The vendor premium

This discussion happens once in a while with tea friends on and offline: what exactly is fair for a vendor to charge, and what, exactly, are they providing?

I guess first of all, we can account for the costs that a vendor has to pay to keep his or her business a going concern. This may involve a lot of costs, especially if there’s a physical store attached to the business. It might include labour, rent, electricity, water, local taxes and fees, certifications, etc etc. A store that exists only online is going to cost a lot less to run than a store that exists as a standalone teahouse in a small town, which will in turn be cheaper to run than say a shop with a nice locale and decor in an expensive city like Paris, London, or New York. The majority, I suspect, use the proceeds from online sales to subsidize their brick-and-mortar operation. Few, if any, go the other way around. Maintaining the internet store also costs money too, of course, as does the need to keep a merchant account with credit-card processing ability, website hosting (the cost of which, as I’ve discovered, is non-trivial), and other sundry outlays that are necessary to keeping up a store and running it as a business.

Then there are the costs that are necessarily associated with running a tea business. Storage, obviously, is a concern, and with that, the holding of physical inventory, which represents a time-value-of-money type of cost (holding, say, $10,000 worth of tea instead of treasury bonds costs real money, although you can argue about that point with regards to puerh). There are risks of spoilage, floods, fire, and whatever other natural disaster that may happen that can ruin the tea in question, so a certain, small amount of risk is involved, further increasing costs. Shipping the tea from wherever they’re sourced to the vendor’s own location obviously costs money too, and for tea there really aren’t many cheap, good ways to ship tea in bulk.

On top of that, some vendors may be spending a good amount of money traveling to get the tea to begin with. Some vendors seem to make multiple trips a year to faraway places in Asia, ranging from India, Malaysia, Taiwan, Japan, Korea, and China. These trips, if undertaken from North America or Europe, are not exactly cheap, and presumably, all these costs are rolled into the cost of running the business. Some vendors probably buy most of their teas from wholesalers in their respective continents, but then, if you’re an avid reader of this blog, chances are you don’t patronize these vendors too often.

What I’ve described so far, I think, are most of the normal day-to-day costs of running a tea business for vendors based in the Western hemisphere. The question here, I think, is what exactly is the value-added from these vendors?

The first thing that comes to mind is, of course, that they are making teas available that are otherwise out of reach of the average Western consumer. Flying to Taiwan or China to buy oolongs or puerh is not exactly what most people do on a regular basis, so absent that, buying it from a vendor who’s doing it for you is probably not a bad idea. That service, of course, is worth something, but then, there are a number of vendors these days that are based in Asia and who are increasingly branching out to sell to the West, since everyone recognizes that there’s a market there for premium quality teas. Also, more and more consumers in the West are taking advantage of services such as various Taobao agents and buying more or less direct from Asia. So, “making teas available” alone is, I think, no longer a compelling reason for a high premium when vendors who are based on location can provide the same services without the extra cost of travel and airfare.

The second value-added service that vendors can claim to be doing is, of course, that they are selecting out the chaff from the wheat. There’s definitely some truth in this, as there’s plenty of chaff to go around, and as anyone who’s tried to buy tea blind from Taobao would know. Sampling crap costs real money, so yes, that’s work that deserves credit. At the same time though, it is still work that can be done by someone on location. Also, I’m sure many vendors, including those traveling to Asia, are only buying from shops there, instead of going all the way to the farms in all cases. In some cases, such as aged teas, this is a necessity, since they are all held by vendors of some sort or another. In other cases it could easily be the result of convenience and cost, or of the Longjing rule at work. Either way, there are oftentimes multiple layers of vendors between a tea and the end consumer. All of these costs – both the regular running costs, as well as whatever transaction and other value-added mentioned so far, are probably reflected in the prices that the consumer ends up getting charged. None, I think, is particularly valuable above and beyond what some vendor based in Asia can do.

This is why I think what Western vendors must be able to do is to provide exclusive access to teas that are rare or otherwise unobtainable, even if you were on location. In many cases, however, I think that exclusivity is only an illusion, present because of the lack of comparison and alternatives, not because the teas provided are truly unique, great, or both. Not too many people sell real first flush longjing, for example, or a well roasted tieguanyin of top flight quality, or a well aged, 10 or 20 years old puerh cake. If they have it, and you don’t have market access in Asia directly, chances are you can’t find it elsewhere.

In almost all these cases, there is always a tea that is similar enough that can be had elsewhere. Exclusivity is therefore a product of a dearth of selection, rather than a real shortage of teas. Among the selection that is available, very often I find the teas to be very mediocre, especially if they are aged teas of one type or another. Among the aged oolongs people have sent me samples of which were acquired from Western vendors, not a single one has been better than mediocre, with some being downright problematic or fake. The same can be said of pre-2000 puerh, with cakes that are available tending to be the 3rd tier goods that are sold in the Asian market – the top flight stuff are never offered online to Western drinkers, so they never have anything good to compare it against. Instead, what are basically rejects from the Asian market are sold as well aged teas, which is really a bit of a shame. The only exception to this that I’m aware of is my friend Tim of the Mandarin’s Tearoom, who really has some interesting teas, but then, as it will be obvious to anyone who visits his site (so hopefully he doesn’t stop talking to me forever for saying this), there are prices to match.

This feeling of inadequacy in terms of selection and dearth of information on such rarer teas has been reinforced since I got back to Asia this summer. Aged cakes of puerh from the 90s are everywhere, as long as you want them. Some are not very outrageously priced at all, and even late 80s cakes can be had for a relatively reasonable sum, providing that they are not hyped and famous, thus extremely expensive. Aged oolongs are never terribly expensive, if you know where to look and what to look for, but good ones take work to find. As for new teas, the range is endless, and as long as you’re willing to pay the price (which is not cheap these days with prices rising by the day in China), topflight tea is easily to be had.

I’m not sure where that leaves the average consumer without language or physical access. I guess the first thing to remember is that tea is not nearly as rare as vendors generally make them out to be. While some are indeed quite unique, if you spend time in the tea markets often you can end up with something similar within half a day of shopping. Vendors, I think, can do better in providing good quality tea at reasonable prices, given their constraints anyway, but consumers also need to work a little harder. By that, I mean that consumers need to think about what they’re drinking, and seek out alternatives to their usual vendor. Of course, how far anyone is willing to go in that direction is really an individual choice, but I think one’s experiences drinking tea will be that much richer if such issues are contemplated actively and assumptions, statements, and claims questioned. Obviously tea is a drink to be enjoyed, but at the level of connoisseurship, I think part of the enjoyment comes from critical evaluation of the teas in question.

Pursuing my last few lines from the previous post, I think chasing particular teas based on outside factors is quite dangerous, and lead you down a path of high prices and oftentimes disappointments. I just heard a story in a teahouse recently of a certain someone who “only drinks Red Label” (the 1950s puerh that now sells for $30,000 a cake). Well, sure enough, that person bought a bunch of fake or, at best, very inferior quality ones. Just like all those people who went out and bought particular cakes of puerh because so-and-so said it’s the greatest thing ever, many are now sitting on teas that are not necessarily very good and have barely appreciated above and beyond what has generally happened to the market in the past few years. Others follow this or that fad, and end up paying the most for whatever tea is “hot” at the moment, such as how jinjunmei, a rather mediocre black tea, was all the rage in the last two years and one jin of the tea was selling for over ten thousand RMB. All of these are rather senseless, and are mistakes that I think should be avoided if one were serious about drinking tea.


Comments

The vendor premium — 20 Comments

  1. Dead on for almost all points, but, I don’t feel that a single vendor has emerged yet from Asia with both worthwhile tea and convenient sales to the US.

    People with exceptional tea have enough folks coming to them, and so far, the merchants who do take an interest in selling to the west are not doing very well with their sourcing.

    I often think there must be a good opportunity for tea fans local to Taiwan or Hong Kong to make a few bucks shipping aged teas to the west, but that itch hasn’t been scratched yet.

    I have a feeling that besides a few (loosely, the readers of this blog), most drinkers of Chinese tea don’t have the knowledge or exposure to demand something different – yet.

    • I think Brandon is underestimating the difficulty of making a living by selling tea, and the sheer smallness of the crowd that buys the good stuff in the West.

      In terms of young sheng, everywhere I’ve ever looked, using the power of Google Translate, none of the stuff I’ve ever was tempted by was very cheap. It is not actually easy to beat Sanhetang’s p/q or Nadacha’s p/q in my book, and in my few chances to try other people’s stuff, like from Puersom, etc, etc, you pay almost as much or even more for merely good stuff. I have located other people I’d like to try tea from, like that Xue Dong dude with the hyx8888 website, but him, and that zhengulao guy, sell *tiny* amounts of any specific good pu. There are *massive* informational barriers here, even if you’re in Taiwan or HK, and you’re not going to be able to source enough tea that would be attractive to Western audiences to make it worth your while. Oh, and if you’re going to sell the stuff that’s unknown/forgotten but cheap, it will take some degree of free samples/education to get anyone to buy that stuff. I do think that good commemorative puerh tea have by and large stagnated in price since release, and many of them are really good deals–like the ’06 taipei stuff, for regular youngish sheng drinking.

      For older stuff, I keep track of what people bring back, the only person who seems to bring back *interesting* tea from those anon shops on a regular basis is that edp guy who has that clarethe blog. If the best one can do on the run is grab a late-90s Hualien brick at non-extortionate prices, I think it is probably very difficult to get anything good from before ’98 without really overpaying for that tea. Reading eastern forums (who aren’t suckers), those guys are *all about* finding older teas people forgot about and are still cheap. It’s a pretty big crowd of people of modest means who want sumadat aged sip.

      • I think if you use Sanhetang or Nada as your benchmark for quality/price, then you can find all sorts of comparable, or even better, alternatives if you were on the ground in China, or even on Taobao. No, they’re never very cheap, and sometimes even more expensive, but quality can also be very high – like the Jingmai thing I tried and blogged about two days ago. What you’re encountering is clearly a language barrier that is stalling you from finding these things, and a lot of these local vendors don’t make their way onto the internet anyway.

  2. A agree. Tim’s tea is always awesome. I would add that Imen at Tea Habitat also is a U.S. vendor who sells top-tier stuff, though she is pretty much limited to selling Dan Cong. I have bought some really good puerh from her on a few occasions, though. I even bough a LBZ shu from her once, a strange and unusual thing that probably costs too much.

    Ben

  3. +1 Jakub Likes that…

    I think that before internet and samples being sold on regular basis, vendors were sort of pioneers who really helped a lot of people (however, here, in Czech republic, they often helped themselves too, selling stories for big money). It may be much more difficult for them now. Actually, the fight for customers is occasionally very nasty at this time in here.

    Until I started buying tea myself from China (skipping local resellers), I enjoyed that there were local vendors who outsourced chinese vendors… but then I felt that I myself would like to taste through hundreds of samples and choose myself. Once I had enough money, local merchants were simply not necessary.
    Jakub

    • Yes, back in the day they were pioneers, but no more – internet has really shrunk the distance between tea and consumer. Glad you’re finding the right things for your taste!

  4. I cringe when i read a vendors tales of a tea being so unique and rare that its virtuly unavailable anywhere else. If the tea is that good than theirs no reason for it to come with a sales pitch like that. Any time i see that on a description i have to assume the seller doesn’t know much about their teas. I try and avoid buying from vendors that seem like suckers for a good story since i see it as a sign of inexperience.

    • I see it in terms of a marketing ploy instead of a lack of experience, though I don’t doubt that, in some cases, the latter certainly comes into play. Many Westerners’ idea of tea consists of either tea bags or low-quality, mass-produced sugar water containing a laundry list of artificial flavors, and are thus unfamiliar with plain loose-leaf varieties–both in terms of what they’re called and where to buy them. For many people in the States loose leaf tea IS a rarity. Although I may roll my eyes at some tea vendors’ flowery and exotic descriptions, my tea-purchasing options are pretty limited where I live in the States and a particular type of puerh, oolong, etc. is only available through one particular vendor.

      • Indeed, lack of alternatives and a general lack of information is a problem. At the same time though, I wonder if there’s some way to strike the balance between the two. After all, a lot of the more specialized vendors selling puerh or oolong are probably not catering to the “loose leaf is a rarity” crowd anyway – those people opt for more mainstream vendors, such as Adagio or, horror of horrors, Teavana.

  5. Hi MarshalN and everyone.

    Very interesting point of view… It’s been on my mind for the last few days because, while I understood (and sometimes agreed with) your statements, I don’t feel really comfortable with the overall idea.

    First of all, you mention one important point : the language issue. Buying tea directly at the source, physically or via the web, means that you speak chinese well enough to question, understand an answer, argue, give details, etc… And you shall also have a slight understanding of the writing too. How many persons in the large west are in this position? I mean in the overall drinking tea community, not only the high-end chinese tea drinkers who are often connected, one way or another, to chinese-speaking persons.

    Another point is the possibility of having a direct connection to chinese tea. If I understand correctly, you live or you’ve been living in Asia and you’ve been able to source tea and teaware in the mainland, Taiwan or other tea places. You all have to admit this is not possible for most of westerners because of cost, time, family, and other issues. And even if you were able to get to thoses places, issue #1 remains.

    Let’s admit you got there. Another point would be to know where to start looking for tea. As you previously noticed, it’s quite difficult to know where to get a true nice Shi Feng long jing, a Wu Yi bei dou yi hao zheng yancha, a genuine single tree Feng Huang dan cong or a 20 years old dry-stored 7542 Menghai pu’er. So, the vendor will have to spend a considerable amount of time, a fair amount of money, and a lot of energy to get there, find the producers or the sellers, taste a huuuuge amount of teas (and let’s remember that if you love pu’er and your friend prefers wulongs, other customers will want greens or reds, with the same willing of top quality for the lower price possible) and make a selection of what you, the customer, would like to drink.

    At this stage, if one considers all the above points, I begin to think that the western vendors who have done all this process for us are, at least, respectful.

    Then, if you accept to retribute the above “sourcing” service, how much should these persons charge their customers? That’s the moment where my knowledge is limited. I agree with most of the costs you’ve listed. But, as I have always prefered physical stores, I think you minimize the costs of those places. Let’s talk about a place where you can buy tea (with a large choice of all types of teas), drink tea in a calm and spacious environment (not an overcrowded, noisy, sitting one on the other concept store) and get some information on those teas you like. The main costs will then be found in the salaries of the vendors, the stock and in the store by itself.

    Because, for what you ask for, ie time to discuss, infos on those teas you like or on that factory #1 70’s shui ping teapot, it will be necessary to have several vendors, not even speaking on the ones doing the job at the tea tables…

    At this stage, I’m probably already not totally in agreement with your point of view.

    Then, and we’re certainly touching the heart of the difference, you seem to place the vendors on a simple balance of “added value for the money/right to exist”. I will never say any point of view is the right one or just better than the other, may this be stated once for all. But I think your position is located at the hardest end of the capitalistic way of thinking. This might be due to a lot of circumstances but the cultural aspect of US vs old Europe (France in my particuliar case) is probably of importance.

    Why should a shop be denied its right of existence because you think you can find the same tea directly in China or on Taobao?… I may not have exactly understood your post but I think giving us, customers of all sorts, the opportunity of getting teas we would really hardly get our hands on directly is sufficient to respect tea merchants. Of course, they are not all equals and some of them are clearly surfing on the tea fashion that arose in the last decade throughout the large west. In France we have, like in the US and elsewhere, knowledgeable vendors struggling against big companies. And, like you mentionned, we have our Teavanas too (Palais des Thés, Cha Yuan), selling what is supposed to be « rare, original, high end, exceptionnal, earliest picking,… » teas with reality being far away from what they claim.

    But we do have some little companies trying to bring west the eastern idea of tea. I think it is difficult, energy and money-demanding, and rarely a good and easy way of making money.

    I will finish this long comment by saying I will continue to spend money in these shops where I find good teas, good advice and nice discussions on the art of tea in general. Another point of importance, for me, is the human relation that needs to be built, weeks after weeks, with those vendors that just like tea and would like to live, simply, from their passion.

    Sorry for the numerous mistakes I surely did in this text, have good teas and nice 2012 year to all of you.

    • Thanks for the long comment. I don’t think I ever claimed that a shop should be denied their right to exist, so to speak. Clearly, if people are still buying tea from them, for some people it is offering some sort of value, and by and large I am talking about internet stores – physical stores are a very different animal, and should belong to a different category all together because they provide services that are non-transferable, so to speak. A teashop in Lyon isn’t going to be able to serve a cup of tea to someone in Marseilles, much less New York, so there is always going to be a demand for local services for people who prefer physical stores for the human interaction/experience. That is something that cannot be replicated by any internet entity, and I, for one, will never argue that we need less tea stores – if anything, we need more physical stores.

      Having said that, I think the point that you took as “denying the right to exist” is what, to me, merely a call for better teas. What I am saying is that teashops in the West who sell teas to people need to do a better job of bring good, interesting, and ultimately worthwhile teas for people to buy. Otherwise, they’re reduced to some reseller for low quality, but high priced teas. There are lots of small, interesting outfits who, nevertheless, serve very mediocre teas, yet dressing them up as something special and unique. All that money wasted on traveling in Asia is better spent on educating themselves, before we even talk about educating others in tea drinking. The most egregious example of it was this tea, which was being sold for an insane amount of money but which is actually something that is almost worthless (a few dollars a brick). It is those places that I decry the most. Therefore, I think consumers need to educate themselves and find alternatives themselves so that they are better able to police the shops, and thus ultimately get better offerings from them in the long run.

      • Hello!
        I see a bit of a problem with lack of punishment for selling fakes. If I did not care for tea and wanted to make money, it really is much easier to buy some cheap three-times-already-resold crap from Germany (a lot of containers with tea goes through there) and spend cheap time fabricating stories about emperors in big red robes bursting into orgasm upon drinking the unique tea they offer. Another way – what I call level 2 (where I currently am, for example), is to find a good good internet vendors and try loads of samples and buy from them. But this is time consuming, more expensive than the first way and the tea is way more expensive (not much people willing to buy it – if they can have emperor’s tea for $5 per 100g (bought for $1 per kilo), why to spend more?). Of course, the 3rd level is going to China and buying directly – which will yield cheaper tea than on level 2, but getting there and communicating with locals takes time and money.

        If the merchants selling obvious fakes were forced to change “emperor’s tea” label to what their tea really is, there would be more distinction in quality. I believe that most tea drinkers have not that much experience (when one buys from crappy store, but is fed by nice stories, why would he change anything?) to tell bad tea from good tea, that the feeling of “being a real teamaster” is pleasant enough.

        Then there are, of course (luckily) people who understand tea more. The problem with them is, that they are often similarly, or more knowleadgable than tea merchants – effectively not needing any merchants of level 2. Level 3 merchant could do… however – if a local (Czech) chap goes to China with the desire to find first-hand tea and make profit…will he be cheaper than Yunnan Sourcing, Chawangshop, Essence of Tea, etc.? I don’t think so. He could be cheaper, but the profit would not be good enough probably.

        I see two ways of merchants being useful
        1) Use the fact that they get wholesale prices and sell at their country at the same (retail) price as the original store – people may try the tea locally, don’t fuss with post, custom office, etc. Not much money will be made this way though (less than when you sell expensive rubbish).

        2) Be an investor, invest into puerh and after some years, sell it with profit. The profit should be healthy enough even if lower than the profit would be in China.

        But being only a reseller of some publicly known e-store, adding your margin to theirs… nope, I don’t see the point of that.
        Jakub

  6. Thanks for the kind reply. It ruled out some of the wrong feelings I had after having read your post.

    We probably actually agree on most of the points concerning the lack of informations carried out by most vendors. But we also have to remind ourselves that we represent a relatively small, if even noticeable, part of the customers in the tea field. This is probably why it is so difficult to find vendors that would carry the whole panel of those teas, you, me and the other tea “connoisseurs” (I heavily dislike the term but couldn’t find better) would like to find in the ultimate tea shop.

    It would certainly be, at least, very difficult for anyone to build a shop for that only purpose of selling only high-end, genuine teas and teaware!

    Thanks to those sellers trying to fulfill our inquiries, may they meet success and consideration for the amount of passion and hard work they provide.

    Thanks MarshalN for this discussion 🙂

    • I think an important thing I left out in my last reply is also that what we need, more than anything else, is accurate information that does not deceive. Commercial interests get in the way of good tea, sometimes, and if a seller is stuck with a stash of bad tea that they bought in error, not all of them will be willing to eat the cost and will instead try to pass it on to consumers who are unaware. I think that’s why a lot of times we have very mediocre teas on sale – well meaning tea vendors who did the wrong thing, sometimes without even realizing it themselves.

  7. This is a really good article, and one more new to tea should read.

    My wife and I got into Chinese Tea in 2005 and found out the it is a huge subject and one never stops learning. About two years ago we came across what we believe to be the best shop for Chinese Tea in Australia (where we live). The owner of the shop is Chinese and his wife’s family own tea plantations in China. My wife and I have talked for hours about tea in his shop whilst drinking tea.

    The shop owner is very keen to introduce Chinese Tea to more western people and whilst his range is large he does not want to have too big a stock as he does not want to confuse people who are new to Chinese Tea.

  8. Jinjunmei sells for 1k RMB in Kunming. I’ve never seen a price much higher than that. But even 1k is too much since the only difference I’ve noticed between that and much cheaper but still decent dianhong is in the size of the leaves. So, are you saying that jinjunmei hasn’t always been pricy? Why the change?

    • There are jinjunmei selling far more than that. Five years ago nobody has even heard of the tea, never mind buying it at those prices.

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