Something has been bothering me ever since the World Tea Expo. It seems that just about every tea entrepreneur considering a brick-and-mortar tea shop is planning to open a cafe (including seating and some food). This is the default strategy for two reasons – cafes are a proven, profitable business model in the U.S. and this is what almost all customers SAY they want. So why is it that I am absolutely convinced that the customer is wrong? What hubris leads me to claim that customers don’t know what they really want?
I’ll dig into the business rationale for my departure from conventional wisdom in a moment, but first let me to attempt to redeem myself by association. Steve Jobs, the venerable CEO of Apple, often cites this quote from Henry Ford: “If I’d have asked customers what they wanted, they would have told me, ‘A faster horse!'”. Henry Ford envisioned an innovation that the customer didn’t realize was even possible. He created the Model-T automobile, the first “horseless carriage” that was mass-produced – and therefore within reach of the masses – and founded the Ford Motor Company.
Apple ignores its customers, ignores the critics, ignores the press, and ignores its own employees. New products are approved by Steve Jobs and a VERY small group of key employees with a vision for the future. On May 26 of this year, Apple became the largest technology company in the world, and the second largest company (after ExxonMobile) in the U.S. (by market capitalization). This from a company that was saved from bankruptcy in 1997 by a $150 million investment from Microsoft.
So back to tea. Customer thinking is derivative. It is based on the way they see tea today. According to conventional wisdom, a tea shop is a place where you sit and sip a cup of tea with a good friend and eat pastries or finger sandwiches. Or, if you’re a bit more progressive, a place where you sample fine loose-leaf teas and modern Asian-inspired health foods. But this has been done before! There are more than 25,000 cafes in the U.S. already, most of which serve tea and pastries. Innovation doesn’t happen in an echo chamber.
No one has cracked the code yet. No one has figured out how to inspire the rapid customer adoption that coffee saw when the number of coffee shops went from 1,650 in 1991 to 24,000 in 2006. Teavana has probably come the closest. They’re opening 800-square-foot stores with one register, selling over $1 million in product, and most likely delivering gross profits of a quarter million dollars annually. I’m not aware of anyone else who has come close to that level of efficiency and profitability in the U.S. How did Teavana do it? In part by ignoring the customer’s perception of what a tea shop should be and instead focusing on what it could be.
Yet, for all of Teavana’s financial success, they have yet to inspire the passionate customer loyalty that brands like Apple have managed to create and capitalize on. Teavana does a pretty good job introducing casual tea drinkers to loose-leaf teas, but my impression is that most customers don’t walk away from the shopping experience in love with tea or in love with Teavana. Moreover, the chat boards are strewn with Teavana customers scouring the Internet for new sources of tea.
I’ve spent five years in the trenches, and often behind the counter, of tea retail. I learned pretty quickly to ignore what customers are SAYING and focus instead on what drives their behavior. There is a BIG difference between what customers say they want and what actually prompts a purchase. The only people who are less honest than customers are friends and family. They’ll tell you that just about any idea you have is a good one and that you should “go for it”. Have you ever seen the early episodes of a season of American Idol? Most of those people were told by well-meaning friends and family that they could sing.
The moral of the story? Turn down the volume and start watching customer behavior. Look for opportunities for innovation. Look for the next big thing. There are opportunities all around us, but the next big thing is unlikely to be a carbon copy of something that already exists. An entrepreneur, by nature, thinks he/she can do it better. The successful ones also do something different!