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How can Korean-Americans afford to start so many grocery stores?

Dear Cecil:

How is it, during the days of tight money when few people, particularly those born in this country, can secure loans to start businesses, that Korean-owned-and-operated deli/grocery stores continue to spring up like mushrooms on almost every block of most major U.S. cities? Where does this money come from? Second, how do these places justify charging fifty to a hundred percent more for common grocery items than other grocery outlets?

Steve Glave, New York

Illustration by Slug Signorino

Cecil replies:

Cecil is struggling to suppress his irritation, not with entire success. Where do you think the money comes from? The Koreans save it up, just like you could do if you hustled more and whined less. They also borrow from relatives and form fundraising clubs, in which 10-20 people contribute to a cash pool each month. The ante can range from $75 or $100 to thousands of bucks. The pot is given to a different member each month, who invests it as he or she sees fit, usually in a business, home purchase, or the like, although there is nothing to prevent somebody from blowing it at the track. When everybody has had a turn, the club disbands. The money is not a loan and you don’t have to pay it back.

In Korea such a fundraising club is called a kye (pronounced “keh”). Dating from the 17th century, it’s one of the main ways Korean small business people and investors historically have raised money. The concept is hardly confined to Koreans; Chinese have the hui, West Indians the susu, and Ethiopians the ekub. But Koreans seem to be especially adept at it. The number of Korean greengrocers in New York grew from 30 in 1977 to 1,300 in 1988. Koreans dominate the wig and liquor business in Los Angeles, and they’re a big factor in dry cleaning in Chicago and in convenience stores in Toronto. Kyes are given much of the credit for this success.

The great thing about a kye is its simplicity. There’s no red tape or bureaucracy. Typically the members meet each month over a meal at a Korean restaurant to conduct their business and swap advice.

A potential drawback is that there’s nothing to prevent kye members from failing to keep up the monthly payments once they’ve had their turn at the trough. What prevents this is a combination of trust and savvy. Kye members often belong to the same church or share some other close bond, and they know that if they stiff the others they’ll be considered slime for the rest of their lives. In addition, kyes usually are organized by a a wise head who knows enough to keep out the losers.

Kyes aren’t the only thing Koreans have going for them. Although they’re not subsidized by the Korean government or the CIA, as some envious native-born types believe, they’re usually not destitute when they arrive in this country. (In fact, they’ve become so prosperous in recent years that traditional fundraising devices like the kye have become less prevalent.) Many are college educated, and while an engineering degree doesn’t give you much help stocking shelves with toilet paper, education does confer a certain amount of sophistication, the example of Notre Dame grads notwithstanding. (By contrast, Indochinese immigrants, many of them poor peasants, have had a tougher time.) Koreans share the essential traits of all successful immigrant groups, namely tight-knit families and a willingness to work like dogs for peanuts. Finally, many stretch their money by buying businesses in tough inner-city neighborhoods that the previous owners are willing to sell cheap.

As to why the prices are higher … I don’t know that I’ve found this to be universally true, but let’s note that Korean stores don’t get the volume discounts from suppliers that the big chains do (although there are Korean buying cooperatives in some cities), and many are located in neighborhoods where pilferage is higher. And some just charge what the market will bear. What’s it to you? Buy your stuff someplace else. Better yet, now that I’ve revealed the Koreans’ secrets, get together with 20 friends and start a bodega of your own.

Cecil Adams

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