I had a debate this evening with a commenter named Austin that got me thinking. A lot of people, like myself, shout from the rooftops that the U.S. tea industry is growing rapidly and full of opportunity. At the same time, tea shops across the country are going under. Are the industry insiders just blowing smoke and patting each other on the back?
I’ve talked to more than 100 retailers this year and at least a dozen wholesalers. My anecdotal evidence is that for most, same store sales are down roughly 10%. At the same time, most wholesalers are up more than 20%. This tells me that there is pain out there, but that the industry is still growing rapidly in spite of the down economy. The truth is that even though the last 50 years in the U.S. have been years of incredible growth and prosperity, we all have seen the statistics that two-thirds of new businesses fail. The tea industry is no different. MOST new tea ventures will fail. That’s scary when you realize that these start-ups represent the dreams and savings of a lot of individual entrepreneurs.
The solution is not to discourage people from trying, but to encourage people to pursue strategies that have the best chance of success. So why is it that people always give feedback on business plans based on what some theoretical “average person” would do?
“I’m sure there are A LOT of people that would love to spend lots of time and money at a cute, comfy little tea café. Granted, I’m far too busy to go myself but it just sounds so nice!”
Maybe it’s the same thing that drives people to tell their friends what they want to hear? “Do these pants make me look fat?”
I spoke at the 2009 World Tea Expo and asked the audience to raise their hands if they knew of a tea shop that they thought did a really good job. Nearly every hand went up. Then I asked them to leave their hand up if they KNEW that shop was actually profitable. ONE HAND remained raised.
I’m currently in the process of building a strategy to expand the Adagio Teas brand into a physical retail store. As part of this process, I’ve received feedback from hundreds of people. Some I know well; many are Twitter or Facebook acquaintances who share my love for tea.
Over and over, I hear people suggest that we open a warm, friendly tea café with good food and comfortable seating. I know, it just sounds so nice, but I have yet to see a business model built around the “perfect tea café” that excites me. Most tea drinkers love the IDEA of a café, but few actually frequent them when available. Why pay $4 for a cup of tea that costs me $0.25 at home? Why subject yourself to the attention span of a young server when you can get just the right amount of leaf, water temperature, and steeping time in the comfort of your own home?
I get the sense that between the feedback of friends (which is often irrationally positive) and the feedback of passionate tea connoisseurs (which is awesome but far from mainstream), too many people get sucked into ideas that just don’t have legs. Too many people make the decision to move forward based on vision and gut feel while ignoring the numbers.
For anyone considering getting into the tea business, I have this advice: Avoid navel gazing! Most ideas are bad ideas. Most advice is wrong. Most new businesses will fail. There really is A LOT of opportunity out there. I can tell you stories of incredible success achieved through good strategy and hard work. It IS possible. But be critical, be careful, and do your homework. Vision and passion and a romantic idea are simply not enough.
So as for me, I’m going to open a tea retail store – focused on selling loose-leaf teas. If anyone wants to open a warm, friendly café, I’d love to help you! I’ve opened a couple tea bistros and a handful of tea retail shops. I am glad to share what I’ve learned, am happy to sell you some tea, and would love a great tea café in my own neighborhood. I just know I’ll only visit a couple times a month. Hopefully that’s enough.