All Xero In episodes
Hosted by Jeanne-Vida Douglas and Rob Stone
It’s gone from scones and doilies to crazy and creative, but giving tea a retail makeover hasn’t all been smooth sailing. So how do you go from surviving to thriving in retail?
Maryanne Shearer, founder of T2, has been answering this questions with increasing confidence for two decades. With T2 stores surviving the global financial crisis, and now going global, Maryanne shares her insights into creating a retail experience, inspiring brand love, and keeping your course during tough times.
Maryanne chats with Xero In hosts Rob Stone and JV Douglas about her journey from failed homewares business to international buyout, and the value of a good cup of tea.
Small business resources:
Email marketing for retail stores – Xero Small Business Guide
Hosts: Jeanne-Vida Douglas [JVD] and Rob Stone [RS]
Guest: Maryanne Shearer [MS]
JVD: Welcome back to Xero In. I'm JV Douglas and I'm here with Rob Stone. Today we're talking about one of my all-time favourite topics, tea.
RS: Tea, yes. The founder of T2, Maryanne Shearer, growing four stores to what is now over 90 stores, an incredible story.
JVD: Creating an incredible retail environment – that's what I'm really keen to hear about today, how you actually take a product that everybody knows, because 20 years ago when she got into the business, everybody had tea on their shelves. Everybody knew what a retail environment was like and she combined the two that already existed and created something amazing.
RS: A true entrepreneur, she didn't look at the economics straight away. It was a passion for her, and she dove into a fairly commoditised market, Bushells Teas and whatnot and created a unique brand, and was able to monetise that brand.
JVD: Absolutely, yeah.
RS: It's really interesting how she did that. One of the great phrases from her, which I really like, "We learn how to sell the ceremony."
JVD: Absolutely. Not just a tea ceremony, but the ceremony of walking into those stores and discovering new things and discovering creativity, and all of that process. The smells, and the tastes, and the opportunity to experience the tea as you're going through. She unashamedly will say, "No, we didn't ever discount. No, our teas were more expensive but we weren't selling tea to compete with Bushells. We were selling an experience."
RS: That's exactly right. That's a big takeaway for me as well. You build a brand, and then you create the experience for the consumer around that brand.
JVD: Let's hear how Maryanne did it.
RS: Maryanne, thanks for coming on to Xero In today. We're very excited to have you. Now being the founder of T2 Teas, would you mind sharing with us where you started the journey?
MS: So 20 years ago, we had just started a homewares company called Contents Homewares, and you'll never hear about it because we could never get it off the ground, although we put a lot of work into it. We did months and months of planning and we just couldn't get it to happen.
We're sitting there having a cup of tea, and decided that everybody was doing coffee, and why wasn't anybody doing tea? Once we fell on that, we just couldn't get our heads around why nobody was doing tea.We went for a drive, made a few phone calls, and decided that we were going to change our big plans from home wares to tea. It was amazing from that very second that we'd committed to that.
Within hours we had the name, we had the specifications, we all just felt that we couldn't go home until one o’clock in the morning. You know when something triggers a great idea and you can't sleep, you can't do anything else. It was very spontaneous. It wasn't the big plan. It wasn't a life journey. It was something that was accidental and we loved it.
RS: You're taking on a almost commoditised market and you're taking the approach of an artisan tea, how did you position and differentiate yourself?
MS: My original business partner, Jan O'Connor and myself, Jan was working with Myer at the time, a very rock solid retailer. My background was in fashion: fashion design and fashion retail. We both had sort a modern contemporary preference. We decided that tea was just too daggy, if you like, for want of a better word. They were very sort of scones and doilies. We decided that maybe it needed to be a little more modern. It was a bit of a challenge to get that modern coffee drinker, juice drinker to drink good, old, daggy tea.
I think that was our challenge, but when we scratched the surface we realised that in fact, that was one of the first great ideas and that was to make tea modern. No one was doing modern tea. Everybody was doing very established old-fashioned tea.
JVD: Once you started scratching the surface, what did it feel like to suddenly discover or to increasingly discover the scope for tea? There are just so many different varieties that were on offer but not really being brought to the public in a way that they could access them and experience them and really discover the pleasure that is leaf tea.
MS: Once we started to play around with tea. Of course, we both thought we knew everything about tea and we knew nothing about tea. I think had we really done the homework on the world of tea, it would have been too scary.
When we realised that the variety was there and the well-being side of tea was also I think, our timing was perfect for that. We looked into the fact that tea isn't just camellia sinensis, it's not just the tea leaves. It's also the herbal market and the tisanes and the fruit teas.
When we looked into the big world role, the Europeans, particularly the Germans and the French, were mad about tea and there were thousands of teas, not just English breakfast, Earl Grey, Irish breakfast. There was just this amazing world of tea out there that had not been brought to Australia. It was still being done in a very conservative, old fashioned way, but there was a lot more scope out there.
We jumped on that and had a ball with it. We started when we were in Brunswick. We started with 40 teas and five kilos of each and when I left, we were buying it by the 40 foot container and up to just over 200, but we could be doing 1,000. The options are endless for tea.
We were able to apply our background in fashion and creating. Going into a retail fashion store, every six weeks, eight weeks, there's a new experience, whether it be fluorescent or summer… We could do the same with tea because you could actually adjust the teas to the mood or theme.
I think one of T2's great advantages is that we weren't just tea leaves, we were creating a retail experience. A great environment, great music, amazingly passionate team members that loved what they sold. The way we injected them with that knowledge was just making sure that they were passionate people. They would come in and they would get very excited about our more contemporary approach to tea. I think that was critical, right to the very end when, a few months ago, when I left, it was just hitting on 20 years of working on T2. I think that energy and passion is still there.
JVD: Absolutely. Now, you say though, you didn't have much insight into tea when you started, but you certainly had insight into creating a beautiful retail space. The thing that I still find magical about walking into a T2 store, and I told you it was going to be a fangirl interview, I'm afraid, is just that sense of wonder and exploration and creativity that goes into it. How do you actually create a space that expresses that as well as the product that expresses that?
MS: I think when I shop myself, I love walking into stores where I discover things. Like in Aladdin's cave. You say to your friend, oh come over here, look what's on this shelf, have a look at this, this goes with that. Often if I would be doing a round of the stores, I would become very nervous if I walked into store and it looked very neat and tidy and organized. There is a distinct sense of order in T2, because it's a bit medicinal in that you've got all the different varieties of teas and they're all in cubes and they're all organised. But, in fact, the store is quite chaotic. I think that if it gets too organised, we get in there and we just shake it up and make it a little more like a treasure. You need to discover when you're shopping. You need to feel that you've found something that no one else has got. The best T2 stores have little nooks and crannies that you can find things that you didn't quite expect.
RS: You created an amazing, unique product. When you were coming up with a design for your first retail experience, because to me it sounds like your gutter mark was very much based around that whole concept of letting a consumer discover and have that unique shopping experience by walking into one of the T2 stores. Was that your first iteration of your gutter mark or did something come before that and you slowly developed this concept over time?
MS: T2 is constantly changing and I think of course the consumer and the market has changed dramatically in 20 years. The internet has a lot to do with that. I think when we first opened T2 in Brunswick Street, it was all about tea. It was full of tea leaves and we had a few little infusers here and there, a few mugs, but ultimately it was all about the tea. Over the years we tried everything from candles to honey to food to pots and cups, but really at the end of the day we are selling the ceremony. When you go up the pantry; oh, what tea do I have? How do I feel, what am I feeling like, am I sitting on the couch, am I sitting at my desk, am I putting it into a travel mug to take to the car? We found that we had so many categories of customer and environments that they would drink their tea in that we would adjust our ranging to suit that.
The ranging at T2 between the homewares and tea never really fluctuated in percentage, but it certainly did in the varieties we had within the tea wares. What we find over the years was we had to ensure that the tea wear you bought at T2, you could not buy anywhere else. That forced us to design all of our tea wares ourselves. There is very little that is not actually done by T2. The reason for that is we found the crazier the tea wares, the more we sold them. If we decided to do something that was quite classical, conservative, the customer was uncomfortable with that because I think they can buy that anywhere. Whereas at T2 we were offering them kind of crazy out there stuff that was fun and not cheap, absolutely not cheap, but affordable. So you were getting a lot of fun for not a lot of money. Of course, at the other end we still have the really creamy homewares and the collectibles, but the majority of the tea wares we sell is something that you can use everyday.
JVD: Now, you've also been a retailer that has expanded at a time when a lot of retailers have been facing challenges. What is the secret sauce to retail success? What is it that you're offering people that they can't get online? That they can't get through other shopping experiences?
MS: I really think the best thing that happened to retail was the internet. You have to be a great retailer, and a great retailer isn't someone with a shop. A great retailer is someone who offers a complete and absolute experience, even when you walk past a store and you can smell it or sense it before you walk into it. Whether you like it or not, that's a great retailer. They've seduced you from the inside and they've got you coming into the store.
I think great retail has got nothing to do with price point going on sale. Great retail is when the customer actually starts dreaming about coming into your store before they get there. You know when you're driving somewhere and you think, "Oh I can't wait to get to that store because I'm going to try to find this, and I'm looking forward to that." Great retailers now are the ones that will survive. I think that we became stronger and stronger and stronger because that learning was there for us in the very beginning. You spoil your customer and you create great product and create a very passionate team. It's a great way to open the door every morning.
RS: Twenty years is a long time to be in business and you would have seen a lot of different cycles during that time. What are some of the learning that you have garnered from that experience?
MS: I suppose to be T2 centric, the big learning was locations and leasing was a very big one for us. As the business grew we realised where we sat comfortably. Leasing can be a very expensive mistake in retail. By the time I left we were well over fifty stores, heading to 60. I think we're heading to 90 now. That's a lot of leases that you need to look after and you need ensure that they're in the right place.
RS: They're fixed costs.
MS: That's exactly right. There's not much you can do about getting out of them and if you can get out of it, it's expensive. Over the twenty years that I was there, we had to close two stores but it was a really good learning. It taught us that we needed to be where the traffic was. So leasing, it gave us all these little tick boxes that we needed to ensure every time we did a lease. Leasing was a very big one for us.
Our little dabble into franchising was very expensive mistake as well. I think a brand like T2 which is so reliant on heavy inventory and passionate team members, franchising wasn't the model for us. We went into New Zealand as a franchise model and that didn't work at all. We quickly took that back. I think they were probably the two biggest and most expensive leanings for T2.
RS: Thanks, Maryanne. During a recession, foot traffic is one of the key things to weather those tougher times and then obviously having that great retail experience. Was there anything else in terms of internal, with your team, that helped you fare through those tougher times?
MS: I think what happens when it's all good, when is business is going well and everyone is happy and the numbers come in each evening and it's all positive growth, it's all fine. When it gets tough, that's when a great retailer shines, I think. When business gets a bit tough, people start talking about numbers and conversions and customer references and that drives me crazy. You've got to maintain your nerve, I think, as a great retailer. It's a roller coaster. Anyone in retail knows that you have great months and you have shocking months and sometimes you can't understand why. That's beyond your control. You've just got to keep your eye one the ball and keep focused on your vision. For T2, when the GFC hit and tough times were really on our doorstep, we maintained our cheeky nature. I think that's very important. A lot people immediately go on sale and start cutting costs and making all the wrong calls. I think you've just got to maintain your brand integrity. The brand will hopefully drag you through.
JVD: Did you benefit through those down times though from really offering affordable luxury? You mention not discounting through those times, was it that sense of being true to your brand and true to your customer and allowing them access to something that was still a pleasure that they had access to even though times were tough?
MS: When someone offers you a cup of tea at their house and they swing their pantry open and they've got their 10 T2 teas lined up, I think there's a sense of pride there for that consumer. They're very proudly offering you what they perceive to be the best tea in the marketplace. If we chip away at that armour and constantly reduce our price and go on sale, subconsciously, not just you but everybody realises that maybe it's not quite the brand that we all thought it was. I think the brand integrity is critical to maintain the customer's passion for what you do during those tough times. No matter how tough times are, particularly with tea... For us tea was our essence so we couldn't and shouldn't and never did reduce the price on our tea. We might do a little particular promotion or have tea parties or whatever it might be, but reducing the price on your tea or compromising the customer's perception of what is the best tea in the country is so dangerous and we never went there.
RS: When consumer confidence came back into the market, did you do anything underneath those conditions, or again did you just stay with your position of your brand?
MS: Brand, brand, brand. Everyone used to get very sick of me ranting on about the importance of the brand because that's why the customers love it. What we find when times are really good, we can do things like invite our T2 society members in for tastings. You can have little tea gatherings and just take that little extra step to spoil your customers a little bit more. Send them a random gift for no good reason. Not for a return, not for a special offer, just pop a gift in the mail and send it out to 10,000 people and there's no reason for that. I think customers are so sick of being thrown a lure, if you like, to get them into the store or to offer a discount that when you surprise them with a tantalising pressie, they're sort of like, what's the hitch? They find out there's no hitch. You get far more return for that sort of activity than the standard retailer does.
JVD: If you were starting out again or if you were speaking to someone in almost a mentorship capacity, what would you tell them that you wish you had been told 20 years ago?
MS: One of the things my business partner, Bruce Crome and also my life partner at the time, was always saying to me no matter how good your idea is and no matter how good you are at retailing and how good your profit is, if you don't have cash, you have nothing. I learned over the years cash flow can completely break any great brand or great company. It always made me very nervous and I constantly surrounded myself with great finance people.
JVD: Thanks for that very germane advice. How were you thinking big from the start?
MS: When we first started, we just wanted to have fun shaking up the category of tea. Homewares, we got nervous, we got shaky. When we found tea, we were happy just to have a little collection of stores. Maybe four stores, five stores, I don't even think we had a plan. It was just, we were going to have some fun and do something that we really enjoyed doing. We could use our skillset.
Even on the first day we opened the store we did $420 on the first day 20 years ago. I think on that day, we thought hang on, the customer loved being in our store today and so did we. There's something quite magical about it. As the weeks and months went on, we realised we were on to something. We realised that we could take this further and we started taking probably greater risks than you would if you were just working in a single store going to one store, two stores, three stores. So I think we were looking for ways to grow the brand once we got a few months down the track and that's when Bruce Crome came in and financed our growth. That allowed us really take our ideas to the world.
I think once we got the confidence from the customer, we were really, very brave and we took some big risks. When I look back now, I think you just have to do that in business. You have to say, "Hey, what we're doing is loved by the customer, we're having a ball." I think when we discovered the world of tea was so big and had so much opportunity and scope, it was endless. We were dreaming up tea department stores, for goodness sake, it was out of control. So, yes, we loved it. We had a ball and we realised that we were on to something that we felt that we could take to the world. At no stage did I think that we would be in four countries and being acquired by a company like Unilever, but I certainly thought that we would get us up to 20 stores. Now it's heading toward 100 and that's very satisfying.
JVD: Tell me about taking risks, though, because there is a side of business risk which says, "OK, go out and try something new," but there's also a capacity to know when to pull out, to know when the risk isn't paying off and when you actually need to step away from what you're doing. Are there any risks that you can discuss or risks that you took that you then did have to step away from? How do you learn when is the right time to say, "Now, hang on. This isn't working. Let's go back to the drawing board and let's try something else"?
MS: I think if you are passionate about what you're doing and you can sit down and convince someone to finance you into the chapter, I think ... But you do need to know when you've got to sit down and go down that path. You do need that mentor, business partner, someone that can step in that's a little impartial and that says, "No, no, okay. This is where we need to work, this is what we need to do to get you to the next chapter."
You constantly need to, I think, stop at the barrier. Do the big 360 and see where your strengths and weaknesses are. As our business grew and changed, the demand became so different at every chapter. I had the pleasure last week: I’m currently on the board of judges for the Veuve Clicquot New Generation Award. We sat down and spoke to so many delightful young entrepreneurs about the business they're building and it reminded me of 20 years ago when we started T2. They're all taking huge risks. They're all putting their own money on the line. When it's that small, because you've got your savings or you've got your first $100,000 and you throw it out there to the wind and that's your risk.
When it becomes someone else's risk and they're expecting you to give them a return on their investment, it's a very different ballgame. In the end we had a board and we had a chairman board, and you've got to get up there every month or every six weeks or whatever and sell your wares. I think when you speak to young entrepreneurs about what they're putting on the line, it's them and their personal money, but when it becomes a huge concern the risks are greater and you're no longer on your own. You're risking a lot of other people's money and time, I think.
RS: And more accountability.
MS: Absolutely, and I think that as T2 got to the size that it did, I loved when it was small because I did what I did best which was being creative and creating product. In the end, I was spending most of my time being a CEO or sitting on a board advising the board on what's going on, when in fact that's not my burning passion. In the end, you've been doing it for 20 years so you know what you're talking about but you don't look forward to a board meeting with gusto. Some do, I don't.
RS: What did you learn personally about yourself along this incredible journey?
MS: I think that just stay true to yourself, and if your business gets to the size that T2 did that it's now got me doing things that I don't love doing, that being very involved in commercials and business and money. I'm very passionate about people and product and marrying those and getting a great outcome. I'm a classic entrepreneur. I'm always on to the next thing. That's often to the detriment to myself and the people around me.
I think there's so many people out there with great idea and they talk about them a lot but they never actually get them off the ground. I think so many great people have just not had the opportunity to get their ideas off the ground. I would love to help people with a spark or a burn in their belly to get their idea happening.
If I had sat down in the early years and got too many people to advise me, or both Jen and I at the time, I think we would have been talked out of it. Everybody would have convinced us that it was a lousy idea because it couldn't show any return. I think that young entrepreneurs need wiser, older entrepreneurs to push them along, not someone telling them they can't do that because it will never give them a return.
JVD: It sounds like you're already giving back to the business community in certain ways and using the knowledge that you've gained through T2 to encourage business to come up through. What are your plans in the next little while in terms of creating other business opportunities in Australia? Are you looking at angel investing, are you looking at more mentoring, are you looking at founding a new business?
MS: I think definitely I will go back into retail in some way, shape, or form. I love retail, I love customers, I love creating beautiful environments. I don't know what that looks like. I'm going to enjoy this. I've been in retail now for 35 years or something ridiculous like that and never as the shopper. I've always been on the other side of the counter. I will get myself organised and get something happening and it will definitely be in retail. I do love retail and ... yeah, have some retail fun again.
JVD: Listen, best of luck with those endeavours. I would like to ask a cheeky question right at the end: is there any tea combination or flavour of which you are particularly proud or is there a favorite from amongst those dozens and dozens of varieties that you created at T2?
MS: I think this is probably the most commonly asked question because everybody wants to know what tea they should be drinking every day. That's why we've always promoted the 12 teas in your pantry, but I would drink White Rose every single day. First thing in the morning I get to work and make myself some White Rose, and then it depends on the weather and what you're doing and where you're going as to what the rest is. Grand Yunnan is a beautiful smoky black tea, fantastic in the afternoon. Grand Yunnan is not a tea that a lot of people know about and it's one of my absolute favourites. China Lychees, a lychee flavoured tea, very light, very delicate. I can speak very fondly of all of our teas. I think White Rose and Grand Yunnan would be the two that I would insist that everybody have in their pantry.
Then, of course, you've got peppermint. You can't past a great peppermint tea. You can also go out to the garden and go grab a handful of peppermint, that's just as lovely for tea too, but that's not very good for T2 if you grab it out of the garden. It's also equally as lovely.
RS: Thanks Maryanne. We wish you the very best of luck for your new venture in 2016. I'm sure you're going to bring just as much passion to it.
MS: Thank you. Thank you. Thanks for chatting.
JVD: It was so exciting to speak with Maryanne about how she had created these really, really exciting stores. It's something that always intrigues me. You go into some cafés and it's just got no vibe and you can't see why. You go into another café and it's amazing. That's the thing about a retail environment is how do you create something that provides an experience from the moment you see it in the street, walk through the door. What is it? How do you do that?
RS: Talking about being seduced from the inside, wanting to go back and looking forward to that experience around that brand. I think that just comes back down to amazing retailers. People who can actually impart that personality on themselves, onto a brand and onto a space.
JVD: What I thought was particularly fascinating, too is that she said online was the best gift retailers have had.
RS: Yeah, I love that. Well, she said the best gift that good retailers have.
JVD: Great point. See, that's the thing. It's all about experience, it's all about being there, which is something you can't get online.
RS: Yeah and she had a few starts, as well, before she came across T2 and made that a success. What I loved is she kept going back to brand. It's all about building that brand, and owning it and knowing what it is yourself and never wavering from it regardless of where you are.
JVD: So I'm off to have some Grand Yunnan.
RS: And I'll join you for a peppermint.
RS: Thanks, JV.
JVD: Thanks, Rob.