With the growing interest in tea, many tea lovers have chosen to follow their passion in becoming a tea retailer. Some may have dreams of wealth and fame, but the honest truth is that it’s a hard business and the only thing keeping them motivated is their love for tea. There are very few ways of making high margins as a tea retailer, so one should not assume that retailers are lining their pockets with money, especially if they are making high quality tea available to you. By understanding the business of tea retail you can make more conscious decisions about which tea retailer you choose to support.
There is money to be made in the tea business. Howard Schultz of Starbucks recently claimed the global tea market to be $90 billion. This is a market that large retailers such as Teavana and David’s Tea can dominate with their enormous supply chains and large network of brick and mortar stores. These operations have high overhead and significant inventory requirements. Quality begins to slip in these situations because the only way you can find tea in these large quantities with a consistent quality year after year is to source commodity tea from around the world and blend it together. The customers of these businesses are not making their purchase based on the quality of the tea but rather the quality of the experience. Maintaining highly trained staff is also a difficult task for these retailers. You will have better luck learning about the origin of Dragonwell tea from a Google search using the café’s wifi than from the server making your tea.
Competition is heavy with a few large players and many smaller, independent players. Independent retailers either have a brick and mortar shop or do their business online and in temporary space such as farmers markets and popup shops. Brick and mortar retailers have high overhead and must deal with keeping their shops staffed while online retailers struggle to get customers to learn about their business on the internet. Sales volumes are not as high as you may think and these business owners have trouble providing themselves a paycheck after all the bills are paid. Most independent tea retailers I know must maintain at least part-time jobs to stay afloat – even the most famous online tea retailers. Retailers that focus on quality tea are also at a disadvantage due to the high price competition of commodity tea. These retailers often do their own sourcing to ensure higher quality and must purchase in small quantities which significantly increases the price of raw materials for the business, sometimes multiplying expenses five times.
As a consumer you have a choice in which retailer you support with your tea purchases. Independent retailers who are focused on sourcing high quality with a high level of ethics are at a disadvantage, oftentimes selling the tea at a lower retail price than what it is sold for in the local market where the tea was grown. These retailers must pay higher prices to tea producers for their tea due to the growing wealth class that is paying top dollar for high quality Chinese teas in China. Margins are low for these retailers and your support of them keeps their business and energy alive. If you want quality tea you should support these retailers and understand the resources required to bring high quality tea to you.
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