Jan 11th 2011 Issue
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Timing a store opening

Charles Cain - Jan 11th 2011

Old Orchard store

Old Orchard "before"

Naperville store

Naperville "before"

In business, timing is everything. Location is everything too. And so are people. Apparently, in writing about business, hyperbole is everything. Hyperbole aside, while timing won’t make or break your business, it can have a huge impact on how quickly you break even, and how much cash you need to reach the promised land of profitability.

Over the past six years I’ve opened tea retail stores in March, April, June, September, October and November. The perfect model, run by a great team and supported by professional marketing will work smoothly regardless of when you open it. That said, most new businesses and new stores will require a little trial and error, a little creative adjustment, before we can say with confidence that the store, the staff and the merchandising are ready for prime time.

For a business that makes its money selling tea and teaware (as opposed to a tea café or tearoom with a food service focus), the key to a successful year is holiday sales. For a store that’s open all year, you’ll likely find that the 4th quarter accounts for 40% of annual sales, and each week of December (leading up to the 25th) will yield approximately the same revenue as a month in the summer. This seasonal spike, while still present, is MUCH less extreme for operations that derive a good portion of their revenue from food service (or tea service).

The heavy focus on December sales means that a store opened early in the year may not break even for up to 11 months. While this can be painful, the worst-case scenario comes in the form of a store opened too close to the holidays. With no established customer base, people aren’t thinking of you when they plan their holiday shopping. If your brand or product is at all unfamiliar, the likelihood that the customer will stock up on tea is pretty slim. It’s even less likely that they’ll spend a few hundred dollars buying presents.

I saw this first-hand this year as circumstances pushed the opening of our second store all the way back to November 30th. Customer traffic was pretty good, but the average sale was roughly 1/3 what I projected. We sold A TON of sample packages of tea. Long run, the high transaction counts give me confidence that the store will be just fine, but it’s painful to know that if we had opened even 45 days earlier I may have sold twice as much in the month of December.

In my experience, the perfect time to open a tea retail store depends on the efficiency and readiness of your operation. If it is your first store I would recommend May 1st. May is historically a strong month for tea retail, thanks in part to Mother’s day and in part to people out and about enjoying the weather. Sales over the summer will be slow, but this will give you time to test your systems, train your staff, refine your product collection, and perfect your merchandising and marketing. By the time that business picks up in the fall (as people stock up on warm weather drinks), you’ll be ready to make the most of the renewed interest. Most importantly, you’ll have a strong customer base heading into the holiday shopping season.

The other advantage to targeting a May opening is that when things go wrong (and they will) the delays won’t cause nearly as much pain as an opening later in the year.

For myself, now that we’ve opened two stores and have a much smoother running operation, my ideal store opening date would be September 1st. I’d much rather open August 1st than October 1st, so I’m inclined to err on the early side, but a September 1st opening gives us plenty of time to get the staff up to speed and build a solid customer base heading into the holidays.

At the end of the day, timing won’t make or break your business, but the right timing can minimize the cash and time it takes you to build a self-sufficient operation.

Adagio Teas