This is a response to a prediction that Jason Walker made here, this forum post originated as part of a larger response posted in our blog Interesting Criticism: Tea Trade is a clusterfuck. This post is part commentary on Mr. Walker’s prediction and a very brief primer on how tea marketplaces work.

One of Jason Walker’s predictions for 2013 is Look for more multi-brand tea marketplaces.

Nope, sorry. There is a reason, and much of that has to do with two things: technology and cost.

Tea Trade led the way when we innovated and built the first tea-dedicated marketplace on the web. Tea Trade is built entirely on the WordPress platform, that means it is based on an off-the-shelf software product that is then configured to purpose. Tea Trade is also an entirely DIY affair as well, I established and configured the whole thing and that literally saves thousands of dollars. There are plenty of WordPress developers out there, but ones with the knowledge to build out a e-commerce multisite dwindles rapidly. If someone wanted to hire a consultant to build a competing tea marketplace based on WordPress, they would be looking to spend $15,000+ for a consultant to do it, and that number can get much higher depending on the breadth of the project. It could be done by an off-shore developer for about $5,000-$8,000 but you get what you pay for.

That estimate only covers setting up, theming and configuring a WordPress-based marketplace. If the marketplace needed to be coded from scratch, you can double, or even triple that price.

There is also the issue of getting products into the marketplace. Who is going to sell there? Established companies? No, not enough traffic. Established tea companies do sell in what they call third-party markets, but they focus on using really big marketplaces for that like Amazon or eBay. I had a long chat with a VP from Mighty Leaf tea about this in the very early Tea Trade days. For these types of businesses, third-party markets are basically outlet stores for tea that is beyond its sell-by date. A customer can get value and tea through Amazon and eBay from the big sellers, but it is tea they are liquidating. My efforts to build an online outlet store for Mighty Leaf tea on Tea Trade were unsuccessful, we were just too small. In fact, had they agreed, the amount of product they needed to list would have disproportionately overwhelmed our Marketplace and website anyhow, at the time we were actually better off without them.

Smaller companies are the target market for building a tea marketplace, but if they already have a website selling tea, then why should they go through the extra expense to sell tea through you and let you take part of their profits? Selling tea in America is 100% about branding, demonstrating and adding value to the tea, if what you are offering doesn’t help them add value then why should they work with you?

The margins are too small. This comes back to the adding value aspect of it. If what you offer cannot help the seller add enough value to the tea to create sustainable margins, then your struggle is not only uphill, but also up a cliff. The margins in tea are small, one issue Tea Trade has always had in attracting sellers are those margins. We take a percentage of each sale, and PayPal does too – this makes it harder to run a strong-volume business this way. It is fine for small, home-based boutiques, but any company with enough money to lease an office space with a finely-tuned accountancy budget isn’t going to bother unless the marketplace offers a way to mitigate those costs (for the record, Tea Trade does offer a commission-free service for high-volume sellers.)

Ultimately, there will not be a bunch more multi-brand tea marketplaces springing up, because of many of the operational sides of the tea industry. The concept of the multi-brand tea marketplace is not a bad one, but there are things that need to be addressed like costs, threshold to entry (Tea Trade’s is unfortunately high because it uses WordPress and allows sellers to build their own sites, this has a learning curve. We work to lower the threshold though training and support,) technology base, and business relationship reach. Even Steepster abandoned the marketplace parts of its features and stopped pursuing links to the product pages because of the problems involved with it. I found their approach novel, but noticed when they stopped supporting it in favor of Steepster Select, which undoubtedly provided a stronger revenue stream.

Finally, Mr. Walker, Tealet is not a marketplace. I love what they are doing and the products they provide, but they are a tea retailer. They source tea from various places and sell it online, that makes them a retailer. Tea Trade does not source tea, in the same way that Etsy does not source handcrafted items, or eBay does not source stolen TVs for sale. Our sellers sell their own stuff, in their own way, using our platform – that is what a marketplace is. As of this writing, after two years, Tea Trade still offers the only independent tea-dedicated marketplace online.