Abrupt Mid-Holiday Closing of American Tea Room

BEVERLY HILLS, Calif.

The abrupt closing of American Tea Room’s three Southern California locations last week marks the latest of several tea palaces to fail.

In a statement, founder David Barenholtz wrote that online tea and tea ware sales continue. Closing the stores “was an incredibly tough decision” but necessary “as we re-evaluate the retail component of the company,” wrote Barenholtz. The company recently expanded to three locations and completely remodeled its anchor store in Beverly Hills which opened in 2003. Locations in the Arts District in Los Angeles and in Newport Beach featured modern décor, full kitchens and vast selections of tea. Barenholtz was one of the first retailers to invest in Bkon tea brewers at his in-store tea bars and has won many awards for both store design and products.

An accomplished marketer, Barenholtz is a strong advocate of tea education, installing in his stores an interactive rotating pop-up called the Tea Zone to aid discovery. Online his tea encyclopedia is extensive, and his staff has won praise from customers and media for creative blends and table theater.

The expansion to three stores was announced in 2014. Two new stores opened the following year. All three locations are large by comparison to most tea rooms. The store at 909 S. Santa Fe was 5,600 sq. ft. The headquarters was moved to Los Angeles during the year-long remodel which was completed last January when the Beverly Hills store on Cañon Drive reopened.

It was not clear how many positions will be lost due to the downsizing. “We sincerely thank all of our long-time regulars and staff for their support, and we look forward to sharing what the next chapter of the company has in store,” he wrote.

A random survey of experienced tea retailers, who operate online exclusively, as well as brick-and-mortar and wholesale, suggests sales during the holiday season are better or about the same as last year.

Michael Cramer, founder of Adagio Tea, a New Jersey- based online retailer founded in 1999, said that “despite heavy discounting by our online competitors (30 percent off by DAVIDsTEA, 40 percent off by Mighty Leaf and 50 percent off by Teavana),  holiday sales are up slightly over the year prior.”

Cramer noted a “land grab for Teavana’s customers had already begun, heating up the already fierce competition for online tea sales. We’ve formulated a half-dozen teas that resemble Teavana’s best sellers, and look forward to seeing how popular these may prove following the demise of Teavana’s online store,” he said. Teavana closed its online store Oct. 1 but continues to sell its inventory on Amazon.

At The Jasmine Pearl Tea Company in Portland, Ore. “we have seen a slight decline in sales in our brick and mortar stores this autumn. However, our online store sales have increased by 50% over last autumn. For the year overall, we have seen positive grown over last year in both our store and online,” writes Heather Agosta.

“We have not changed anything about our discounts,” she writes, “We offer one anniversary celebration sale and discounts to customers who bring back their tea packaging to be refilled,” she said.

American Tea Room’s spacious tea lounge.

“Our holiday/year-end strategy is simple: we adjust our offerings to meet the needs for gift purchasing customers. We add more gifting food items, tea gift boxes, and special tea ware. November and the first two weeks of December are the times when those changes happen. Bigger than the holiday traffic though, is the general seasonal traffic shift. Soon as cold weather hits, (October-February) we see big increases in sales,” she writes.

This year “there has been zero pressure for us to lower our prices. Customers are asking for other things though: transparency, better quality and sustainability. This is good, because these qualities are something specialty tea companies should be aspiring to. Trying to be the cheapest is really a no-win. Customers get poorer quality tea, small businesses can’t take care of their employees, and farmers don’t get fairly compensated,” she observes.

TeaSource in the Minneapolis-St. Paul region of the country operates retail shops and wholesale teas.

“TeaSource is doing well,” writes founder Bill Waddington. “All aspects are doing well.  Not surprisingly the web and wholesale are the strongest performers.  But all three retail shops are up this year,” he said. “All have good neighborhoody/community locations,” he writes.

“I have always avoided malls.  I’ve always felt malls were most appropriate for folks who were in the tea business to make a quick/short term buck.  We are in this for the long-term.  Our internal slogan is “Make life-long customers.”  And it is looking like a booming holiday season. We were already looking OK for the year,” he said.

“Anytime a business owner is forced to make decisions that impact the livelihood of others it becomes personal and something we take to heart,” writes Dean Jablon, head of business development at Lifetime Tea, located in Mesa, Ariz. “Anyone who has the vison, guts and fortitude to execute a plan that produced multiple locations through the competitive retail landscape of Southern California will no doubt find a way to reinvent themselves in this changing environment to come back better and stronger,” he writes.

Lifetime Tea has experienced another year of continued steady growth, he said. “Our growth is partially attributed to changes we made to our business model which reduced our minimum order quantity for private label tea orders so that more aspiring tea entrepreneurs can get into the business with less risk,” he writes. The company encourages clients to “start small and put their money into marketing, website development and cash reserves instead of large inventory.” Launching multiple private label products is essentially casting a wider net to increase the chances of finding the product(s) that best meet the needs of clients who see great success on Amazon, in grocery stores, restaurants/cafes, national chains, healthcare markets and many other creative outlets, Jablon explained.

This is a changing landscape in the retail tea industry from brick and mortar to Amazon and other online shopping, he observes.

“We have to continue to find ways to be more creative and constantly stay ahead of the curve in this windy road,” he writes.

Sources: World Tea News, LA Eater