Cosmetic Changes -- Koreans Are Moving Into A Beauty-Supply Market Once Dominated By African Americans

Richard Park and Brenda Velasquez do business within a block of each other on South Jackson Street, competing for a small piece of a booming $2.5 billion business: selling hair sprays, conditioners, shampoos, rinses, wigs and other beauty-care products to African Americans.

But there the resemblance ends.

Park came to the United States from Seoul, South Korea, in 1975. Soon, he was working for an import-export business. Later, he owned a string of small shops in the Los Angeles and Chicago areas: dry cleaners, a teriyaki restaurant and a beauty-supply store catering to African Americans.

Well-educated and well-connected, Park, 51, bought many of his supplies cheaply from Korean wholesalers and got his financing from Korean banks and friends. He started Western Beauty Supply in the Promenade strip mall on Jackson five years ago.

How's business now?

"Business has been up and down, but over five years business has grown," says Park, who owns another black-beauty-supply shop in Federal Way and has expanded his Seattle store.

Velasquez, who has a college degree and was a former assistant controller for a Sears store in Aurora, started BJ Beauty Supply in the same strip mall in 1981. She later moved it across the street. For years her retail business thrived, but then she watched sales decline as competitors, such as Park, moved in and undercut her prices. She now wholesales products to black hair stylists, relying on her ability to market some exclusive products that Korean-owned businesses can't get.

When Velasquez opened her store, she counted more than 10 black-owned beauty-supply businesses across the state that catered to African Americans. Today, she may be the only one left.

How's business?

"We're just hanging in there," she says.

Nationally, Koreans, who have traditionally carved entrepreneurial niches in the small neighborhood grocery and dry-cleaning businesses, now control about 80 percent of the retail end of the black-beauty-supply business, according to Beauty Times, a Korean-language trade journal in St. Louis. Some of the larger shops also sell inexpensive Asian imports, from leather goods to apparel items.

Until recently, African Americans have controlled most of the channels in the black-beauty-supply industry. They still dominate the manufacturing of hair products but are losing control of the wholesale and retail sides of the business just as sales nationwide are growing.

In the Puget Sound area, Koreans own an estimated 15 beauty-supply stores that cater to African Americans. Some of the shops were opened in the past two years in anticipation of the industry's growth.

Sales of ethnic hair-care, skin-care and cosmetics products, primarily to African Americans, were up 6 percent in 1992 from 1991, according to a study by Packaged Facts Inc., a New York-based market research firm. Industry sales are expected to grow 6 percent or more annually until 1997.

Many of the Korean-owned stores are concentrated along what has become known as "Nail Strip" on Rainier Avenue South. Hundreds of Asian-owned shops dot the busy street, from restaurants, dry cleaners, discount stores, export shops to numerous tiny nail shops dominated by Vietnamese and Koreans.

But it's the Koreans' near monopoly of the black-hair-care business that frustrates African-American merchants, who say they are being squeezed out of one of the few industries they have traditionally dominated.

"They know there's a lot of money in it," says Decharlene Williams, owner of Decharlene's Beauty and Boutiques on Madison Street and former president of the Central Area Chamber of Commerce. "They know black people will spend a lot of money on hair, clothes and shoes."

Like many of the issues involving immigration, the story has gone unnoticed without a major conflict. Yet as Asians dominate more small businesses in Seattle's inner city, the question is: Can they thrive and become part of the community without creating the racial tensions that have flared up in other parts of the country, such as Los Angeles, Chicago and New York City?

The answer is a complicated one, distorted by competition, race and cultural differences. The biggest difference is that Koreans have a tight support network that includes informal access to capital and lots of family and friends to work in the businesses, whereas black merchants can't get support from black consumers.

Koreans, successful at running small inner-city retail stores, entered the black beauty trade because the profits were higher than the razor-thin margins of some of the other businesses.

Korean entrepreneurs applied the same strategy to the black-hair-care business that brought them modest success in other businesses. They work long hours, use family members as a source of cheap labor, establish tight relationships with Korean businesses and wholesalers, and take advantage of their ability to raise financing through Korean banks or family and friends. Many Korean immigrants have a college education and come from a culture that nurtures business as vigorously as the inner city seems to stifle it.

"They bring high education and money with them," says Steven Balkin, an economics professor for Roosevelt University in Chicago, who has studied the subject.

Cultural factors

Park and Velasquez are no different from any other small-business owner. They want to be successful and make money. But their story illustrates how culture plays a decisive role in the outcome.

Valesquez and other black shopkeepers complain that Korean businesses undercut their competitors by selling below wholesale costs until they have attracted a base of customers, and other owners go out of business.

Park says he studies what his customers need and learns about the products. Price is everything.

"We give the customer the right thing at the right price at the right time," he says, adding: "All of our customers are friends."

Cheaper prices, indeed, do seem to be the reason Korean-owned shops have flourished. But there are other reasons. Korean shop owners benefit from a strong wholesale network that allows them to buy in bulk and cut costs.

Koreans also have what Balkin calls "social capital," a network of contacts to help new immigrants learn of job opportunities or stores for sale, meet role models and learn how to run a business in the U.S.

"Many of the vendors who will supply you will be Korean also," Balkin says. "They have a vested interest in seeing you succeed. They give you advice and help."

Then there is the kye (pronounced "keh"), which is a common but informal way of raising capital among friends, associates or family. One person leads each kye group, gathering 15 to 25 people who each contribute about $500 a month. The total typically reaches $10,000 and often $20,000.

Members then can receive the money through a rotation or bidding system and use it to buy or expand their business. The informal ties of kye members can be as binding as a signed loan agreement with a bank.

No such thing exists in the black community. Black merchants can't attract that kind of support. They complain that black consumers shop with them last, preferring to go to the Koreans and other business owners first.

"It creates a lot of animosity because the Korean merchants are hostile, but the blacks still shop with them because of the price," says Williams of Decharlene's Beauty and Boutiques. "But when black consumers shop at a black store, they expect more service, they want you to be more polite."

The tight-knit Korean business community also makes it difficult for outsiders to make contacts, sell products or hear about businesses for sale. Most Koreans sell their stores to other Koreans or Asians.

One African American, who was representing a company that sells hair spray, says he was having difficulty getting any credibility with Korean-owned shops.

Charles Clarke, who now owns Maxi's Today's Hair Salon in Federal Way, recalled how he offered to demonstrate the product at one of the Korean-owned stores. When he arrived, the manager had forgotten the appointment.

"They didn't have anything set up, so they put me in the corner," Clarke says. "The manager was very rude. I was very disappointed. We offered to leave rather then suffer the humiliation.

"I don't think they have sufficient respect for African Americans. All they want is the business."

Need for better understanding

Koreans say that since the Los Angeles riots in 1992, when black residents torched Korean-owned stores after a jury acquitted the police who beat Rodney King, they realize the need for better understanding. The Beauty Times carries stories about black culture and how Koreans can improve relations with African Americans.

"Black people think the Koreans are not kind, but that is actually not true," says Kay Song Lee, editor of the Beauty Times. "They don't understand how Koreans show kindness."

The language barrier can create misunderstandings.

"The first generation of Koreans have a communication problem," says Eugene Shin, the Korean owner of Living Color Beauty Supplies on South Rainier, which serves African-American customers.

Shin has an advantage, he says, because he has lived in the U.S. for 20 years. He says he understands America and his customers. But that's not always the case with newer immigrants.

"There is this cultural difference," Shin says. "The way they act or speak might be misinterpreted by the customer."

In Seattle, Koreans and African Americans regularly meet to exchange information and help each other, says Dong Keun Lee, editor of the Seattle-based Korea Central Daily.

"We realize there is some issue and some misunderstanding," Lee says. "We learned some good lessons from the L.A. riots. Just to cooperate with not only the black community but with other Asian and white communities."

Inner-city economics and relations between African Americans and Koreans will always be difficult because of cultural differences, studies show.

African Americans often have less education, less business experience and lack access to financing, says Injin Yoon, a Korean sociologist, who wrote his doctoral dissertation for the University of Chicago on the black-Korean rivalry for the inner-city dollar. Black people with education, on the other hand, often leave the inner city for jobs with the government, universities or corporations.

"It's much easier to be an entrepreneur if the people you hang out with are entrepreneurs," says economics professor Balkin. "Many blacks don't have those contacts. And classes are a poor substitute for getting that nitty-gritty, reality-based information that you can only get from experience and from other people."

The problem for Velasquez isn't education. She earned a bachelor's degree in accounting from the University of Washington. And it isn't necessarily financing. She has received bank loans.

What hurts her the most, she says, is the lack of a strong support network. She doesn't have the buying power that Koreans have through their distributors and, as Williams points out, support from the community is a problem.

"It hurts us economically," Williams says. "It's a barrier that we haven't been able to tear down yet."

Korean merchants, for their part, say they, too, are just trying to survive and find economic stability.

"We want to make a successful life here," says Lee of the Beauty Times. "We have more opportunity here. We are the next generation of immigrants. We are no different than the Italians, the Jews and the Irish before us."