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.
Click to learn more about Tealet. Image courtesy of the contributor.
I live in Hood River Oregon and it was only this past spring when we finally got a tea shop. It was so exciting. I make an effort to stop by for tea every week. It warmed my heart to arrive last week to a full house. I actually had trouble finding a table. I stopped meeting friends at coffee shops, of which there are many, and suggest we meet for tea. I suspect the snacks and tea ware sales are critical to the success of the tea shop. Keep that in mind during this holiday season when you’re looking for creative gifts that improve the health and wellness of their recipients. By taking responsibility to support your favorite tea shop, you’ll be contributing to its success and longevity.
Thank you for your support of independent retail!
Great article Elyse. It pains me to have to charge less for tea that I sell, and sometimes quite a bit less, that the retail price I could get for the tea in China. The tea business is a difficult and complicated business that requires never ending learning, a broad set of skills, and a lot of luck in my case at least. Thanks for being for real.
Thank you Austin, this means so much to me.
I wouldn’t want to be anything but real.
We are a chain store and branding nation. We spent half a decade feet on floor until our space rent doubled and they wanted a 5 year lease for a B location and we went into the technology project full-time. Our customers still write us, beg us to open another store. It was the most rewarding experience of my entire ‘life career’ to date and I’d do it again in a minute….but not without proper funding. We can all share how incredible the experience is, we can educate customers, but the masses are looking for convenience and branding. That’s life in the big city, so to speak! We have to live with those rules and work around or with them.