Are you starting a business in California? These tips and facts will stir you in the right direction.
The Californian market is a gold mine for businesses, especially if you are in the Hispanic food manufacturing industry because of the prominent Latino population in this state. But, regardless of what industry your business is in and you want to conquer this market you may have asked yourself, how easy is it to reach this goal?
To answer this question, and show merchants the correct approach to enter the Californian market, Abasto Magazine talked to Juan Prieto, a Broker with 35 years of experience in selling products to supermarkets and owner of Prieto Sales and Service, based in Commerce, California.
Market Facts to Consider If You Are Starting a Business in California
- Study the market. California is the fifth world economy; therefore, all manufacturers want to enter.
- If you are already doing business in other states, whether it is Florida, Texas or New Jersey, a big surprise awaits you in California.
- The cost of living in California is higher than in other states. The highest expenses a retailer will have are its employees, real state, and logistics.
- The minimum wage in California is $12 – $15/hour. There are already cities with hourly rates of $15/hr; Florida, $8.46/hr; Texas, $7.75/hr; New Jersey, $8.85/hr.
- Gasoline price, using a national Club Store as a base measurement: California, $3.09/gl; Florida, $2.50/gl; Texas, $2.39/gl; New Jersey, $2.69/gl.
- California has a State Income Tax. Florida and Texas do not.
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10 Golden Rules to Consider
If you are starting a business in California, according to Prieto, the following rules must be understood and followed:
- Because of those as mentioned above, a retailer in California should not set the same markup to their product as other states.
- Be realistic about your product, about your sales expectations; these will be a reflection of your financial investment.
- Do not waste the buyers’ time, especially on your first meeting. Be prepared; buyers want to know product cost and strategy so that your product reaches the end consumer. Your presentation should be simple and to the point.
- Retailers in California, due to their exponential growth, have a set of clear rules and standards before giving out Purchase Orders.
- Before your product is considered into a retail store, you need a distributor, either wholesaler or DSD. Your product will dictate which route you should take.
- The doors are always open for innovative, healthy, new products.
- New products are always a risk for buyers. Even if your product is a leader in its category in other states or another country, California has its own culture, pace of life, climate, etc.
- New products must be at least 20% cheaper than the leader. They should give the retailer a more substantial gross profit margin.
- New products must bring “slotting”, demos, promotions, and advertising participation. California is expensive to penetrate, but it has the potential to be the state with the highest volume of Hispanic products. For instance, Southern California has retailers where their stores are visited on average by 10,000 to 15,000 people weekly.
- You need a local presence, either with a Broker or a consulting agency, any of them must have the trust of buyers, and you need someone who can provide knowledge, who can give HOPE: Honesty, Options, Word (as in trust), and Experience.
Are you starting a business in California? Do you have a business in California? Let us know your thoughts and any other tips we may have missed!