Ethnic Formula for Success

Beth Hughes, of the Examiner Staff
January 28, 1990

Vietnamese run manicure salons. Arabs own mom-and-pop grocery stores. Koreans run the dry cleaners.

While these statements are obvious stereotypes, the numbers show that immigrant entrepreneurs tend to cluster by ethnic group in the same fields of endeavor.

Unlike many phenomena, this clustering of newcomers by business is not peculiar to San Francisco and the Bay Area, nor did it originate here.

In New York City, Asian Indians run the subway newsstands. In Los Angeles, Armenians are concentrated in the waste industry: landfills, hauling, environmental engineering.

Why does one immigrant group go into one business and not another?

In the past, immigrants were excluded by law from some sectors, which meant they found opportunity in other, usually less desirable fields such as junk collection or waste
hauling.

Showing the Ropes

Today, the clustering most often can be traced to a brother, sister or a friend who, when he or she arrived in the United States, opened a small business and then showed the
ropes to relatives and friends as they arrived here.

"Usually people who come here don't come cold. They have friends or a cousin to guide them," says Fred Mogannam, a Palestinian immigrant who graduated from Lowell High School in 1951, three years after he arrived in the United States. He is now a member of the Small Business Commission in San Francisco.

A graduate of the School of Optometry at UC-Berkeley, Mogannam has worked in Arab-owned mom-and-pop grocery stores, owned his own stores and, in 1969, organized the Bay Area's 500 or so Arab-owned groceries into the Independent Grocers Association.

Now a real estate broker, Mogannam sells grocery stores to young Arab immigrants, who find their first employment and training in the grocery business because of contacts made through family or friends. The contacts often sell their businesses to the newcomers and help with financing. The newcomers get a start, and the seller gets an opportunity to take on a bigger challenge.

"Information is circulated pretty efficiently through church and other groups," says Roger Waldinger, a professor at the City University of New York's City College in Manhattan. "It's pretty easy for someone new to the community to get hooked in with people who have succeeded."

Flow of Information

Once an immigrant group focuses on a business sector, the information flows even more freely.

It is not unusual to find Vietnamese language classes for manicurists at cosmetology schools in Southern California; Korean dry cleaners produce a monthly national newsletter that, among other tips, provides updates on the latest advances in stain removal.

As to how that brave soul becomes the first of his group in a business, the selection process is "totally arbitrary," says Howard E. Aldrich, a University of North Carolina
sociology and business professor who studies immigrant businesses. "You can search in vain for something in their culture, but there's nothing in their past."

Immigrants are "looking for easy entry," says Nina Gruen, the principal sociologist with Gruen Gruen + Associates, a San Francisco research and consulting firm that specializes in the economics of real estate. "That means low-capital-investment, labor-intensive businesses."

For many immigrants, working in and then acquiring a small business appears to be as much a part of the settlement process as learning English. Even though small-business
ownership is not always a success story, the foreign-born have always been overrepresented in self-employment, Aldrich says.

"Small enterprise played an important role in the economic progress of a variety of immigrant groups -- Jews, Italians, Greeks, Chinese and others -- and their proportionally higher involvement in entrepreneurial activities continues to differentiate their groups from much of the population," he says.

Business Comes First

Often the business comes before English-language fluency or even citizenship.

Those familiar with the settling patterns of various immigrant groups say it is unknown how or why the first member of a group makes the initial leap into a field. Historical
patterns, however, are discernible from property sales.

Usually, the newcomer buys from a member of another immigrant group that arrived earlier. For example, on both coasts, Chinese and Vietnamese immigrants are buying garment workshops from Jews, who have dominated the garment industry since the turn of the century, when many arrived from Europe with little except a knowledge of tailoring.

Often the newcomer buys from a family whose success has enabled their children to choose a different path.

"The kids have a higher status, but, interestingly enough, they often don't make as much money as their parents," Gruen says. "In the Jewish situation, which is my own ethnic group, lots of families are in junk, which is very profitable, but the children don't see this as glamorous, so they become doctors or lawyers and never make as much."

Muscle Makes up for Much

Steve Hong, the former head of the Korean Chamber of Commerce in San Francisco, has traced the Korean takeover of the dry-cleaning business from the French. He agrees that immigrants "make up for the lack of knowledge of the culture, the lack of money, the lack of communication skills," with "much muscle. That's the dry-cleaning business."

Now he is watching the Vietnamese take over the local roofing business from the Koreans.

"I don't know why the different nationalities do different businesses like that, but it's there," Hong said. "Middle East people go into groceries. East Indians go into the
motels."

Vietnamese have dominated the roofing business over the past five years, Hong says, because "the Koreans couldn't compete against their labor costs. The newer immigrants had cheaper labor."

How the Vietnamese have come to dominate the local roofing business so quickly reflects the speed with which Asian immigrants launch businesses.

On average, they open businesses within 18 months of their arrival in the United States, compared with 10 years for members of other ethnic groups, says Gavin Chin, a senior
economist with the Minority Business Development Agency in the Department of Commerce.

Chin says he can't explain why Asians go into business so much faster than members of other immigrant groups. "That's the $64,000 question," he says.

Low Start-up Costs

In some cases, the answer is that Asian immigrants enter businesses with low start-up costs, such as manicure salons, which are even cheaper to establish than restaurants, a traditional entry business.

It is not known what percentage of the 300,000 to 400,000 manicurists in the United States are Vietnamese, says Walter Rappaport, director of the World International Nail and Beauty Association.

But the Vietnamese are a major presence, at least in California, says Steve Gold, a sociology professor at Whittier College who studied Vietnamese refugees in the Bay Area for his doctoral dissertation.

"San Francisco, Los Angeles, San Diego -- they cover the whole gamut of neighborhoods -- Beverly Hills, Union Square, Watts. That, along with the doughnut shops, is where the
Vietnamese are," Gold says. "Distant relatives help each other start up. You work as an employee for a while, learn the business and go out on your own. It's almost like a chain."

The lure is the money. "You can net $40,000 to $50,000 a year," says Anna Magren, editor of Nails Magazine, a monthly trade publication. "Many shops are open 12 hours a day, seven days a week, and it's fast work. Vietnamese come from a family-oriented culture. With this, you can hire your family, it's not as expensive as a franchise and it's yours."

Nancy Ho, a 37-year old Vietnamese refugee turned manicurist, fits this profile. After arriving in San Francisco in 1980, she spent two years learning English and then went to
beauty school. She opted for a manicurist's license because "my friends said it looked easy to do and that I could understand when the customers talk to me."

She and a partner then struck out on their own, each investing $7,000 in savings in their own manicurist shop on O'Farrell Street, across from Macy's. Ho works 10 hours a day,
six days a week. After almost four year of filing, painting, sculpting and tipping, she says profits are slim and she is thinking about selling her interest in the shop.

"Now I want to go back to work for someone else," she says. "This is hard."