The ubiquitous Korean grocery and liquor marts that have become a fixture of the L.A. landscape may soon become a thing of the past. A recent report shows that a large percentage of those small-business owners are thinking about calling it quits and closing up shop as their college-educated children turn their backs on the family business in favor of other careers.
"There is almost a sense of fatalism among these business owners," said Denise Fairchild, director of the Community Development Technology Center, which produced the report. "A feeling that this is our lot in life, and because it typically means working long hours just to get by, they are not encouraging their children to do the same thing."
Indeed, the study found that many of the Korean immigrants who run the tiny retail and service outlets feel trapped by cultural and linguistic barriers. A number of them were reluctant entrepreneurs to begin with and bought their stores because they saw that as their only means to secure higher education for their children.
With that mission accomplished, they now are starting to focus their attention on getting out of those businesses.
The CD Tech report, entitled "The Southern California Minority Business Atlas," states that 49 percent of Korean-American business owners cited retirement and succession planning as their most important financial assistance needs. That is a far higher percentage than any other minority group surveyed in the report. By comparison, only 7 percent of Chinese-American and 5 percent of Japanese-American business owners cited those issues as their most pressing concerns.
The unusual preoccupation with closing their shops reveals that many Koreans in L.A. have little illusion about the long-term economic prospects of the types of businesses they operate and don't expect their children to take over.
The majority of the Korean-owned businesses tend to be small grocery marts, liquor stores, dry cleaners, beauty salons and the like, with annual revenues of less than $500,000 and with little growth potential. By comparison, the Korean Americans who own larger manufacturing or distribution businesses tend to be less inclined to sell because those operations are much more viable.
"If the business is too small, the children will not want to take over, and the owners will try to sell it," said Yong Choe, chief financial and operating officer of Hanmi Bank. "But if it has sales of over $4 million or $5 million a year, the owners are not going to sell it, and in some cases the second generation is getting involved in these businesses."
The fact that second-generation Korean Americans have no desire to take over smaller family businesses is in many ways a testimony to the success of Korean immigrants. The children have the education and the skills to compete for well-paying jobs in the mainstream economy and have no need for the demanding task of operating a neighborhood store. "It's in many ways a typical immigrant pattern," said Cooke Sunoo, program director of the Asian Pacific Islander Small Business Development Program. "More than 70 percent of the Korean business owners are college educated, and they will want their children to go to college as well. But when the children have gone to college, they don't want to come back and run a dry cleaning business."
Although this pattern is not uniquely Korean many Jewish immigrants, for example, followed a similar path after World War II the CD Tech report shows that Korean-American business owners are in many ways very different from other minority entrepreneurs.
Not only are Korean Americans well educated, most were born in Korea, with only one out of the 203 Korean business owners surveyed born in the United States. Still, this is also the case for many Chinese-American business owners. What really sets Korean-American business owners apart is their motivation for starting their own firms.
No fewer than 60 percent of those surveyed said they thought that was the only way to make more money. Just 10 percent said it had been a longtime dream.
By comparison, only 1 percent of Latino business owners surveyed said that starting their own business was the only way for them to make more money, and 36 percent said it had been their longtime goal.Land of opportunity
The first generation immigrants who arrived from Korea in the '70s and '80s spoke little or no English and had little education that would get them hired by mainstream businesses. As a result, they used their savings or their access to financial networks to buy small stores, often in undesirable parts of town such as South Central L.A., where few entrepreneurs dared to venture.
"When Korean immigrants arrived here, they dropped right into the existing (Korean-American) business network," said Fairchild. "After (the L.A. riots of) 1992, there have been several efforts from the city to get Korean liquor store owners into better, well-established businesses, but none of these were very successful. The owners' response was, 'This is what we know how to do.'"
Many Korean immigrants came to the U.S. because at that time the Korean economy was still in very poor shape, and it was much more difficult for their children to get into college in Korea than it was in the United States.
"Nobody back then dreamed that South Korea would become as successful as it has," said Caroline Kim, a former program manager with the Los Angeles Community Development Bank.
Indeed, a combination of the stronger Korean economy and the L.A. riots of 1992, in which many Korean businesses were looted and burned, has caused the number of new immigrants from Korea to drop significantly from its height in the '70s and '80.Tough to find buyers
The dwindling number of new immigrants, combined with the fact that second-generation Korean Americans are entering the mainstream economy, means that business owners looking to sell their stores are facing a predicament.
"Unfortunately, many of them have not prepared for their retirement and their business is all they have," said Anthony Kim, a vice president and financial consultant with Merrill Lynch & Co. "There are not many buyers out there, however, and it is difficult to sell. That might mean that a lot of these business owners who want to retire may have to continue working."
Part of the problem is that the market for small retail and services operations has changed dramatically over the last 10 to 20 years. The advent of big-box retailers has cut into the business of small, neighborhood stores and that has made these stores a less lucrative prospect for buyers.
Thus far, it is unclear whether a new immigrant group will step up and take over the Korean shops, just as the Korean immigrant took over many of the Jewish-owned businesses when they first arrived.
"Perhaps some of the immigrants from the Middle East who have a little capital might take over some of these businesses," said Simon Choi, a senior planner with the Southern California Association of Governments. "But there's no way to do it without capital you can't start in the middle."
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