First impressions of the new store
It's been a little more than a week since we opened Adagio's first Tea Experience Retail Store and the initial results are both good and also a bit surprising. Customer traffic is good, the product mix is shocking, and the challenge of balancing customer engagement and efficiency is proving, as expected, to be the greatest challenge.
Good news first: while Naperville, IL is relatively small and quiet compared to many big urban centers, we're seeing no lack of customer traffic. Because we're new to the area, many customers are new to loose leaf tea, and Adagio has chosen to offer very small sample packages (0.5 to 1 ounces of tea), our average order size over the first week was roughly half of my initial $25 target. This is no huge surprise, and not a great concern. The truth is that the inexpensive samples bring more people into contact with a wider variety of teas, and that's a good thing. Regular customers are NOT going to continue buying a size that delivers only 5-10 cups of tea, and the larger pouches are much less expensive per ounce, so I'm not really worried that our average order size will be depressed long term.
While you can't really draw firm conclusions based on one week of sales, our initial numbers already put us on track to break even the first year. From past experience and conversations with other tea shop owners, I would expect our average order size to increase between 50% and 100% over the next 90 days. As that happens, we'll be solidly in the black.
The one big surprise that we're seeing is the mix of products sold. As a rule of thumb (again based on personal experience and information gained consulting with and selling to hundreds of tea shop owners), I tell people to expect accessories to account for between 40% and 50% of retail sales in a new tea store. For this location, based on our merchandising approach, I expected our breakdown to be 50% bulk tea, 40% accessories, and 10% brewed cups of tea. As the customer base matures accessories will trend down and bulk tea sales will trend up, but that's where I expected things to start.
Over the first week of sales, accessories accounted for less than 25% of total sales! In addition to Adagio's core collection of teaware, we are currently offering a broad selection of Yixing clay teapots, handmade cast iron, colorful ceramics and a range of decorative tea cups and brewing accessories. Our customers are currently showing very little interest in decorative teaware. I've never seen that happen before.
In reality this is very good news. One of the most common questions I get from tea shop owners is how to increase the sale of higher margin teas. Historically it's been easy to get people to buy decorative tea pots or tea cups, but much easier to get them to buy higher quality teas. Apparently we've hit a home run with our tea merchandising approach. Customers almost entirely ignore the extremely prominent accessory displays and gravitate immediately to the tea collection. While surprising, and not great for average order size, this is a very exciting development.
The only real challenge we're seeing to this point is the high cost of delivering rich customer experiences. While the long run goal is obviously to sell a lot of tea, we're focusing on engaging the customer and inspiring a passion for loose leaf tea as a means of getting there. Unorthodox and expensive strategies include allowing customers to cup any teas in the store free of charge, create their own custom blends based on our tea bases and inclusions (dried fruits, flowers and spices), and test our line of brewing accessories.
Comparison cuppings particularly have proven extremely popular. Customers absolutely love the opportunity to compare all four of our Keemuns, or sample each of our orange teas (black orange, mandarin green, honeybush orange, rooibos orange, blood orange and decaf orange). Nearly everyone who cups teas with us buys, but the process is very time consuming and requires large team.
It will be interesting to see how this plays out. Our hope is that while the investment in a new customer is high, this will pay off over time as they return and purchase - usually without the same amount of guidance and involvement. We're already starting to see signs of this working. Repeat customers are beginning to brew teas on their own at our self service tea bar. As importantly, non tea drinkers are falling in love with tea AND bringing their friends in for this unique experience.
We'll have to carefully balance labor costs with sales as time goes on, but based on the customer traffic and enthusiastic reception, I'm confident that we'll be extremely successful.
For a full album of store pictures from pre-construction through opening day, check out my Naperville Construction Album.
Adagio Teas
Twitter: @AdagioRetail