I learned some powerful lessons about the tea industry and business in general while running Chicago Tea Garden which closed in June.
I think you will agree the problems I encountered and the questions I asked myself along the way are invaluable for anyone seeking to bootstrap an online business. This article covers what I believe are the most important questions to ask yourself when getting started or struggling with your part-time tea business.
What are the core ideas and values driving you and your business?
You need to answer to this question thoughtfully. So many people today are simply creating generic tea companies and “splitting the pie,” making each person’s share smaller and smaller (the pie is the amount of money customers are willing to spend for tea). Ask yourself: Are you out to make a few bucks capitalizing on the tea trend or are you truly passionate about tea?
Is your product unique?
Even if you haven’t yet started your business, you have likely picked out some teas that you wish to sell. Are they unique? In other words, are your teas truly exclusive? Every budding tea company buys from the same tea wholesalers these days. Imagine how many other tea companies are selling the exact same teas. If you plan to use a wholesaler, what will differentiate your offering from the hundreds of other tea companies buying from the same company? I’m not saying you shouldn’t source from a wholesaler, I’m just saying if you do, you’ll need to have other key business differentiators in mind to set you apart from the competition.
Who is your ideal customer and what will you sell to them?
It is important to identify your ideal customer before you open up shop because this will help you decide what teas to sell. I identified my ideal customer as a single-origin tea hobbyist. Why? Because I see myself as a single-origin tea hobbyist.
I loved trying teas from different origins, comparing them to one another, and collecting authentic tea ware to steep them in. Using myself as a model, I was able to build a brand and product line. Turns out, there were quite a few people like me in the tea world and they appreciated my thoughtful product selection. Once you have defined your ideal customer, work on sourcing a solid product line for them. It doesn’t matter if you are curating a small list of teas, sourcing teas no one has ever heard of or creating inventive blends – your product line should be your key differentiator. As it turned out my ideal customers turned were divided, half were males and half female. One-third (33%) were between the ages of 18 and 24, with about 10% between the ages of 25 and 34.
Can you scale up without burning out?
Consider the problem by looking into an imaginary rear-view mirror. Let’s say your ideal part-time salary is $45,000 a year (gross before taxes). Divided by 12 this comes to $3,750 a month. Now for the sake of simplicity, let’s say you have zero overhead. Your cost consists of packaging and tea. Assume that these two things comprise 50% of your retail price. Let’s also assume that your average unit of tea sells for $8, so that for each unit sold, you earn $4. Based on these assumptions to earn $3,750 a month, you’d have to sell 938 units.
On average, there are 21.67 business days in a month. If there were no fluctuations in the number of orders you received each day, you’d have to fill about 43 units of tea a day. There are 480 minutes in an eight-hour workday, 420 if you take an hour break for lunch. This leaves you with just under 10 minutes to fill each unit of tea. If each order was comprised of only one unit of tea, you’d have to package the tea, print your shipping labels and box the tea for delivery within this time as well.
But remember, we’re bootstrapping here, and these calculations are loaded with assumptions, including the big one – that you have eight hours each day to fulfill orders. Bottom line, look at the free time you have right now and make some calculations. Do you have the time it takes to run a successful online tea company?
How will you market to your ideal customers?
Unfortunately, the web is not “if you build it, they will come.” You must market your tea company. For a bootstrapper, social media is key. It is free and doesn’t require a lot of time. I recommend using Twitter, Facebook, Instagram and Pinterest to make friends and spread good information. Blogging is another essential marketing tool. My blog, World of Tea was the greatest source of business for Chicago Tea Garden. My most popular article, the “Hackers Guide to Tea” was read hundreds of thousands of times across the web and was picked up by Lifehacker as well as several other high-profile online publications. This single article drove thousands of dollars in sales and even led to a book deal in 2011.
Here are a few social media and blogging guidelines to follow:
1. Social media is not a selling platform; it should be used to spark conversations and encourage sharing. If you only use it to share product pages or promotional material, you will lose followers. A good rule of thumb for any social media platform is to post no more than two promotional items for every eight educational/informational posts.
2. Use social media at peak or near-peak times (i.e. Tweeting about a new blog post at 11 p.m. on a Saturday will not be seen by as many people as the same tweet sent out at 11 a.m. on a Monday).
3. Writing well-researched well-informed blog posts to establish trust and credibility with your customers. Social media is a perfect way to disseminate useful information.
Some Benchmarks to Consider
Since Chicago Tea Garden is closed, I’m willing to share with you some data from the time it was up and running. Here is a map of order origins from February 2010 through June 2012 (larger circles indicate a greater number of sales):
It’s fascinating to see that even though the business name included the word Chicago, the orders were quite widespread. Now let’s take a look at tea sales by tea type:
Pu-erhs and oolongs were the best-selling tea types. Oddly enough, my most expensive tea was also my best selling tea: Tie Guan Yin Competition Grade, followed closely by Golden Bi Luo – a Yunnan black tea.
Pricing: The Tie Guan Yin sold for $19.99 for 50 grams in a pouch and the Golden Bi Luo sold for $15.99 for 50 grams. Prices ranged from $8 to $20 per 50 grams. The average order was $24 and customers typically ordered two or three teas.
How about sales volume? It’s hard to describe a trend when you look at sales by month. Sales were indeed growing from year to year, but on a month-to-month basis, they were all over the board and were greatly affected by promotions, newsletters, advertising, social media campaigns and weather:
Notice the low points in 2010 and 2011. Both occurred between June and July, typically right after the new spring teas arrived for the year, but also right when the weather was at its hottest. June 2012 was the highest month on record only because of the liquidation sales that occurred after I announced that the business would be closing.
So what went wrong?
Between the business and my full-time job, I had no more free time and was earning only about a third from sales that it would have required for me to quit my job. This realization and a job promotion led me to close Chicago Tea Garden. It wasn’t a decision that came easily, but I felt it was a necessary at this point in my life. Would I try again? Maybe. Would I do things differently? Definitely. Two things are for sure, I learned a lot running my business and I met a ton of wonderful people.
To see my complete marketing blueprint as well as other insights from my work at Chicago Tea Garden, be sure to check-out my new e-book: Bootstrapping an Online Tea Business.