TeaSource’s Bill Waddington on Retail Innovations

Bill Waddington is the founder of TeaSource, a wholesale and retail specialty tea company based in Minneapolis-St. Paul. As such he imports and blends some of the finest teas from around the world. He is a frequent guest on the National Public Radio program “The Splendid Table” and in 2005 was the keynote speaker at the China International Tea Expo in Beijing. This spring he opened his third retail shop in Eden Prairie, Minn. In this Q&A he generously shares some of his retail insights with World Tea News.

World Tea News: You just opened your third retail store, how has your vision of the retail experience for customers evolved?

Bill Waddington: We wanted it to be clear on first stepping inside, that TeaSource is everything they could possibly need in the world of tea. We have several floor-to-ceiling, full-color, high-resolution photos from our various tea trips. We have large displays of gigantic pu-erhs and dark teas… we want to incite customers to come up to our employees and ask: “What the heck is that?” We are deliberately trying to actively engage our customers in the world of tea.

Our goal was for them to stop in their tracks and go “Whoa!!!”

As they enter they see huge graphics of tea country, vast displays of accessories (all of which actually make good tea) and then they turn to the left and see our more than 250 teas on display in bright shining silver canisters.

TeaSource bakery case
TeaSource entry way and seating.

Right by the entry way, we have the first of multiple sampling stations for customers (this one is serve yourself). It is located beside our education center which offers more than a dozen in-house publications about the world of tea.

And then they encounter our staff- who are fantastic at helping customers learn and experience the world of tea, especially those newbie customers who might be a little intimidated.

WTN: Educating customers is central to your approach will you share with our retail readers some of your innovations at this location.

Waddington: One new thing is the floor to ceiling graphics. I love these. We want our store to shout out the fact that we are all about tea, and nothing else.
We also did a mid-construction Open House that was a HUGE success, we had more than 100 hundred people on a Saturday morning, traipsing around tools and scaffolds, poking around in the back room areas, but sampling numerous teas and going home with gift bags and coupons. And we were assured that each of those people would be talking about TeaSource Eden Prairie and be back during Grand Opening week.

WTN: It’s a beautiful shop but today retailers must also consider the environment, make the workspace efficient for staff and economical to operate.

TeaSource floor lighting
TeaSource floor lighting

Waddington: We worked closely with an architect who has designed our other stores, trying to incorporate ergonomic and efficiency suggestions that we actively sought out from our veterans from our other stores. I figure my employees work the counter more than me. So they know better than I what works and what drives them crazy-so we actively sought their input.

WTN: Despite high unemployment and a sluggish economy you just expanded into a third location when others continue to hunker down. Why?

Waddington: There are a couple of reasons we opened this third store: the Southwest corner of the Twin Cities metro has no tea businesses, so there is an obvious opportunity here. And this particular location is a huge shopping destination with GREAT drive by visibility. Also I wanted to reinforce our brand, TeaSource, in the Minnesota Wisconsin Area with increased retail visibility. Even though most our business is wholesale, getting our brand/name/tea out there continues to be vital.

WTN: When you build a shop, the first maxim is location… but you must also consider sq. ft. of retail space, parking, foot traffic and drive by traffic. What when into your analysis of the latest opening.
Waddington: Location for sure. We are on the perimeter drive of perhaps the busiest traditional mall in the area- great visibility and drive by traffic. And people don’t have to go into the mall (which a lot of people hate, despite the crowds) to get to TeaSource.

The parking issue is huge, and we have a good sized shared lot.

Good neighbors are vital. We are between two of the biggest draws in the area: a well-known and well-loved local family restaurant, and the brand new gigantic regional library.

Area demographics are perfect for us.

The square footage is a little large at 2,300 sq ft. but despite the extra cost I believe it is better to be large enough than too small.

TeaSource merchandise display.
TeaSource merchandise display.

WTN: When you considered expanding to a new location are you a stats guy or a “gut feeling” guy or some of both. Which stats are meaningful?

Waddington: A little of both. We had 13 sites under active consideration. We have a developed a weighted grading system on Excel using more than 20 different parameters to help us narrow down our choices. This helps us take the emotion out of the evaluation process. We use this tool to narrow it down to less than 5 possible sites.

Then we start talking to landlords and contractors and start considering money: comparatively between the finalists, how much will it cost to remodel?

What are the ongoing costs such as rent and utilities for each location?

What is the sales projection for each location? We develop pretty accurate but conservative projections.
Then we weigh all the financial consideration, plus our grading systems, plus a little gut feeling, and decide on a final choice. Only then do we begin lease negotiations.

WTN: Operating two other stores nearby and a wholesale business has to be a big advantage. Name some benefits…

Waddington: Benefits include increased buying power because I am moving more tonnage. Dramatically increased brand awareness.

And there are internal synergies: the three stores can help each other move more product. There is greater flexibility in staffing — we have some employees that float between the stores.

Greater access to customers — we have numerous customers that visit more than one store on a daily basis. We encourage that and even have a little customer reward system when they have visited all three stores.

Also we were able to train new employees for the new store, in existing stores with veterans for weeks before the Eden Prairie Grand Opening.

WTN: How far do people travel to drink tea at a local shop?

Waddington: Good question, actually two questions. How far to drink tea in a local tea shop? I think maybe 3-5 miles, it still needs to be a very local thing.

This raises a second question is “How far will people travel to buy good bulk tea? (as opposed to drinking tea)” And the answer to this ranges up to 150 miles. We have people drive 2-3 hours just to stock up on their teas. So this side of the business is vitally more important to us (and I think it should be to anyone) i.e. selling bulk tea as opposed to serving tea. Additionally it is much more profitable. And you are creating more repeat customers. Our emphasis is definitely on selling bulk tea.

WTN: Once you open the store you look for the right mix of products. Share with us what it takes to be profitable.

Waddington: First and foremost are bulk tea sales. Then “to go” business of prepared tea, there is still a pretty good gross profit on this and relatively little cost.

Next would be sit-down prepared tea business — good profit here but the cost of doing this adds up in labor costs. And lastly tea accessories and bakery which offer relatively low gross profits and on accessories few repeat customers.

One way to think of this is people drink 2 or 3 quarter pounds of tea a month, then they have to come back and buy more. But when they buy a teapot it should last them a lifetime. I would much rather see the customer every month replenishing their supply. 

Dan Bolton

About Dan Bolton

Dan Bolton edits STiR Tea & Coffee Industry International. He was formerly editor and publisher of World Tea News and former editor and publisher of Tea Magazine and former editor-in-chief of Specialty Coffee Retailer. He is a beverage retail consultant and frequent speaker at industry seminars and conferences. His work has appeared in many beverage publications. He was a newspaper reporter and editor for 20 years prior to his career in magazines. Dan is the founding editor of Natural Food magazine and has led six publishing ventures since 1995. He lives in Winnipeg, Canada.