With two products, my bundling strategy had started to take shape. As expected, my average sales price improved and the store’s conversions rose sharply. However, two products were never going to be enough. I knew I was going to need other products for the bundling strategy to take full effect. I had wanted to release vitamins and supplements for some time, but it was next to impossible to locate a suitable product that wasn’t already widely available at reasonable prices. To get the right price-point, I needed something entirely original. Since my first trip to Japan, I had always wanted to do something with matcha, but I couldn’t bring myself to sell it as a stand-alone powder. I personally hated the taste of matcha and couldn’t for the life of me understand why there were so many companies selling it. As a consumer, it was the sort of thing that I might have purchased once after reading about the benefits of matcha on a blog and never purchased again.
I came up with the idea of encapsulating matcha — all the benefits of matcha, without the bitter taste. From what I could tell, it was a world first. No-one else was doing it. I purchased a cheap manual capsule filler online and found the matcha samples my supplier had given me a year earlier. Once the capsule filler arrived and I was able to test out the capsules for a few days, I was confident that it was going to work. I didn’t know this at the time, but there are two reasons no other companies had hitherto released matcha capsules. The first reason is that matcha has a very short self-life and generally lasts six months once it is exposed to air. Most supplements have a shelf-life of approximately three years, which is necessary for retail, where products may move slowly. The second reason is that matcha powder can be very expensive. Depending on the grade of matcha used, when the price of the powder is combined with the cost of encapsulating the matcha, it can quickly become uneconomical. The more expensive types of ceremonial grade matcha are a more vibrant green and aren’t as bitter as the lower grades of matcha. The better grades of matcha are typically used to make matcha drinks. Matcha vibrancy decreases as the grade of matcha is lowered. The lower grades of matcha are used for things like cooking and baking, where the colour vibrancy and taste aren’t nearly as important.
Over a period of three months, I worked with my supplier in Japan to develop a stable grade of matcha that was suitable for encapsulation. I was forced to use a higher (and more expensive) grade of matcha than I would have liked, because the capsules needed to look vibrant. The plan was to market the capsules as an energy supplement that would provide daily energy support. I came up with the name M-Caps (for “matcha capsules”). It was a name that I felt would wear better than “OMGTEA”. I then started looking for a manufacturer who could make the capsules in bulk. The old me would have tried to make the capsules at my kitchen table for a few months to gauge interest; the new me knew that it was better to take a risk. While most of the companies I approached didn’t return my calls, I was able to find a large manufacturer who had heard of OMGTEA and was willing to work with me. I gave them a small amount of matcha to conduct a viability test and they agreed that the idea was at least possible. They had some concern that the matcha might not respond well to encapsulation, but acknowledged that they wouldn’t know for sure until they tried it on a machine. To make it worthwhile for them to use their machines, they needed to do an initial test run of at least 30,000 capsules.
This meant that I had to take a risk. I had to ship over the matcha powder from Japan before I knew that the idea was going to work. I also had to choose the bottle and design and print the stickers before I could do a production run. Something as simple as choosing the bottle size wasn’t simple at all. There were a lot of unknowns at this point. I didn’t know how many capsules would go into each bottle because I didn’t know how safe the capsules would be for consumers. Should my customers consume one capsule per day? Was that enough? Was it safe to consume two capsules? Was it safe to consume four capsules? I had no idea. Since matcha isn’t often consumed in its raw form, I didn’t know if customers were going to get sick and I didn’t know what customers would be willing to pay for the product. While a consumer might be willing to pay $60 for 50g of ceremonial grade matcha that they would never drink, they might only be willing to pay $20 for 30g of matcha capsules that are far more difficult to make. Since I didn’t know how many capsules would need to go into each bottle, I had no idea how much matcha I would need to complete a 1000 bottle production run.
For whatever reason, I had a lot of belief in the concept. I would have sold matcha capsules from the boot of my car if I had to. It was a product I felt comfortable giving to anyone. While I never understood the market for detox products, I certainly understood the market for energy. We all need more energy. It was a product that didn’t discriminate. It was something that could be consumed by men, women, and children. It was safe for almost everyone. Most importantly, it was complimentary to my existing products. People could have the detox tea and the chocolate tea, and the matcha capsules all on the same day. I knew that there was a market out there for matcha capsules, so I decided to ship over 500kg of matcha for my first order.
I learnt from my previous design mistakes and chose gender neutral colours and a sticker layout that made the bottles look good in almost any setting, whether it was in a kitchen, on any desk, or in any car. Matcha has a very short shelf-life, so I had to do smaller production runs on a regular basis, rather than manufacturing the capsules in bulk, as I had done with the detox tea. Since matcha is very sensitive to light, I used opaque white bottles wrapped in a band sticker. The capsule casing itself needed to be transparent so my customers knew what they were consuming, but the bottle had to be opaque to protect the matcha from light. One benefit of doing business with a manufacturer in the same city was that there was no shipping lead time. Once a production run was completed, I could pick up the stock the same day and move it to my fulfilment warehouse a few kilometres away. My goal at the time was to get my matcha capsules into every household in New Zealand. In order to do that, the first step was getting the pricing right. I decided to price the capsules low for the first year to get as many people introduced to the product as possible. I also knew that the low pricing would deter imitators. The original price for the capsules was just NZ$28 for 60 capsules.
I sold through the first 1000 bottles within a month. I sold the second thousand within three weeks. Over the next year, I shipped matcha capsules to every corner of New Zealand. The feedback was incredible. Far from making customers sick, the capsules actually seemed to work. I decided to build on the momentum and released two other types of matcha capsules in quick succession that could be consumed in conjunction with the original capsules. The second type of capsules contained matcha with added b-vitamins and taurine and could be consumed to help with concentration levels. The third type of capsules contained matcha with black pepper extract and vitamin c and could be consumed before a workout to boost athletic performance. I knew that the release of other types of matcha capsules would cannibalise sales of my existing capsules, but I felt that it was important to start building up a range of products. I wanted to make sure that there was always at least one product on the website that an average person, coming across the website for the first time, would want to purchase.
The great thing about having a range of products is that it becomes possible to utilise back-door marketing strategies. When I was just selling the detox tea, it became increasingly difficult to mention or even allude to weight loss on most social media platforms. I instead decided to heavily push the matcha capsules on social media and promote the capsules as a source of guilt-free natural energy. This then brought potential consumers to the website. Once on the website, these visitors were encouraged to buy the detox tea, which had a weight loss focus, better margins, and was an easier sell. It’s a very common strategy in traditional retail. Supermarkets often make a loss on products like milk, bread, and alcohol to get customers into a store. Once the customers come in for some cheap beer, they are more likely to purchase all of their other groceries from the same store. McDonalds does the same thing. They will promote $1 Frozen Coke, knowing that customers are likely to purchase other products once they enter a drive-thru or restaurant.
If I was to point out one principal difference between consumers and creators, it would be this: when a consumer sees a bottle of M-Caps capsules, they might see a green sticker on a white bottle — that’s it. When I see a bottle of M-Caps, I see a white 250ml PVC bottle; I see a high-quality sticker with a textured vanish finish; I see Pantone 7472 C as the base colour. While I moved through a lot of stock, I had a hard time dealing with the fact that my customers didn’t seem to be connected with what they were buying. They weren’t buying the capsules because it was a great product. They weren’t buying the capsules because I took a huge risk. They weren’t buying the capsules because the product was unique and expensive to manufacture. They were buying them because they were captive consumers. They were buying the capsules because of the marketing. They didn’t care about the product. There was almost no point trying to be innovative. I could have sold another type of weight loss tea or unprocessed matcha powder or meme inspired tea cups and made more money.
On Wednesday, February 8 2017, I had a dispute with my fulfilment agent. One of the costs involved in using my fulfilment agent is an inward receipt fee that is charged when new stock is delivered to the fulfilment agent’s warehouse. This meant that every time I brought in stock, I was charged a set fee to compensate the agent for unloading and storing the stock, as well as entering the stock numbers into an inventory management system. My inward receipt fee was $3 per box. So, if I bought in 100 boxes, I was charged a fee of $300. Since my chocolate tea came in loose leaf form, I gave out an infuser free with every order. I knew that a lot of my customers wouldn’t have infusers and lived in areas where they would have no way of getting them for a reasonable price, so it made sense to improve their experience by giving the infusers away for free. The infusers themselves cost about NZ$0.80 each and were shipped in from China. I shipped the infusers in by air at 400 units at a time so I wouldn’t be charged import duties when the infusers entered the country.
Once the infusers arrived, they were stored in an airtight container that was only opened during the packing process. On that fateful date in February, my fulfilment agent received the usual order of 400 infusers. Rather than adding 400 extra units of infusers to the management system, they instead decided to count the infusers one by one — a process that would have taken no more than a few minutes. Sure enough, there were 400 infusers. Based on the terms I had agreed to, I should have been billed $3 for the receipt of the infusers. Instead, I was billed NZ$1200. When I queried the charge, I was told that there was no quantity recorded on the outside of the package, so each infuser was treated as a separate box. My fulfilment agent received the same order once a month and knew that the product cost was NZ$0.80 per unit and was being given away for free, but didn’t have a problem with charging me an additional NZ$3 per unit. I fully expected common sense to prevail. No-one in their right mind would think that it was appropriate or justified to charge NZ$1200 to count infusers for two minutes. Unfortunately, my fulfilment agent didn’t see it that way. I was told to take them to Court if I had a problem with it. That was the last straw. I snapped.
Immediately after getting off the phone with my fulfilment agent, I went on Facebook and announced that I, Sophie, was going to take a break from OMGTEA. I was apoplectic. Within ten minutes, I had drafted a post that I was confident would gain traction. The wording was deliberately ambiguous; I didn’t want customers to think that I was shutting the business down — just that I needed some time away. The truth was that, at the time, I didn’t plan on coming back. I wanted to walk away from the business and never return.
I knew that my business model needed to be improved, but the incident highlighted to me just how fragile my business truly was. I wasn’t in control. It felt like I was on an endless loop: order stock, sell stock, reorder, repeat. Every once and a while, I was able to take a small amount of money out of the business, but otherwise all of the money I made was spent reordering or releasing new products. There was no end in sight. I didn’t want to commit my life to selling tea. It was never my vision. I never set out to become a tea mogul. I never saw myself as a business person or an “entrepreneur”. I felt like I had dipped my toe in the water and been pulled out to sea by a riptide. Now that I was looking back at the shore, I couldn’t help but wonder whether I was going to make it back in. Perhaps I was more suited for law after all. Perhaps I wasn’t so off course when I made the decision to go to law school.
I had been looking for an excuse to walk away from the business for some time, but the money kept drawing me back in. That one phone call changed everything. I not only had to contend with unreliable marketing channels and ever-increasing expenses, but I now also had to worry about a hostile fulfilment agent who placed no value on our relationship. After working well together for over two years and paying my fulfilment agent a huge sum of money in that time, they were willing to throw it all away over $1200. While the decision defied logic, I had come to expect that sort of short-term thinking. It seemed a fitting way for me to end my time in business.
I didn’t have a sales target in mind. I just wanted to make enough money to shut everything down, dispose of any remaining stock, and move on completely. Within 24 hours of posting, the store processed $80,000 in orders. It shattered my previous daily sales record. Within two weeks, I completely sold out of stock. One of the quirks of business is that I couldn’t have given the stock away for free, but I was able to sell it within two weeks because the marketing message connected with enough people.
In many ways, I was committing business suicide. In the moments before a suicide attempt, we want someone to show us that they care. We want someone to burst through the door and put a stop to the act. We want them to tell us how much they love us and how much we mean to the world. Something, anything. Just one sign: a child’s laughter, a sudden downpour, the bark of a neighbour’s dog. Anything but silence. Silence tends to amplify irrational thoughts. If life truly is worth living, someone or something would intervene. That day showed me that life in business was worth living. It was the one thing that kept me going. If I had a business capable to liquidating 100% of its stock within a few weeks, maybe I had something after all.
I should have ended it there. I would have walked away with enough money and never had to think about the business again. Instead, I couldn’t help but question the rationality of my decision to stop the business. How could I walk away from a business capable of making $80,000 in sales in one day? It was a question I couldn’t adequately answer. Some days, it felt like I had made an irrational snap-decision to end the business based on a bad phone call. On other days, I felt like it was the best decision I had ever made. I couldn’t stand the toxicity of social media and wanted so desperately to re-enter the real world. However, after a few weeks away from the business, I buckled. I couldn’t let it lie. I placed another order with each of my suppliers and set about mending the relationship with my fulfilment agent. I ran the business for another year and a half before I decided to move on completely.