A Tea Addict's Journal

Explaining the impossible bargain

January 2, 2014 · 3 Comments

Sometimes when shopping for tea, one comes across the impossible bargains – prices that are simply too good to be true. Over the years, I’ve found those to fall into three main categories.

1) It really is too good to be true. This is probably something that isn’t what it claims to be, or possibly, not the whole truth. There’s often some fudging going on with these – an aged tea that isn’t quite aged, old tree tea that is, well, not that old, high mountain tea from areas that really don’t qualify, etc. “Revivals” or “the area of XXX” or “1990s” are all labels that may pertain to these sort of teas. So, in other words, these are trying to upsell as much as possible. There’s a reason they are so cheap.

2) The seller has no idea what s/he is selling. This happens most often in smaller shops, out of the way shops, shops with really old stock, or personal sales – people who don’t know what they’re doing. They are also invariable teas that are older – if it’s new tea, and s/he had to buy it and resell it on the open market, they’re not going to get good prices that you can pass on to the customer unless they operate at a loss. You have people who inherit old puerh cakes by the boatload and throw them away thinking they’re stale tea. You have people selling their own collection on the cheap because they’re in a hurry to get cash. You have sellers who just want to get rid of something and don’t care what prices it goes at. These are real bargains, if you can find them, but they are pretty rare. It also takes a lot of energy to seek these out.

3) The seller knows exactly what s/he is doing and doesn’t care. I’ve met some of these before, and these are the most interesting cases.

Modern economics has as one of its basis the assumption that actors are, by and large, rational. They generally do things that are in their own best interests, and sellers of a commodity like tea would, normally, behave that way. If the market price is $100/jin for a given tea, then a seller who sells it for considerably less must have some reason to do so – the reasons should include some return on the lower price they accept. That could be liquidity (like the guy who needs cash now) or relationship building (selling you something cheap so you’d come back for more). Or maybe it’s part of the business strategy (hypermarkets). There’s a good reason they do such things.

But over the years I’ve met a few sellers who don’t care, and whose motivations for selling at below market defies economic logic. I’ve bought cakes before from people who know it sells for, say, $250 a piece on the market, but sold to me for half the price. I’ve bought aged oolongs that are quoted at the same price they were sold 30 years ago (granted, prices for Dongding in the mid-80s was high), when the same tea can only be had at other joints for 3x the price. Why?

Oftentimes the answer I’ve gotten goes something like this: I sell this tea for cheap because I need to sell to my own customers. However, these are customers who generally don’t do a lot of business. For example – I only go to Taiwan a few times a year, and I buy, at most, a few jins (one jin = 600g) at any given shop. My total purchase within a year at any one shop will probably not exceed 10jin. That’s peanuts. While I was there this time, one of the shops was readying a shipment of 20jin of Dayuling for a store in Tokyo. I’ve sure that order alone outpriced whatever I bought by a factor of 5 or more. What’s the point of keeping customers like me happy?

The answer to this rather silly question is that to some, wringing maximum amounts of money is not quite the point. It’s somewhat interesting, as the rationale told to me is usually something like “well, I have to make sure I have stuff for you guys” or “I don’t know how to just mark it up like them.” There are also others who do it to stick it in people who change prices monthly for their tea – although in these cases selling tea tend to be a sideline of sorts to something else. Also, if they know that the buyer is a vendor, the price is not as friendly – therefore in these cases, buying small quantities through retail is actually better than buying dozens of jins of tea wholesale.

I’m not complaining about this, of course, if I’m the beneficiary. It’s just an interesting case where the textbook assumptions in economics fails. I think for these sellers, they derive pleasure in actually selling to retail customers who are loyal and come back year after year. Earning an extra 200 HKD or not on that sale is not that important to them. This is also why I have, over the years, stopped going to places that keep their prices very current – there’s something cold and unfriendly about places like that. I might not get the latest fashionable tea from them, but what I do get is a very nice reliable supply of teas that I like. That’s good enough.

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3 responses so far ↓

  • Darius Wilkins // January 2, 2014 at 3:05 pm | Reply

    On the third point, I think it’s a combination of a) good tea is more of a rare treat for normal people, even as non-elite, but good, teas skyrocket in price. b) these shops always want to have a steady selling volume. c) running a shop that’s too expensive for the locals and anyone else that might wander in renders it lonely, with an unsocial vibe. The shopkeep and workers contribute some potential wealth for regular socialization.

  • Callum // July 10, 2015 at 1:07 am | Reply

    Another possibility is that the retailer gets special pricing when they buy in larger quantities from the wholesaler or farmer. The retailer knows they will have to keep up purchases of a certain quantity and therefore are willing to sell inventory at less than the “profit maximizing” price just to keep the inventory turning over fast enough that they do not lose access to special pricing with their supplier. I think economics can quite easily explain why people sell below market value. It is a very rational thing to do under certain circumstances.

    • MarshalN // July 22, 2015 at 9:54 pm | Reply

      I’d say in most cases I’m thinking of here the “need to take this much good from distributor” is not going to be a big factor – the only example is Dayi, which pushes new tea down the throats of its distributors. Otherwise most tea vendors are dealing with interchangeable goods – or the supply is so small that the producers can’t enforce these terms the way, say, a watchmaker can.

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