Small Business Owners: Why
Korean Americans Dominate the Inner City Retail Market
By Richard Shin
benefit of EDGE is the unique opportunity for students to share the knowledge
that they’ve attained through their research.
In reviewing the
dynamics between minority business owners and the respective communities in
which they operate, there arose a need to clarify the situation of the most
infamous small business owner: the Korean American inner city small business
owner. Within the last few years,
Korean American business owners have drawn considerable media attention
highlighted by the extensive news coverage during the “Rodney King” riots in
LA. These riots targeted Korean
American businesses and were fueled by misconceived anger and frustration.
Even at Stanford
University, a vast majority of the students and faculty are not completely
aware of the background from which many Korean American students come. Although there is some literature that
pertains to this general topic area, many of these documents focus on the
either the aftermath of the LA riots or initial hardships faced by the
intricacies of the how the small businesses work and their interactions with
the communities they serve are often overlooked. This information is important for several reasons. First, to understand and predict the
direction in which these businesses are heading. How will they continue to interact and serve these inner city
communities that they monopolize?
Secondly, to understand what is the cause of such a disproportionate
amount of Korean American business owners.
Thirdly, to shed light onto an integral part of the Korean American
culture. Lastly, and perhaps the most
key, to entertain the possibilities other minority business owners entering
these inner city markets. What are the
keys that have made these Korean American businesses successful and are they
transferable to other communities of color?
This essay has been composed with these hopes and to dispel any further
myths of Korean American businesses.
Small Business Owners:
Why Korean Americans Dominate the Inner City
Several years ago,
Margaret Cho starred in a short lived TV sitcom called “All-American
Girl.” The show drew up comic situations
fueled by the stereotypes of Asian Americans.
One of the most prevalent stereotypes involved Margaret’s parents and
their small bookstore. Numerous comical
situations arose in the way Margaret’s parents managed the store and interacted
with their customers. Although some
Korean Americans may have been offended by the blatant exaggerations in the
skits, many of these stereotypes are justified and accurate in depicting Korean
American business owners.
In recent years
Korean American business owners have received backlash by the community in
which they operate for numerous reasons.
The businesses are primarily located within urban neighborhoods and
serve a customer base consisting of mostly Blacks. These business owners have received complaints about poor service
and many of these communities have accused the businesses of exploitation.
intricacies of the Korean American business owners have been somewhat
documented, many issues still remain unclear and misunderstood. Furthermore, many
of these accounts have been given with a West Coast perspective with much of
the literature coming out of the Los Angeles or Bay area. A majority of these articles and issues
have been brought to light due to the extensive media coverage of the explosion
of anger and frustration within the Black and Hispanic communities during the
riots that followed the Rodney King decision in LA.
Regardless of the
accompanying baggage that surrounds the Korean American business owner, the
hard facts still remain: they dominate the inner city market with their
grocery, discount, dry cleaning, deli and clothes stores. They continue to thrive in these
markets. With such a monopoly held by
Korean American business owners there have been increased interest in diversifying
the owners of the inner city markets.
In order to entertain the possible influx of new Black and Hispanic
storeowners, it is necessary to examine the salient points that have allowed
the Korean American business owner to come into such prominence.
of those unfamiliar with the general situation of Korean American immigrants, a
brief summary of their emigration habits is needed. Koreans have been immigrating to the United States in great
numbers since the early 1970s. The
number of Koreans coming to the Unites States have only been limited by the
rate at which visas have been issued.
The majority of these Koreans flocked to large urban areas such as LA,
New York, Chicago, San Francisco and Philadelphia. Although they originally settled in the inner cities, many of
these Korean Americans have been able to move out to the suburbs. For many of these Korean Americans, their
“American Dream” has been made possible through opening and running small
businesses within the inner cities.
Interactions and Beginnings of Community
the late 80’s, it was widely believed throughout the inner city Black
communities that Korean American business owners had received loans from
various banks to fund the capital for their stores. Many Black entrepreneurs who also sought to open businesses in
Philadelphia had been declined loans due to their high-risk ventures, weak
credit history and lack of collateral.
Banks were leery of funding stores that would literally be located in
the ghetto. These businessmen lacked
the necessary credit history due to the simple fact that most purchases in the
inner city are made through cash transactions.
Thus the notion that members of a different minority group were being
approved for the loans that these Black business men coveted, frustrated and
angered many Blacks in the community.
This false pretense caused much resentment towards Korean American
business owners by the inner city Black community who comprised the majority of
these Korean American storeowners lacked proper business etiquette. These added complications added further
tension between the storeowners and Black shoppers. Ever since the opening of Shin’s
Lady in 1980, Mrs. Shin has been the primary cashier of the small clothing
store. For many years, Mrs. Shin used
to place the change and receipt on the counter after a sale. In Korea and Japan where physical contact
between strangers is highly discouraged by the culture, this is the proper
manner in which cashiers give back change.
Often customers would interpret Mrs. Shin’s actions as a lack of respect
and would leave the store discontent.
Mrs. Shin did not understand her actions to be poor business etiquette
until customers started asking and even demanding for the change to be handed
to them. Once this had been brought to
her attention, Mrs. Shin had no problems adjusting. Mrs. Kim who works at Kim’s Fish Market also recants a similar
small businesses also lack the financial ability to hire security guards. As a result, these stores are a popular
target for shoplifters. Thieves often
enter a store in large groups and employ different shoplifting techniques. Sometimes they bunch into one area to create
a cover for the individual who is actually shoplifting. Other times they spread out through the
store to create an atmosphere of havoc.
With only a few workers manning the store and with so many people to
watch, a shoplifter can easily steal a pair of earrings, a candy bar or a
toothbrush. Whether it’s a clothing
store, a grocery or a discount store, the situation is always the same: one or
two workers for the entire store. With
these conditions to overcome, Korean American business owners never let a
shopper out of their site. No shopper
likes to shop while under the premise of being a possible shoplifter.
shoplifting and petty theft is prevalent enough to call for such drastic
measures. One Korean American
storeowner recalls an incident in which he caught the thief in action. The thief had decided to rush into the
store, grab a jacket and run. The
storeowner saw this and pursued the thief on foot. The Korean American storeowner caught up to the thief several
blocks down the street. At this time,
the thief pulled out a knife. The
storeowner proceeded to disarm the thief, take back the jacket and return to
crime rate is so bad certain areas of the inner city that some storeowners have
set up physical barriers between them and the customers. In many delis and sandwich shops,
bulletproof glass separates the workers and the shoppers. The order for the food is taken through the
glass barrier. Once the customer passes
the money through a small opening to the cashier, the change and food is passed
back out. This setup resembles that of
banks in which there is bulletproof glass protecting the tellers.
further the dissatisfaction of the shoppers, many of these Korean American
businessmen offer poor to no customer service.
Many times they refuse returns or exchanges on items sold in their
stores. Their general interactions with
the customers are interpreted as harsh and abrasive often due to their poor
English speaking skills.
adverse conditions, why do Korean American small business owners remain successful? Rarely do you see a small store go out of
business. In fact, many of these stores
have been in business for nearly 20 years.
The majority of the reasons stem to the basic economic rule of supply
and demand. There are no other
businesses within the inner city that offer competition.
Korean Advantage: Procuring Capital
of the greatest reasons why Korean Americans have been able to open up small
businesses within the inner cities is due to the means in which they are able
to procure capital. They are able to
circumvent the banks that would never fund business ventures within the inner
cities and ghettos.
are several manners in which Korean Americans are able to obtain capital. The method of the “geah” (pronounced with
the same vowel sound as the word “red”) has received notoriety. This system involves an exchange of money
between a group of friends. Consider a
“geah” of 12 families that have arbitrarily decided to have individual family
contributions of $100 a month. Each
month, one family would be the recipient of the other 11 members’ contribution
of $100. The recipient of the cash
would now have $1100 to invest interest free.
Now consider a “geah” of 20 families that have decided to have monthly
contributions of $500. The investment
possibilities are certainly enticing.
there are numerous unsaid rules governing this informal organization. The money is exchanged with the intent of
investment. The Korean culture is
largely governed by the idea of “holding face” in public. It would be a great shame if a family
defunct on a payment. Additionally, the
Korean community in even the largest of cities is relatively small making peer
accountability a great motivator. Word
travels quickly within the Korean community further stressing the need to hold
“geah” is such a dynamic and informal setup that if a particular family is in
dire need of immediate capital, the recipient can be changed. Interestingly, the institution of the “geah”
is not solely based on money exchange. The “geah” is usually contracted between
friends. Thus there is large social
aspect to the organization. The
recipient of the money pool on any given month is usually responsible for
hosting the gathering. The gathering is
usually held within the recipient’s home and gives the opportunity for friends
to catch up at least once a month.
Additionally, the members of the “geah” will often golf and vacation
together. Within this unique social and
financial model, money is freely loaned with the assurance that everyone will
be the recipient of the money pool at some point.
Korean American families have become more established the need for the “geah”
has turned into more of a social institution.
Within older and more established “geahs” the exchanged money is
primarily used for down payments on houses or to purchase new vehicles. Even though the actual money exchange is no
longer needed for business purposes, the money is still transacted for the sake
are several other means by which Korean Americans procure the capital necessary
for starting businesses. There are
hundreds of thousands of Korean Americas that are living in the United
States. The recent wave of immigrants
have included some that have come to the United States in order live in closer
proximity to their families. The Korean
immigrants are no longer the most impoverished. Some come over with small fortunes and are able to easily fund
themselves. In fact, many people that
were white-collar workers in Korea have given up their jobs to emigrate to the
U.S. With poor English speaking skills,
these workers are left with few working options. Many choose to open a small business.
the innate capital and the system of the “geah” low interest loans are freely
made between individuals. For the same
reasons as the “geahs” these loans are always paid back within the agreed time
allotment. These loans are made
possible by the high amounts of hard cash that is available within a small
business environment. Interest free
loans between family members are not uncommon.
of Korean American Businessmen
the plethora of Korean American entrepreneurs, one never sees a businessman
venture far out of the small business arena.
Some businesses have begun to move out into the surrounding suburbs of
Philadelphia. Even so, the inner city
businesses still remain the most profitable.
Greater profit margins are turned with high turnover rates of lower
priced goods and services.
Korean American small business faces difficulty in catering to the higher
quality of goods and services that suburban consumers have come to expect. Nonetheless, the lower crime rates, closer
proximity to their homes and new markets with less competition have drawn some
Korean Americans businesses to the suburbs.
However, the Korean American business is best equipped to serve the
contributions to the profit margins that allow these inner city businesses to
stay afloat include the option of not hiring any additional salespeople or
store workers. The husband and wife
usually work in tandem to run a store.
If there is a greater need, the children, grandparents and various
members of the family are recruited to help out at the store. Working at the store can be equivocated to
performing other household chores. Some
Korean American children receive their tasks dutifully, while others are less
than willing to help out. It is a truly
unique characteristic of most Korean Americans that have parents with
stores. Regardless of their
socioeconomic class, they have work experience in the ghetto. Sometimes the extended family enters a
business venture together. Nonetheless,
the expansion of the store and growth of the business is literally limited by
the size of the family.
Curse of the Inner City Small Business
order for a Korean American businessman to remain successful, he must commit to
a life of working in the ghettos and inner city. Most businesses have six-day working weeks, and there are few
vacations during the year. For some,
such as deli owners, the store must stay open 365 days of the year with closing
times nearing midnight on weekends.
of these businesses are in areas that have high crime rates. In fact, the mortality rate for Korean
American grocers is higher than for U.S. soldiers in Vietnam during the Vietnam
War. It is likely that every Korean American
businessman will be the victim of at least one robbery at gunpoint before he
these adverse conditions in which Korean Americans work, they are still accused
of exploiting these primarily Black communities in which they work. Some of this dissention stems from a lack of
understanding of the Korean culture.
Much of the exploitation accusations arise from the fact that most
Korean Americans live in the suburbs.
All of the money that is made in the inner cities is directly filtered
out to the suburbs via these Korean American storeowners. This undoubtedly weakens the economic
infrastructure of the inner city communities. The Future of Minority Business Owners in the Inner Cities
there have been improving relations between the inner city Black community and
the Korean American business sector.
These improving relationships have been facilitated by the increasing
numbers of Korean American political organizations such as KAGRO (Korean
American Grocers’ Association) and their desire to maintain good relationships
with the communities that they serve.
with more time spent in the United States, the English speaking skills of the
Korean American business owners have vastly increased. They have also adapted better business
etiquette. Mrs. Shin now comfortably interacts with her customers. Since she is familiar with the products she
sells and the popular new fads, she is able to make suggestions and help the
customers to a great degree. Mrs. Shin
is on a first name basis with some of her frequent shoppers and even allows her
oldest patrons to shop using a store tab.
After 15 years in the business, Mrs. Shin is now able to provide the
comforts and conveniences of shopping in a small store.
the great stress of education placed by many Korean American parents on their
children, the continued dominance of Korean American business owners in the inner
cities is highly unlikely. Although
there continues to be an influx of Korean immigrants that fuels the small
business market, the growth rate of new stores within the inner cities has
drastically decreased. The
second-generation of Korean Americans are leaning towards a variety of
professional fields. Running stores
within the inner cities is considered an occupation of their parent’s
of these trends and the proven viability of the inner city markets, the ability
for other minority groups to enter the market seems open. The greatest issue that other minority
groups still face is the ability to procure the initial capital. Given this problem, all minority entry would
have to be from the outside in. That
is, it would be highly unlikely for inner city residents and businessmen to
capture the capital needed. The venture
would have to come from businessmen already established in more upper class
districts of the urban environment.
efficiency of the “geah” system is culture specific to Korean Americans. It has been observed that a great deal of
the culture of Korean Americans is intricately intertwined with the “geah”
allowing for its great success.
additional consideration is the fact that many Korean immigrants bought their
businesses from Black owners who incidentally bought them from Jewish owners in
the mid-1960s. Many of
these Black owners forfeited their businesses due to the increasing crime
rates. The profit margins were not
worth the high risk for them. The question
of whether a second wave of Black owners would sell their businesses in the
midst adversity still remains.
The financial potential for the inner city market is still
great. There is also a great need to
diversity the ownership within this arena.
In order to revitalize these communities, the cash spent in these stores
must remain within these communities.
Thus the owners of these inner city stores must be residents of the
inner city. Unfortunately, even with
extensive micro-loans, large scale financing is nearly impossible. The success of the Korean American
businesses is rooted in the initial capital that the businessmen are able to
procure. Any businessman who is able to
obtain the necessary capital and is willing to face the hardships of running an
inner city store is nearly guaranteed a comfortable profit margin. However, up to this point, only the Korean
American immigrants have been able to accomplish this task. Nonetheless, there is comfort in the
potential for an open market.