The zips were the importers wholesalers of the heroin, they worked with a handful of top lcn guys like matthew madonna and then you had mid level mob guys that would distribute it to street level guys that were running the corners or turf. However as african american crime groups became larger and more organised such as frank matthews, Nicky barnes and the council the pretlow group in new jersey they were able to take control of the street level and mid level trade meaning that they cut out alot of the middle men both black and italian and deal directly with the suppliers and top guys in the drug trade. Controlling street level sales although it brings the violence and police attention it however brings in the maximum profit that the drugs can make. Also you had an italians in the purple gang that sort of took over from nicky barnes for a short time when he was arrested and were supplying the network of dealers that were left over. Im not too sure if it was exclusively sold in the ghetto at the time as heroin has large white customer base as well especially now but it wouldnt suprise me if some of the lcn guys thought that only blacks do drugs hence they were safe selling it in the ghettos. As for what happens to the heroin it gets cut up with other substances which bulks it up and then sold. Also there have been a number of instances where mobsters have engaged in street level drug dealing, take this case for example http://www.nytimes.com/1996/10/02/nyregion/officials-say-mafia-ran-crack-ring-in-brooklyn.html