Cramping my style?


Trends and Tips on developing and operating a tea business.

Cramping my style?

Postby dadams7 » Aug 29th, '09, 02:46

Before I start, I would like to apologize for the long-windedness of my post; it's just my nature. Now to begin...
I am a 24 year old student at a fairly prestigious southern university pursuing my MBA. I will be graduating in May. I have always enjoyed tea, but for the six years that I've been in the South (originally from the NoVA area) I haven't been able to indulge in my passion because there is literally nowhere to get loose-leaf tea (of any quality for that matter) in this city (maybe even the state). I finally buckled down and ordered some online and received it last week. As I was enjoying my tea I had one of the most powerful "Eureka!" moments of my life and decided that I should bring high quality loose-leaf tea to this area. I have many Chinese friends, and spoke to one about my idea. He agreed to go into this venture with me. We imagine a place where we can sell loose-leaf tea as well as an atmosphere for people to sit and enjoy their tea. A very large part of the business model was that we would be the ONLY suppliers for a very large distance. He says that he will be going back to China in December and while he is there, he will locate suppliers from different provinces for different teas. Great. And we already have a supplier in Taiwan. Now just looking for Japanese and Indian suppliers (any ideas anyone?) It seemed like things were going well, and I put an aggressive timeline to open our place in May after we graduate.
Since there is nowhere here to get tea, I figured that I would have an incredible competitive advantage from the product differentiation side. There are a million coffee shops as this is a college town, so I saw this as out biggest obstacle. We thought that we would have to shift the culture of the town from away from a strict coffee diet.
Then I found out today that a certain large tea retailer (whose name starts with a T and ends with eavana) will be moving into the mall here very soon. Seems that they caught on the my idea before I did. Go figure!
My thoughts are that it will be very difficult to compete with this corporation given their size and capital resources, but I do see some positives. If they move in before us, and with their reputation and resources, they can spark the culture change so that by the time our business opens people will be just getting open to the idea of tea but will not be set in their ways enough to become loyal customers.
I also believe that we will now have two competitive advantages. Now that there is a local competitor (and given their prices and what I hope to be a very efficient supply chain) we should be able to offer our product cheaper and with better quality. We also will still have somewhat of an advantage with product differentiation as they do not allow you to sit in their store and order tea but we plan to. Hopefully this will allow us to become the premier tea shop in town.
The questions is this:
Would you be intimidated to go into business with such a large retailer entering the market before you and possibly swallowing a large market share?
Is my analysis of the new entrance correct? Is it a positive thing, or a bad omen for me?
I intend on meeting with a SCORE representative within the next two weeks, but I just wanted some of your esteemed opinions. Thank you for any feedback.
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Re: Cramping my style?

Postby Dreamer » Aug 29th, '09, 11:17

I am guessing that overall that mall tea store showing up will be a good thing for you. They will bring a tea awareness to the community...some amount of education that there is something besides Luzziane tea bags in the world.

They are selling tea (they push a pound and lots of "flavors"). But, you, you will be selling an experience. You would probably be in trouble if your intent was to sell 100 teas by the pound in greatly oversized tins all the while trying to sell largely worthless lined tetsubin to impulse buyers in the mall...that's what they do. It sounds like you want to have a nice selection of tea and give people a place to enjoy it.

There are three of these mall tea stores within easy driving distance of my house. In my experience, they brought me the realization that the world of tea is far larger than store-bought tea bags. They "got me started" with a few small purchases of tea and a gaiwan. They no longer get my business...I buy all my tea and teaware online (i.e. for my money they can't compete with somebody providing an accurate description of a quality product at a fair price, even if I have to order it and wait for it to come!)

Your "place" sounds great...I would drive right past my local mall tea store to come by for a cup!

Good luck with your dreams,
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Re: Cramping my style?

Postby virago_ns » Aug 31st, '09, 11:09

In marketing location, location, location has been replaced by traffic, traffic, traffic. Your sucess may depend on where your shop is located. Remember traffic is not only foot/vehicle traffic, there is also vertual traffic so have an easy to use and informative web site.
Your competitor is no doubt a franchise, and they have to follow strict franchise standards. You can capitalize on this by finding out their brand standards and offer more unique/personal experiences and products.
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Re: Cramping my style?

Postby Intuit » Sep 8th, '09, 11:25

If there aren't any tea shops in the area, you might ask why. Might be that T-vana saturates the local market with tea. OT one Hand, they tend to be pricey from high overhead - mall rent/fees plus franchise and high startup costs (the corporate look). They'll be pushing popular flavored/herbal teas that might constitute most of the area demand for tea. OTOH, they will introduce the locals to the concept of tea shop retail, but at a price point higher than most are willing to pay, and they will do a lot of market break-in advertising, another startup cost that can be tough to shoulder on a slim budget.

Why not start simple? Build mobile concessions, put them on or near campus. See how the student population responds. Location in a U-town is a definite plus, as any small retailer will attest to, if your product fits studen budgets and taste.

Tea is cheaper than coffee. Bubble tea will go over BIG - it's poised to be the next flavored latte hit for portable beverages in the hinterlands. The locals (assuming you are located in the deep South) already drink iced tea like water, and you're not competing with the numerous coffee stands (a good thing, unless they catch on and start to offer tea too).

Tea cart has a low overhead. You can move it around to find your best spots for foot traffic. You can shut down during holidays. You can clone them easily if demand and profit flow grows sufficiently, and you don't need a major loan to get started.

Yeah, that last point is the killer for small business startups right now.
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Re: Cramping my style?

Postby judyw » Oct 30th, '09, 20:58

I went to the mall store and found them pricy, over reaching and only wanting to get their hands on my money. I then looked for places more reasonable ( and nice) to help me get my tea fix. Maybe there are others like me in your area.
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Re: Cramping my style?

Postby J. » Jan 16th, '10, 09:52

I think it's a god end crazy idea.
If the product is different enough that's will work. For example; as you say, a place where people can drink tea, or "rare" teas, I mean teas you bought at the plantation and informations about the traditions and the growers.
The only thing is that I don't know if there are people that are ready to buy quality loose leaf teas where you live.
If there are, that's a good opportunity.

And teavana doesn't seem problematic, I think it's good because people have first to get interrested in teas before getting interrested in quality teas and tea culture.


EDIT:
I tought a bit more and...
There is a street un Brussel where there are two tea stores since july.
It doesn't seem to be a problem.
One teashop sells a lot of different teas stored and big boxes and a lot of different teawares of different styles. Some of the teas are good (but expensive) and I haven't tried the other ones (and I won't buy there anymore).
The second shop sells a bit of everything, sometimes the same teas but of different grades and prices (for example tie guan yin, imperial tgy, and another more expensive one) and gong fu oriented teaware. They also serve tea and asian meals.
So, two shops in the same street is possible in some cases... but this is a chic street.
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