The global tea market size was valued at USD 12.63 billion in 2018 and is expected to expand a CAGR of 5.5% from 2019 to 2025. Most of this success comes from the rising awareness of the significant mental and physical benefits of these tea blends. For fitness enthusiasts and Instagram models to entrepreneurs and celebrities, the tea craze is storming the nation which, as a business owner looking to open a tea shop, could mean serious profits over the next five years alone.
To open a tea shop successfully, you must focus your efforts on the following: your business plan, brand identity, location, inventory, equipment, and marketing strategies. If all of these key factors are in place, you can make anywhere between $300,000 to $500,000 a year.
However, naming these factors is far easier than executing them. You must be able to have the right strategy and financial prowess to tackle these steps productively before opening up shop. To help you along the way, take a look at the 8 detailed steps below and get ready for your future in the tea industry today.
Think of these steps in the same way you do tea. Having the right blend of leaves and spices is crucial to a delightful cup of tea. Similarly, your tea shop must have the right blend of creativity and precision to blend smoothly and leave a smile on your customer’s faces. Having said this, it’s time you take the ingredients below and prepare your ‘business blend’ accordingly.
How to Open a Tea Shop
STEP 1: Write A Business Plan
Creating a business plan allows you to have a structure that you can depend on when opening your new tea shop. To create the best business plan possible, you will need to identify your target market, profit margin, and competitors. This will keep your expectations realistic and help you to market yourself effectively as well.
Identify Your Target Market
In a market as broad as tea, the best way to determine your target market is to first figure out what inventory you will be offering. For instance, the main target audience for health-based teas and pre-workout teas are men between the ages of 20 and 45. However, teas for relaxation and focus have a target audience that mostly consists of women between the ages of 18 and 40.
Using this information, it is safe to assume that a standard tea shop with standard teas should target middle-aged individuals that are looking for a healthier alternative to coffee and other caffeine options.
By providing a varied inventory made up of health-based and calming teas alike, you can cast a wider net and also have multiple ways to target multiple audiences at once. This is where your marketing campaign’s diversity and creativity come into play.
To best break down your different audiences, you should create a buyer persona. Buyer personas are essentially made-up people profiles that encapsulate your target audience. The value in this is that you can focus on targeting just one person at a time instead of a whole audience.
Using the information above, a good set of buyer personas would likely consist of three types. First, a middle-class male that is 30, has an active lifestyle, and is looking for teas to boost his energy during physical activities. Secondly, a middle or upper middle class woman who is 25, needs to relax at home and focus more at work, and wants a tea option to help with both. Lastly, a middle class woman that is 35 and simply wants a tea shop near them with variety and good deals.
Identify Your Profit Margin
According to Tillerman Tea, “A major importer/wholesaler advises retailers to trade in “luxury tea” because “loose tea is a high margin product” that can deliver profits up to 400% on cost. That’s a retail margin of 80% at the high end. At the low end, they calculated the retail margins at a measly 71%.”
This gives a good insight into the right kind of inventory to purchase and its profits when done correctly. Essentially, if your inventory is unique and enticing enough, you can expect to see up to quadruple the cost of your inventory back in profits.
Identify Your Competitors
Since 1990, the amount of tea shop brands has increased to well over 1500 shops across the nation. Similarly, tea sales have increased 165% since 1990 meaning more are sure to appear. This is why it is highly important that you determine who your competitors are before you even open.
While you won’t be able to compete with companies like Starbucks more than likely, you can definitely compete with the other smaller tea shops in your area. To find these shops, start by looking up keywords like ‘tea’ or ‘herbal tea shops’ in your area. Once you have a good list of other local tea shops, take a close look at their business plans.
This includes their inventory, their website, their social media, and their sales. By analyzing these things, you can find ways to outshine them from opening day. You may also want to see if any of your competitors offer subscription boxes. Since this is slowly becoming the new trend for similar industries, it may be a way to stand out and attract more long-term customers.
STEP 2: Private Brand Vs Franchise
Your business plan and goals as a business owner will be the best way to decide between owning your own store or franchise.
If you are looking for quick growth and a trusted name in your city, being a franchise owner is best. However, if you prefer originality and the ability to choose your marketing strategies and identity, having your own store is best.
When becoming a franchise owner, you will be required to follow their business plan, stick to their identity, and use their inventory. This may be easier in the long run but could feel like you are still working for someone else. Still, if you prefer the structure and ease of being a franchise owner, here are a few of the most popular franchise options for tea shops below.
Franchise Brands For Tea Shops
- Fava Tea
- The Teahouse
- The Coffee Bean and Tea Leaf
- Teapioca Lounge
- Dobra Tea
If the options above are a bit too mainstream for you, you can also look for local franchise opportunities as well. Many local stores offer these opportunities and may have a better reputation depending on your location.
After you’ve chosen what brand you hope to work with, you will need to find their application online and fill it out. Usually, on this page, they will outline the requirements to become a franchise owner as well. Being able to adhere to this is the crux of a good franchise opportunity so pay close attention to the parameters from the start. After the application is sent, you will likely receive an approval or rejection email in one to two weeks.
STEP 3:Find a Suitable Location
The first step to finding a suitable location for your shop is determining how big you actually want your shop to be. As a tea shop, you will definitely need to be able to find a location that has the right setup for food vending. It will also need to be big enough to fit people and tea inventory as well.
A good option for this can be contacting others in your industry and seeing if they know of any companies similar to yours that are retiring or shutting down.
Sometimes, these shops will even offer their equipment and inventory at discounted prices likewise. However, if this isn’t an option, you can always check CraigsList and sites like LoopNet, OfficeSpace, Commercial Exchange, and Crexi as well.
Determine how big Your Space Should be
On average, a tea shop is usually roughly 2,500 Sq. Ft. This provides enough space for inventory, people, and the equipment all at once. For your shop specifically, a good way to determine the best size is to create an aerial dream map of your shop.
Similar to a floorplan, include your equipment, tables, and shelves to estimate your needed shop size. You will definitely want no smaller of a space than 800 Sq. Ft. because you will need to be able to have a sitting space for patrons to compete in your industry.
STEP 4:Find Wholesaler / Acquiring Stock
As a tea shop, your stock is your bread and butter so to speak. Without a diverse inventory, your brand is sure to fail before it even begins. Because of this, finding a reliable wholesaler is highly useful. A great wholesaler should have affordable prices, be reliable, have connections, and be local.
With the right wholesaler, you can expect to pay far less than you would simply buying online in bulk. Their connections to manufacturers and unique products makes them invaluable to your business as you start out. On top of this, a reliable wholesaler will be able to get you your inventory far quicker which will allow your customers to be able to rely on you without fail.
Between a wholesaler and creating business connections with tea brands, you should be able to acquire all of your stock fairly easily.
You can also buy from eBay and other wholesale markets if you are still trying to find the right wholesaler at launch. All in all, the key is to find a wide variety of popular and rare brands to have in your store so you get more foot traffic and online interest than your competitors.
When launching, it is recommended that you have roughly 50 SKUs. This will give you a good variety but not so much that your returns don’t match your investment.
STEP 5:Get Business Insurance
As a tea brand selling products meant for human consumption, it’s highly important that your business insurance plans are on point. From employee injury to potential lawsuits in the future, you simply can’t predict the future. However, being insured is the best way to prepare even for the unexpected. Below are the main insurance options that most tea brands and other small businesses invest in.
General Liability Insurance
As the most broad insurance plan for small businesses, general liability insurance covers bodily injury, property damage, medical payments, legal defense and judgment, and personal and advertising injury. The average tea shop pays roughly $500-$1,200 per year for $1 million in general liability coverage.
Commercial Property Insurance
Commercial property insurance is highly useful for food or drink vendors that own their properties. This insurance is valuable to property owners since it covers fires, burglaries, and natural disasters. On average, this insurance plan costs $1,000 to $3,000 per million dollars of coverage.
Whether you are hiring part or full-time employees, workers compensation will cover their safety in the workplace. If your employee is injured at work or falls ill after a work-related accident, this insurance plan is best to protect you and them. On average, workers comp costs $500 to $600 annually.
Food Liability Insurance
Lastly, this insurance plan is specifically for tea shops and other food vendors. The goal of this insurance is to protect brands from being sued if their products make someone sick.
For tea shops that make their own blends, this is particularly important. If someone becomes sick and blames your brand, this insurance will help protect you from lawsuits. For this plan, expect to pay roughly $375 annually which is pretty fair considering how expensive lawsuits can be.
STEP 6:Select A POS System
A great POS system can quite literally be the crux of a business structure and skyrocket it to success. POS systems can help in countless ways that all benefit small businesses as they are starting out immensely.
For instance, when a customer uses the POS system to buy products, they are marked off your inventory so you can always keep your products available.
A great POS system can also track the coupons and cross promotions you do to show their efficacy. This will help you market your business even better moving forward. Lastly, POS systems can help promote mobile sales even in your store as well. This saves time, labor, and money for your business while streamlining sales.
The Pros to a Great POS System
The positives to having a great POS system are truly insurmountable. Some of these include:
- Inventory management
- Customer service and support
- Identifying bottlenecks
- Reporting and analytics
- Streamlining sales
- Managing employees
- eCommerce Integration
- Mobile functionality
- Facilitating sales and cross promotions
With all of these functions, it’s clear to see why the average POS system can cost anywhere between $800 t0 $2000. By using your POS system to track your products, inventory, employees, and customer relations, you can better your business daily.
STEP 7:Start A Website with eCommerce Integration
The value of a good website is immeasurable. This is why you will definitely want to take the time to choose the best platform before all else. Your site will not just need to be visually appealing but functional as well. If you plan to have an online shop—which you should—then your site needs to have eCommerce integration guaranteed.
The best eCommerce platforms for small businesses include:
- Shopify (www.shopify.com)
- Wix eCommerce (www.wix.com/ecommerce/)
- BigCommerce (www.bigcommerce.com)
- Magento (magento.com)
- WooCommerce (woocommerce.com)
Since your shop will need to be simple to navigate and offer an abundance of tea options, we recommend WooCommerce or Shopify. They have plenty of plugins to choose from that can help with management, inventory, and SEO as well. You can also track your sales, customer retention, and traffic through these platforms too making them immensely useful.
STEP 8:Promote & Market Your Business
With the infrastructure of your business complete, you still need to be able to market your tea shop effectively. Even the best businesses can fail without a marketing strategy that stands out. Fortunately, with the six marketing techniques below, you can create a well-rounded strategy that is guaranteed to keep your company growing.
Social Media Advertising
Perhaps, the most common marketing strategy nowadays, social media is everything. Having a good social media campaign could literally increase profits exponentially thus proving its value. To start your social media campaign properly, first you will want to pick the social media platforms that are best for you.
Since you are marketing a tea shop, your best platforms include Facebook, Instagram, TikTok, and Reels. You will then want to create a social media calendar with variety. Try to engage your customers, offer deals, make them laugh, and share interesting content regularly. With a good mix of content, all that’s left is scheduling it all using apps like HootSuite or Canva to your benefit.
Your website is yet another place where you should most certainly sell your products. As such, having an optimized site is best. The more optimized your site is, the more traffic you will see on it. To optimize effectively, you will want to use blog content, internal and external links, and keywords to your benefit.
All of these things will help increase your site ranking on Google. They will also help you be found far more easily for your industry in your area. To track your site ranking, you can use Google Analytics to your benefit as well as Moz, SEMRush, and Yoast.
Local Markets and Events
With summer finally here, local markets and events are popping up everywhere. This is a perfect opportunity to interact with your local community and sell your products as well. To get involved, look up ‘farmer’s market’ and other keywords like this in your area. You can also check out the events page on Facebook too. All of these places will have a list of the events and markets that may be perfect for your brand.
After you’ve chosen which to participate in, be sure to get your packaging, business cards, leaflets, and discount cards on point as they will all make your booth more enticing guaranteed.
Monthly Subscription Campaigns
As stated above, subscription boxes are currently skyrocketing. This is particularly prevalent for brands in the health and wellness industry. As a brand that crosses over at times, offering subscription boxes could be a great way to target this market.
For instance, offering a monthly subscription that includes samples of various teas could be one box. You could also have a focus subscription or fitness subscription and include teas meant to target these needs. To do this successfully, check out this guide on subscription boxes today.
Both health and mental clarity are top priorities for a large majority of your customer base. As such, creating a newsletter covering these topics is ideal. In your newsletter, you should have a healthy variety of business news, industry topics, and incentives.
For instance, one week could include an article about the best teas for backpacking trips. It could also have a list of your new summer teas and a discount for these products as well. This is a well-balanced newsletter because of it. Try to use a newsletter platform like MailChimp or SendGrid because you have more styling options and analytics likewise.
As a tea shop, you have a unique opportunity with your blog content to write about all things natural and health-oriented. This means you aren’t stuck writing solely about your products like other brands are. Take this opportunity to write about topics that will interest your target audience.
From the best blends for back pain to five detox teas that really work, your options are nearly endless. On average, you will want to stick between 500 to 700 words and incorporate links in your blog to help your SEO further. You will also want to share your blogs on social media as well.
How Much Does it Cost to Open a Tea Shop?
There are lots of varying factors that can change or alter the average cost for your tea shop. However, using the comprehensive breakdown below, you can begin to create a list of your average costs to prepare. By breaking down your opening costs, you can determine a more precise estimate and save accordingly for your opening day.
- Monthly rent for a 2,500 sq.ft. storefront in a busy area: $4,166
- Fixtures: $3,500
- Computer, accessories, internet, and phone system: $1,200
- Shelving, signs, counters, and furniture: $2,000
- Opening day inventory: $5,000
- High quality POS system: $1,500
- Website: $1500-$3,000
- Marketing/Branding Materials: $5,000
- Insurance: $3,800
- Additional Costs: $2,000
After the opening of your shop, you will still need to set aside roughly $2,000 to $6,000 a month for daily operating expenses and additional inventory. This is how you will retain your customers and keep your shop in great condition for far longer.
Opening a tea shop successfully isn’t as simple as getting the right products and place to sell them. It requires knowledge of your market, a business plan that stands out, and the right marketing strategy for your identity. Fortunately, by using the steps above to create a perfect foundation for your brand, you can open your shop in no time.
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.