Verdant Tea Offerings?

[Geoffrey_Reiff]

Concerning the "Star of Bulang”
'06 Yongming Bulang Mountain Raw Pu’er Cake

In the first case, the blogger Hster compared an '06 Yongming Bulang Mountain raw pu’er cake, which we referred to as the "Star of Bulang" and retailed at a price of $156, to the following pu’er cake on Taobao priced at 108 RMB ($17):



In this TeaChat thread, it was recently revealed via a photograph of the wrapper that the '06 Yongming Bulang Mountain raw pu’er cake we actually carried and sold to our customers was not the one Hster compared it to on Taobao, but actually looked like this:



On Friday, I found a listing for this exact pu’er cake (the one we carried and sold) on Taobao, which is being offered at a price of 600 RMB ($95.47):



Here is the reference link to that Taobao listing:
http://item.taobao.com/item.htm?id=1549 ... 1465487831

The discrepancy in price comparison here is that the pu’er cake we actually sold is available on Taobao at a price 550% more than what Hster has led people to believe with the example listing she cited. Just as a thought experiment, we could apply the same math being used in her price comparison and conclude that if we had purchased this pu’er cake from a Chinese vendor for 600 RMB as our base price and resold it for $156, the markup figure would be 63%, instead of the 900% being claimed. But this is before the actual "cost of goods sold" is factored into the equation.

"Cost of goods sold” is a business term that accounts for all costs of purchase and other costs incurred in bringing the goods to their present location and condition, as well as any costs associated with modifications and delivery of these goods to the customer. For our business the "cost of goods sold" figure includes our added costs for covering import commissions, customs brokerage, licensing fees, air shipping to our office, packaging, and subsidizing shipping to our customers. At the present time, these costs add an average of $14.12 to the base cost to us for any given pu’er cake we import. As a technical point, from the standpoint of business accounting and reporting, I want to clarify that "markup" by definition should be applied to the "cost of goods sold" figure and not the base cost of the goods.

Looking at the example of the cake I've cited on Taobao, anyone ordering that cake from outside of China might expect to pay as much or more than the $14.12 I've cited on top of the listed price to actually acquire it through Taobao, given the associated agent fees and cost of international shipping. So let's hypothesize that someone in the United States could purchase this cake through Taobao for $109.59 or more. With this factored in, the price comparison of this example reduces the hypothesized markup figure to about 42%. So it's worth asking the question: what does this extra 42% in price provide a customer who purchases from our business as opposed to purchasing on Taobao? David addressed this in one of his original responses to you, Hster, by pointing out that our business offers the added value of a guarantee of satisfaction and a return policy, which would not be available through Taobao. Further value is added by our making available these cakes to those of our customers who would not otherwise have the language skills, time, or interest in searching through thousands of teas on Taobao to find one they might like. Many of our customers have told us that they find our sourcing efforts to be a valuable service to them. If anyone can find a tea that we offer on Taobao, and they possesses the skill, means and buyer confidence to purchase it there, they are certainly welcome to do so. But not everyone has the ability or interest in doing that.

Now, having said that, I would like to also make clear the importance of understanding that our total "cost of goods sold" figure does not account for the covering of our fixed operational expenses as a business or United States business taxes, which include things like office/facilities overhead, modest salaries and payroll taxes for the 4 people our business now employs, business income taxes, costs related to the operation of our website, and a whole array of other costs that you might very well find tedious and boring to read about. The point is that even after markup is applied to the "cost of goods sold" figure, there are operational expenses that add up to make our net profit margin on a given tea much, much thinner than anyone is these discussions is assuming.

[Geoffrey_Reiff]

Concerning the Tian Di Ren Mt. Bulang ’06 Sheng Pu’er Cake

In the second case, Hster started the following TeaChat thread:
http://www.teachat.com/viewtopic.php?f=20&t=17766

Hster, in the mentioned thread you have speculated about a Tian Di Ren Mt. Bulang ’06 Sheng pu’er cake that was mentioned on a page of our website describing a Pu'er Reserve Project. You provided an incomplete screenshot of that page and objected to the following statement:

"The goal of this project is to make available small quantities of pu’er whose prices are too prohibitive to fully recover costs on through normal retail sales. Every once in a while we come across teas that we wish we could import, but know that the price would be too steep."

In your original post on that thread, I would just like to point out that you neglected to mention that we have not yet even offered this pu'er cake for public sale, nor published any retail price for it. The rest of the page describing the Pu'er Reserve Project explains that we were only giving away 7g. samples of this Tian Di Ren Mt. Bulang '06 Sheng pu'er cake "as a second sample in all orders over $50 for pre-release tasting while supplies last." We had run this promotion of the project for a brief period a few months ago, and then decided to table it for the time being because there were more urgent things we needed to accomplish for our business.

You then asked if there could possibly be an ’06 Bulang pu’er cake that exceeds the $156 price of the Star of Bulang cake you brought into question earlier. Without having any published price from us to compare against, you then cited the following listing from Taobao (provided to you by Professor Zhang) for a 2006 Tiandiren Bulang priced at 69 RMB ($11):



In that same post you encouraged readers to "search 2006 天地人 布朗 on Taobao". Well, I went ahead and did that, and I’ll tell you what I found. I found that the query returned 3 pages of results. The first page of results listed neither the ’06 Tiandiren Bulang that you and Professor Zhang have referenced, nor ’06 Tiandiren Bulang pu’er cake we actually have at our office. Here is a photograph I had taken of the ’06 Tiandiren Bulang pu’er cake in question held up next to my face, to offer conclusive proof that this is the one we have and were referring to on that Pu’er Reserve Project page:




And here is a closeup for reference to the details on the wrapper:




So on the second page of results for the Taobao query you suggested, I found two different listings for the ’06 Tiandiren Bulang pu’er cake we have (depicted next to my face). One is from a vendor that lists it at a price of 211 - 220 RMB (around $34), and only has a quantity of 1 left. Here is an image and link for that listing:



http://item.taobao.com/item.htm?id=3000 ... 1773154676

The other is from a vendor who has a quantity of 200 of them on hand and lists it at a price of 308 RMB ($49). Here is an image and link for that listing:



http://item.taobao.com/item.htm?id=9550 ... 1334407186

The 69 RMB ($11) cake that you and Professor Zhang originally cited as evidence of your claim does not appear on Taobao until the third and final page of results for your suggested Taobao query. Unless I'm greatly mistaken, the cake that I have cited on Taobao and pictured is clearly labeled in Chinese as ’06 Tiandiren Bulang Mountain Raw Pu’er Cake. Professor Zhang, I gather that you know Chinese well enough to have seen that this cake offered at 308 RMB existed in the Taobao listings for Hster's suggested query. I’d be curious to know why you did not cite this one as well as, or instead of, the much cheaper one. I'll acknowledge the possibility that these listings I'm presenting were not on Taobao at the time of your own searches a little over a week ago; but whatever the case may be, I'd like to ask if you did see them, and if so, why you might have considered them not relevant to this discussion?

In any case, the going list price for this cake on Taobao is about 325-450% higher than the 69 RMB ($11) example you've cited. I know what our base cost for this cake was, and while I don’t think it’s necessary to state it explicitly, I will give you a sense that you can deduce from. For the Pu’er Reserve Project, David asked our pu’er supplier and personal friend, Wang Yanxin, to send us a diverse selection of pu’er cakes of her choosing at or above a price floor of 300 RMB ($48). We gave her a lump sum on trust in her judgement and received from her a box of a couple dozen pu’er cakes with an itemized list of cakes ranging in cost from 300 RMB to 750 RMB ($48 - $119). That range represents base cost before cost of good sold for each cake. Wang Yanxin sent us a whole tong (7 cakes) of this ’06 Tiandiren Bulang pu’er, which was the most of any one tea in the box she sent us. By this you could easily deduce that it was the least expensive of all the pu’er we received, and had a base cost around the price floor of our request to Wang.

I’m not going to go so far as divulging what our general markup would be on this cake, but I would like to engage in another illustrative thought experiment here to further parse out the concept and idea of markup that has been discussed in these threads so far. Professor Zhang, you've mentioned here that you would consider a markup of x3-x4 from base cost to be "fair game". I understand that you've come to this conclusion from beginning to sell tea yourself, and recognizing the associated costs of doing business. In this case, let’s assume hypothetically that we imported the ’06 Tiandiren Bulang pu’er cake at a base cost of 308 RMB ($49), with "cost of goods sold" applied this cake would cost us about $63 to import and sell. If we apply your definition of "fair game” markup to this cake, it could retail at $147-$196 (x3-x4 markup from base cost), or $189-$252 (x3-x4 markup from the cost of goods sold figure). I think it's pretty clear that these prices, based on Hster’s reaction to the $156 Star of Bulang cake alone, could legitimately be described as "pu’er whose prices are too prohibitive to fully recover costs on through normal retail sales”.

What that quoted description of this pu’er means is that we know we would not be able to price it at a normal markup level for retail without many customers balking and refusing to buy it; as such, we wold have to price it at a reduced markup to make the price more palatable to customers, with the final consequence for us being that we would stand to potentially make a net profit margin of zero or even lose money on importing the product for sale. That is what we’re describing on the Pu’er Reserve Project page. David told me explicitly before we even pursued the project that he didn’t expect we would make any money from it.

[Geoffrey_Reiff]

Concluding Statement

So having laid all this out, I would like everyone to make their own assessment of the evidence. We stand secure in the integrity of what we do to run a sustainable business, and will continue to maintain that we are not the robber-barons of tea that the speculative claims in question have made us out to be.

On a more personal note, I would like to add that the characterizations that I have seen made in this discussion of my employer and personal friend, David Duckler, are way off base. It saddens me to see him talked about in this manner. From my direct experience with him, I can tell you that on multiple occasions David has made significant sacrifices in his own pay so that I wouldn't have to during slow months for our business, even when I offered to take a temporary reduction in my modest salary to help us keep the business going. I could provide an abundance of other anecdotes conveying the extent of David's good will and openhanded generosity, and I'm sure that many of our customers could do the same.

I want to stress again that my intention here has been to present our case in as respectful and honorable a way as possible. To Hster and Professor Zhang, I would like to say that I fully acknowledge and respect your freedom to state your opinions in public forums. As David pointed out in his most recent contribution here, we have indeed learned some helpful and valuable things from this discussion that are changing the way we do things. The most salient point being that we need to present a full and clear image of the wrapper for any pu'er we sell going forward, for both the benefit of our customers and to avoid any future misunderstandings like the one we've been discussing. Before you, no one had questioned our motivations for presenting our products in the way that we have. This incident has helped us understand that we need to adjust the way we present our pu'er to better satisfy the expectations of elite pu'er buyers.

With that expressed, I want to also say to you both that we have suffered from the unproven claims about markup that have been leveled against us. I hope that in reviewing the information and evidence for the case I have presented, you can both acknowledge that on the question of our price markup for these two pu'er cakes you have been mistaken. The point I would really like to convey to Hster and Professor Zhang, as well as everyone else reading or participating in this discussion, is that your words have consequences that do not stop at simply effecting the reputation and practices of a business. Your words have consequences that can, and have, endangered the wellbeing and livelihood of real people, with families to support, who are working to make an honest living. I have in mind here not only myself, David, Weiwei, and our part-time employee Brandon, but all of the friends and farmers that we work with in China as well.

It is a mandate of my job, and my responsibility to all the people that we employ and work with, for me to set the record straight and put this question of our price markup to bed. I want to conclude this matter by stating our desire for an amicable resolution with you, Hster. If after reviewing what I've presented, you are satisfied with the evidence, and are willing to acknowledge that this question of our price markup has been a misunderstanding, I kindly request that you honor us with a respectful retraction of your claim that we have applied a markup of 900%-1000%+ on the pu'er cakes in question. We would deeply appreciate, at the very least, a willingness on your part to revise what you have said about us in your blog entries to reflect the prices on Taobao that are listed for the actual pu'er cakes we have sold or made mention of. If you are willing to honor this request, we would readily forgive any grievances we have suffered and be happy to move on from this.

On behalf of everyone at Verdant Tea, I thank you for your careful consideration of all that I've put forth here.


With Great Respect,

Geoffrey A. Reiff
Business Development Manager
Verdant Tea

[sherubtse]

I have been following this debate since the get-go, and have a few comments to offer.

I know nothing about puerh. So the discussions about the teas in question are beyond my comprehension.

However, I *do* know something about customer service. And I must say that I am quite impressed by the quality of the responses from the Verdant Tea personnel. They have responded fully to criticisms from others, and have been willing to learn from those criticisms. They have taken the time, and made the effort, to do what almost all other vendors would not even think of doing.

Again, with the caveat that I make no comments on the issues surrounding the teas discussed, I wish to compliment David and Geoffrey for their responses here on TeaChat. They have shown a level of responsiveness that many others should emulate.

Best wishes,
sherubtse

[the_economist]

It was simple enough to resolve this issue without the long response. Just post the wrappers. Why the wrappers were not posted in the first place simply baffles me. This way, you wouldn't even need to do all this typing and taobao searching yourself, we the customers would do it on your behalf to check the fairness of your prices.

I like to know exactly which cake I'm ordering, not just a picture of nondescript leaves accompanied by a vague title which would give rise to all sorts of misunderstandings. I am very glad to see David taking this suggestion seriously, and like others who have followed this, will be looking at future postings from Verdant Tea.

Other than that, it seems that Verdant tea's markup wasn't that crazy after all assuming the cakes offered are the cakes posted in the response given here.

[shah82]

with the_economist here. The response is way too long, and I did a tl;dr. The wrappers/full searchable name were what was important.

The other issue is that these are actually known factories with a reputation for being rather low in quality. It's not unreasonable to think the worst. And puerh consumers do have to think the worst on a regular basis, because while there is a ton of good tea made in a province the size of France, there is also a great deal of bad tea made, and much of it is used to scam others. The initial lack of transparency was why I never entertained purchasing from Verdant tea (after seeing tea on Steepster), plus the claims about some of the products, I deemed to be unlikely and somewhat manipulative. I suspect I wasn't the only one, and that's the loam in which Verdant tea had to be pulling weeds from.

[wh&yel-apprentice]

Mod edit: posts deleted and account deactivated ... done.

Reason, harrassing members ... and your very biased moderator.

[Chip]

Too long or very thorough ... ? I give the benefit of a doubt to very thorough ... IMHO.

[brandon]

$156 for Bulang from any factory defies logic so heavily that people had no problem getting sucked into the markup scandal. It is unfortunate that people were comparing unlike items. But no one is ever going to buy Bulang from a factory of this caliber for more than the going rate for a very nice Guafengzhai from a small label with good reputation. It just sets off all sorts of alarm bells.

[Chesslover]

However, I *do* know something about customer service. And I must say that I am quite impressed by the quality of the responses from the Verdant Tea personnel. They have responded fully to criticisms from others, and have been willing to learn from those criticisms. They have taken the time, and made the effort, to do what almost all other vendors would not even think of doing.

Again, with the caveat that I make no comments on the issues surrounding the teas discussed, I wish to compliment David and Geoffrey for their responses here on TeaChat. They have shown a level of responsiveness that many others should emulate.

+1

[MarshalN]

Mr. Reiff:

Since you named me as one of the people you're responding to, I figured I owe you a response. I'm afraid I haven't had that much time today to go through everything you've laid out, but I'll address one of your points first. Regarding the "Star of Bulang", I think in the first case it was entirely reasonable for hster to mistaken the cake you at Verdant are selling, because the cake that Mr. Duckler eventually showed us does not contain in its name "Star of Bulang" at all. It's no wonder it was mistaken - one cannot find the right cake with the wrong name.

Now, as for your discovery of this 600 RMB cake, I looked at this vendor who is supplying this cake of yours. There are two things worth considering here. The first is that the vendor who is selling this is quite questionable - you neglected to mention that the vendor, aside from the wrapper, lists no info regarding the cake at all. More importantly, this vendor clearly prices his teas above and beyond market rate.

The reason I say this is because we are lucky this vendor sells a well-known and well benchmarked cake.

http://item.taobao.com/item.htm?spm=a1z ... 5491757409

The Haiwan Laotongzhi, nongxiangxing (year unstated, but no earlier than 2004, the first production). This is a very widely available cake, found easily on Taobao from hundreds of vendors. Your vendor here, also at 600 RMB, is the single highest priced Haiwan Laotongzhi I can find. Most other listings sell it for 200RMB or under. That I think is all we really need to know about this vendor and the prices that they represent.

I can't find another example of the 2006 Bulang that you possess, but I do find two vendors who sell the 2007 version. See below:

http://item.taobao.com/item.htm?id=1717 ... 1059540180

http://item.taobao.com/item.htm?id=1536 ... _460374723

Sold for, respectively, 48 and 70 RMB a piece. Not quite 600, I'm afraid. Of course, they're not the same thing, but as the business development director of Verdant, I think you'd agree it's marketing suicide to use the same design for a cake and sell it at 10% of a prior year's price.

As for the second Bulang, the Bulangqing. I did, in fact, see the 300 RMB cake, but let me show you something

http://search8.taobao.com/search?spm=a2 ... c-50103377

This is a search for simply "Tiandiren" and "Bulang" under tea cakes in the puerh section, as I had no idea, when hster first mentioned this, what bulang exactly you folks had. Aside from the one cake that is listed as Laobanzhang, which sells for 288, and a few items that are above the weight of a normal cake (a bundle of cakes, and a huge brick) the ONLY item that is over 200RMB is your Bulang cake. Everything else falls into the 100 or under category. In social sciences when presented with a scatterplot of data, if you see a clear outlier, you discard it. It could be a vendor or two who prices their things way above normal market rate, which is not unknown on Taobao, or just an anamoly. Given that if you search for Tiandiren puerh generally, you get the same results of a flood of under 100RMB cakes, one can reasonably conclude that the 300 RMB cake is one or two vendors having a fantasy of what they can charge, rather than what they are worth. Not dissimilar, I might add, to the vendor above who prices his Laotongzhi at 600 RMB. Nobody will bite at that price when there's a wide selection of sub 200RMB cakes floating around.

Now, nobody knows exactly what you folks paid. For all I know, you're losing money on your cake and you actually paid $1000 for each. What I can say though, is that Yongming and Tiandiren generally produces very low-market, mass produced puerh of inferior quality. There's nothing wrong with selling these cakes as what they are. There is, however, something wrong when the vendor chooses to represent these factories as "workshops" and disguise their origins so that price comparison is impossible. If you think you're charging a fair price, then you should not be afraid of letting people know what you're selling. If you're the only one in possession of the tea, you do not have to fear competition. If you can easily find other, alternative sources for the same tea at a fraction of the cost, however, then the customer should have a choice of whether or not to continue to patronize your shop for this particular item or not.

As for the 3-4x markup being reasonable, I've held that view for a long time since the days when I first started blogging and in discussions with folks back then about prices, because I was in Taiwan and they were in the US, so we were comparing prices of what I found on the ground versus what was being sold online, chiefly through Hou De & Co back in the day.

Now, I'm not sure why you assume that you can only get the Tiandiren Bulang at 308, when very clearly there's another person willing to sell it at 220 (and recently sold 7 of them at that price, I might add). If you are an importer and are buying in any volume, discounts are quite normal, even on Taobao. I recently bought 11 cakes on there for myself that I got 20% off for from the listed prices. I'd assume you can do just as well, if not better. Shopping in person can further lower the price. Taobao, if anything, represents the high end of the price spectrum when it comes to puerh tea. If something is generally listed there as, say, 200 RMB, I'm pretty sure any savvy shopper walking around a good tea mall can get a 25% discount off that in half a day for something not too rare or special. Tiandiren is not speical.

So in that sense, if we work from the basis of 220 RMB, the price of the other vendor's cakes, and we generously call it $40 USD. Even if one were using a Taobao agent, which charges 10% service charge, we're talking about $45 a cake. 3x that is only $140. Profit on the cake is not too bad, although the real problem, of course, is that if your customer finds out that this is actually something they themselves can buy through Taobao for $45, they might not buy it from you.

Hou De seems to be able to sell some pretty high end puerh for prices that are about the same as your Star of Bulang. Their 2005 Chenguanghetang Yesheng (Yieh Sheng on his website) is sourced probably at around $80 or so, and yet he seems to be doing ok selling it at $165. Maybe you should lower your overhead?

In sum, I suppose we differ in our views. In response to sherubtse's point, I think good customer service really boils down to two things: 1) adding real value to what one sells, and 2) solving problems quickly and well in the process of ordering/purchasing. It seems like Verdant might be quite good at 2, but I'm less convinced of 1.

[hster]

Geoffery,

I appreciate any efforts from pu-erh vendors to improve their transparency and I ask you to provide a clear back wrapper shot of Verdant Tea's Yong Ming Bulang Qing which shows as much text as possible.

MarshalN has covered all points so I'll provide screenshots for showing that the Bulangqing is not a premium high end production. If we do a taobao search for your Bulang (永明茶厂布朗山乔木青饼), we can see 2007 versions for less than $10 with the cheapest at $6.30:

http://s.taobao.com/search?q=%D3%C0%C3% ... _20121002

As mentioned, selling a "Star of Bulang" which is not a Star of Bulang is misleading but this is still moot when we compare the following prices. 40 yuan is currently $6.30.

TaobaoBulangQingListing AM.png (152.66 KiB) Viewed 4621 times

Beengs from low-end factories like Yong Ming do not have a 1600%+ increase for the same cake released only a year apart ($6 to $98)- $98 being the Taobao price you point out.

2007CheapStarofBulang AM.png (125.77 KiB) Viewed 4625 times

I singled out Verdant Tea for lack of transparency and inflated markups. If you can convince your customers to pay $156 for a cake for which a previous year's version goes for less than $7 on Taobao- more power to you.

On the matter of the Tiandiren Bulang- I was calling for transparency. If Verdant Tea sees a beeng less than $50 to be prohibitively expensive to import in the normal way- already you will fail to capture the high-end pu-erh market and the patronage of any of the serious pu-erh drinkers.

I'll provide a second part of my response later this week.

Sincerely,
Hster

[sherubtse]

In response to sherubtse's point, I think good customer service really boils down to two things: 1) adding real value to what one sells, and 2) solving problems quickly and well in the process of ordering/purchasing. It seems like Verdant might be quite good at 2, but I'm less convinced of 1.

Number 1 is an interesting point, MarshalN. And I would argue that doing number 2 *is* adding "real value" to what one sells and does as a tea vendor.

Best wishes,
sherubtse

[SilentChaos]

In response to sherubtse's point, I think good customer service really boils down to two things: 1) adding real value to what one sells, and 2) solving problems quickly and well in the process of ordering/purchasing. It seems like Verdant might be quite good at 2, but I'm less convinced of 1.

Number 1 is an interesting point, MarshalN. And I would argue that doing number 2 *is* adding "real value" to what one sells and does as a tea vendor.

Best wishes,
sherubtse

True, but it number 2 cannot be the only value vendors add to what they sell? Sourcing, providing detailed information and fetching a good price are surely at least equally crucial.

[sherubtse]

In response to sherubtse's point, I think good customer service really boils down to two things: 1) adding real value to what one sells, and 2) solving problems quickly and well in the process of ordering/purchasing. It seems like Verdant might be quite good at 2, but I'm less convinced of 1.

Number 1 is an interesting point, MarshalN. And I would argue that doing number 2 *is* adding "real value" to what one sells and does as a tea vendor.

Best wishes,
sherubtse

True, but it number 2 cannot be the only value vendors add to what they sell? Sourcing, providing detailed information and fetching a good price are surely at least equally crucial.

Very true, SilentChaos - all of the points you mentioned *are* very important. But I personally wouldn't call them part of "customer service". To my way of thinking, they are more in the line of marketing.

Customer service I think deals with how the vendor relates to / deals with a customer (or potential customer). For example, a vendor may have great info on their site, etc. yet still deal poorly with their customers (e.g., not respond to e-mails, have long delays in sending off orders, etc.)

Best wishes,
sherubtse