Riot Impact Worse Than Predicted : Commerce: Many businesses in South-Central Los Angeles and Koreatown were underinsured or had no insurance at all.
South-Central Los Angeles and Koreatown--the areas hardest hit during the spring riots--suffered greater business losses than expected, and revitalizing the areas will be extremely difficult, according to the first survey to measure the riots’ impact on commerce.
An estimated 40% of the businesses damaged or looted during the three days of rioting have shut their doors for good--double the failure rate expected by Dun & Bradstreet, the business services giant that conducted the study, which will be released next week.
In addition, nearly 40% of the responding enterprises in South-Central and Koreatown had no insurance or were insured for only 50% of their total losses or less, a percentage that survey managers called relatively high.
The study provides evidence of a shrinking retail base in South-Central and Koreatown, a trend that concerns many residents in those communities.
“Immediately after the riots various federal agencies came to town and said everything is going to be OK,” said Jack Kyser, an economist at the nonprofit Economic Development Corp. of Los Angeles County. “However, this study shows that some communities have taken a tremendous hit and are still suffering.”
The survey is based on data gathered from 560 business owners in South-Central Los Angeles and Koreatown, a pool of respondents that represents about one-eighth of the enterprises affected during the riots, Dun & Bradstreet executives said.
Of the 560 businesses suffering losses in the two communities, about 75% were retailers, according to the report. In all, 229 of the 560 enterprises are no longer operating, the report said. Of the 229 out of business, 196 were retail operations.
“This is a very sad situation,” said Michelle Smallwood, manager of the Dun & Bradstreet Los Angeles office. “It will take a long time to recover from this. The shopping choice in these areas has been sharply reduced.”
Indeed, many residents of the two communities are now traveling greater distances to shop because nearby stores are no longer operating. Effie Sims, who lives near the intersection of 77th Street and Crenshaw Boulevard, said she is also now forced to drive to Inglewood to have garments dry-cleaned because the local cleaners, a riot target, has closed.
“I drive, but I have friends who don’t have a car and I give them a ride,” Sims said. “I’m concerned because this community was already under-served before the riots.”
To be sure, the retail sector was hard hit--but certain kinds of retailers suffered more than others. For example, at least 31 stores that sell liquor, beer or wine in South-Central and Koreatown have closed after suffering damage or inventory losses during the riot. Before the disturbances, there were 366 spirits retailers in those areas.
Grocery stores in South-Central and Koreatown suffered most. At least 46 groceries were destroyed or permanently shut down after experiencing damage or inventory loss. There were 714 groceries in the two communities before the disturbances.
However, many new grocery stores will be erected in the two communities, said John Golisch, partner in charge of Southern California retail and wholesale services at Arthur Andersen & Co., the accounting and business services firm. Indeed, supermarket chains such as Vons, Food 4 Less and Smart & Final have announced plans to expand in those areas.
“Grocery stores will be replaced because people have to spend money to eat,” Golisch said. “However, apparel and other consumer goods involve more discretionary spending. . . . Consumers in those areas are already turning to retail facilities outside their immediate vicinity.”
As a result, some of the shopping patterns of residents in South-Central and Koreatown may change. Retailers or investors may be reluctant to re-establish businesses or open new outlets in the two communities--even if they have sufficient insurance coverage--because consumers may be developing new loyalties, Golisch said.
But a large number of businesses in the two communities have little or no insurance.
Of the 140 business owners who answered questions about insurance coverage, 33% said they were insured for between 50% to 80% of their losses, and 25% said they were insured for 80% or more of their losses. However, 19% said they were insured for 50% of their losses or less, and 18% said they had no insurance coverage.
In comparison, Michelle Smallwood of the Los Angeles Dun & Bradstreet office, which maintains credit ratings on businesses from San Luis Obispo to Los Angeles, said that only about 10% of the businesses the firm contacted in that area have no insurance.
Riot-Related Losses
A Dun & Bradstreet survey of businesses experiencing riot-related losses in South-Central Los Angeles and Koreatown included data on the kinds of enterprises most affected by the disturbances. The following shows the number of enterprises in those communities damaged or looted during the riots and the total number of businesses operating in those two areas.
Number Total damaged number of Percent Category or looted enterprises lost Grocery stores 82 714 11.5 Spirits retailers (liquor, beer or wine) 57 366 15.6% Restaurants 30 1,603 1.9 Women’s apparel 23 513 4.5 Furniture stores 21 161 13.0 Shoe stores 15 142 10.6 Drug stores 13 112 11.6 Gasoline stations 11 218 5.0 Men’s apparel 9 200 4.5 Jewelry retailers 9 109 8.3 Consumer electronics 9 97 9.3
Source: Dun & Bradstreet Information Services
