of marketing messages has become river and then a waterfall, quickly overwhelming the consumer.  At the same time, some of the most profitable small businesses have found a way to target a specific market or demographic and appeal to that market in a way that is nearly impossible for big companies to replicate.  The moral of the story is that you’ll have a hard time beating the leading online retailers at their own game.  To succeed, you will need to change the rules and offer something (an experience, a product, a perspective, or a story) that they do not.

Good luck, and happy innovating!

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