Tuesday, June 26, 2012

More Is Not Better: How To Balance Freshness and Turnover for Small Tea Companies

This page highlights a business mistake that I see dozens of small tea businesses, mainly small tea shops and tea houses, making. This is carrying too many teas. But beyond just recommending small companies to carry fewer teas, I also want to provide deeper advice about how to effectively manage your stock of teas when you have a small turnover. This advice comes both from my experience as a tea shopper, my experience working with tea businesses through RateTea, and my past experience working in retail establishments -- many of these issues are the same for any business that sells perishable goods.

I will be the first to admit that I love a good selection. My favorite tea company, Upton Tea Imports, has a huge selection (currently over 480 teas), but selection is always less important than other factors, including quality and price.

Above is a picture I took this past October, in Cups and Chairs Tea Shop in Philadelphia, which I reviewed in that earlier post. This photo shows 61 teas, in glass jars. The actual tea that is used for brewing or for sale is stored in airtight, opaque tins, but these small samples are exposed to light in this bright storefront, leading them to degrade in color and aroma.

Given the relatively low traffic in this store, I can't help but wonder how much turnover in the teas this company has. I strongly suspect that this store may be incurring losses associated with carrying more teas than can be justified by its level of traffic, as I explain below.

You need a high turnover to justify a large catalog:

The main problem with a large catalog is freshness. Tea does not stay fresh indefinitely. A higher turnover can justify a larger catalog, because more of your company's teas will sell out, and you can keep them fresh by frequent restocking with fresh batches.

Offering a huge selection of teas for sale might initially excite people, but, once those initial batches of tea go stale, you will either be faced with a large loss from products you did not sell, or a dying business as you fail to impress people with your stale tea. Tea that is not fresh is not going to keep people coming back to your store, and it's not going to attract die-hard tea enthusiasts who are likely to do some free work for you, promoting your business. In order to retain customers, you need high-quality tea.

Balancing selection and freshness when you have low turnover:

If you run a small tea company and are struggling with low turnover, there are several things you can do to achieve an optimal balance between selection and freshness of your teas:

  • Put more care in choosing which teas to sell, so that you can get the most mileage out of a smaller selection. I offer detailed advice on this topic in my recent post about choosing which teas to sell.
  • Throw out stale tea rather than selling it. While this results in a short-term loss, it avoids the negative results of selling stale tea, which can turn customers away and result in permanent or long-term losses.
  • Use sales and deep discounts to sell tea before it goes stale - If you find yourself stuck with a batch of something that is not selling, put a deep discount on it so that it sells out, and try to empty it out of your stock before it goes stale. This allows you to recover some of the loss, without disappointing a customer with stale tea. Discounting can sometimes also draw in new customers hunting for a bargain.
  • Highlight teas that are not selling before you need to discount them - If it looks like you are going to end up with a batch of tea that you might be tempted to discount, try highlighting it in your store or catalogue. There was probably a reason you chose to carry it in the first place, so it is likely that if you draw attention to it so that your customers buy it, someone will enjoy it.
  • Order smaller quantities of each tea, so that you can order more frequently even if your turnover is low. This also minimizes any losses from throwing out or discounting stale tea. Although smaller quantities tend to cost more, you will tend to save money if you manage to keep your orders close to the amount you actually sell. If your wholesaler doesn't sell in quantities small enough to work for your constraints, find a source that does; the smallest shops, and tea rooms, can even consider buying some tea from a company that focuses on retail, as these tend to offer smaller quantities. Keep in mind, you can sell teas from a variety of different sources.
  • Rotate and vary selections rather than keeping your whole catalog in stock at all times. This allows you to provide greater variety to your customers, without incurring the greater costs of keeping more teas in stock. You will notice that even many companies with a large selection, like Upton, frequently vary their offerings.
  • Be okay with selling out of less popular teas - If you are effective at managing your catalog, you can effectively avoid almost all waste. Throwing out tea, selling stale tea, or offering a deep discount, are all generally worse outcomes than temporarily selling out of a product. If a product is popular, you can keep it both fresh and continuously stocked. But if the product is not popular, people will be much less likely to miss it while you restock. Estimate the amount of tea that people are buying and then under-stock the more esoteric teas to avoid waste. Focus on keeping your popular teas stocked, and always having enough of a selection to keep your catalog interesting, and you'll be fine. In some cases, under-stocking teas could even impress customers because they may be more likely to perceive a tea as rare or difficult to obtain. And tea connoisseurs will understand and appreciate that you don't over-order because you value freshness and and want to keep your waste to a minimum.

I'd probably still discourage a small tea shop, tea room, or tea bar from selling as many as 61 varieties of tea, unless they had an exceptionally high turnover. The Ten Ren store in Chinatown in New York can get away with this. A small tea shop in a small town, or even a small tea shop in a peripheral part of a medium-sized city, probably cannot. But, if you are clever, you can find ways to achieve both selection and freshness. The same goes for small online companies: if you have little sales volume, don't carry hundreds of teas, because you won't be able to keep them both fresh and in stock.

If you want some inspiration, in the form of examples of companies stocking fewer teas, I'll point to Little Red Cup, Chan Teas, and Min River Tea Farm. These three companies have taken a more minimalist approach to their catalogue, probably in large part due to the constraints discussed in this post. Even having never tried any of their teas, I'd be more likely to guess that their teas are higher in quality than other similarly small companies with huge catalogs.

What do you think?

What are your experiences with tea shops and online tea companies? Are you often turned off by companies that display a huge selection but below-average quality or freshness? What do you think the optimal amount of selection is for a small brick-and-mortar store? And if you run a tea business, whether one with a storefront, or a strictly online or mail-order store, how do you deal with these issues? Do you find the advice offered here to be useful and the reasoning valid?


  1. Speaking of 1st impressions and aesthetics, the glass containers thing is one that is so frustrating because it immediately tells me you don't know enough about tea to store it well and/or (more likely) you don't even stock tea good enough worth storing well--yet at least in terms of storage mechanics, it's such an easy problem to fix. More likely indicative of "we don't care enough, and we're betting our customers won't care enough to notice." And, sure enough, I can't remember ever visiting a tea shop that was storing their tea in glass containers that had distinctive or high quality tea, or seemed genuinely interested in educating its customers.

    1. This tea shop stores the tea that they sell and the tea that they brew in opaque metal tins in the back of the store. This shelf with the glass jars is only for samples to display what the tea looks like, because the opaque tins don't show this. So, I do understand this.

      But the person working there was also encouraging me to open up and smell the teas in these jars--and they did not smell fresh. The tea in the back of the store was much fresher. So I'd be hesitant to draw a strong negative conclusion about this setup, because when it comes down to it, this particular shop properly stores the tea that they actually sell. But I did think that it was bad to have potential customers smelling stale teas, even if you're going to serve them high-quality tea. I think the approach that many tea shops, including Ten Ren and Teavana do, which is to keep the loose tea in tins, and open up the tins for the customer to smell it when someone is interested in a particular type of tea, is superior. I've noticed that both Teavana and Ten Ren have round tins with larger bases, as opposed to the more upright tins used in many stores, because I think they lend themselves more to letting the customer smell the teas. But that's the subject of a whole other post!

    2. Yep, you should either let a customer smell the real product they're going to buy, or just let them sample freely (what the more "upmarket" tea shops in Taipei do).

  2. Alex,

    Was cruising through your blog and stumbled across this post which I think is spot on. Coming from a small tea company, I can tell you first hand that managing freshness, quality & selection is quite a delicate balance but one that is absolutely necessary. For us, that means having a lean selection of the best quality teas we can source, while at the same time providing excellent customer service. Thanks fror the link!

  3. Hey Alex, Chris from minrivertea.com here, just noticed the blog post!

    Regarding a small catalogue, actually the real reason is different from your analysis - there's a difference between catalogue and stocks. I keep small, fast-turnover stocks in order to maintain freshness, but the catalogue is small for another reason.

    Visiting tea farms in China is extremely time and resource intensive. They are in countryside or mountainous areas, spread out over large areas, not easy to reach in inclement weather etc. eg. this Spring I spent around 7 days visiting just 2 farms where our Iron Buddha and Da Hong Pao comes from (because of bad weather). So we only sell a tea if we've seen it being produced - who else can say that?

    I strongly hope the trend for having ridiculously large ranges changes, to the benefit of customers. There's a glut of companies with 100+ teas claiming 'direct from the farm' and 'ethical sourcing', without having even visited China! There's a fundamental dishonesty about that which affects quality much more than storage of their tea, and really misleads customers too.

    1. Ahh...this makes sense.

      I do think most of the companies with large catalogues probably source a majority of teas from wholesalers. And because most tea companies are secretive about their wholesalers, and most wholesalers secretive about both their sources and clients, there is no way to independently verify anything about the origin of the teas. And this also bothers me, as I value transparency highly, and think it is one of the best ways to advance prosperity for all people and for society as a whole.

      I want to write a long reply to this, longer than would comfortably fit in this comment, so stay tuned for a follow-up blog post.

    2. it'll be interesting to see what you write on the topic - your blog posts are always comprehensive and thoughtful, so I look forward to it.

      There's been various long discussions (interesting ones!) on LinkedIn about transparency in the supply chain for tea companies, but I sometimes feel like this wholesalers/sourcing issue is the elephant in the room right now for us all.

    3. I've published the follow-up post: Honesty and Dishonesty in American Business. Pretty heavy stuff; I hope you find it interesting.

  4. Glass jars aren't always a bad thing.

    In my shop, I have the majority of my teas displayed in glass jars, but that "wall o' tea" is in the very back of the store, over 100 feet from the front windows (which face east and have buildings across the street).

    As long as I can turn those teas over regularly, the glass jars make for a much more attractive display, in that the customers can actually see the tea, and it doesn't affect the quality of the product.