Utah Company has a Head for China Business

By Doug Barry

Derrick Porter has a knack for looking at situations and seeing opportunities. Twenty years ago, he marveled at how integrated the world was becoming, specifically the economies of the United States and China. 

At first blush, distributing stuff doesn’t seem all that exciting. But all of us depend one way or another on supply chains and Porter enjoys putting them together, thrilling customers and clients by reducing costs and speeding up delivery times. 

He has done it for companies and brands large to small, handling kitty litter, mattresses, window coverings, and even human hair extensions. 

Porter said: “My business partner, Logan Woolley, had served in Toronto and learned Cantonese and Mandarin during a mission (for the Church of Jesus Christ of Latter-day Saints). He became a tennis pro after his mission and went to Hong Kong where he was constantly in and out of Shenzhen teaching students. He began to get a lot of requests for sourcing products. One day, he heard about the hair extension industry and upon further investigation realized it had all the inner workings of a great business. He dug in and eventually started Donna Bella Hair, a company selling hair extensions online. That’s when Logan and I were connected, and the rest is history.” 

“Donna Bella Hair was one of my customers,” recalls Porter from his office in Salt Lake City. “Logan was kind enough to allow me to become an equity partner in 2007, and we built our company into the largest hair extension provider in the world.” 

Part of the vision from the outset was to include China, a country and people both he and Logan had always felt an affinity for. To say the business is growing is a cheeky understatement. The company is now backed by private equity and has morphed into a holding company called Beauty Industry Group with 13 brands, operating independently in six countries with some shared resources and what Porter calls a “shared vision from the executive team and board of directors.” 

Hair-raising experience 

China really made Beauty Industry Group. “China is the best place for hair processing. The base for our supply chain is constructed from a practice that has been going on over 100 years.” 

Around the time of the 1911 ousting of the Qing dynasty, Chinese men began cutting their queues, a long piece of braided hair that extended from the back of the head past the collar and down the back. Villages had collectors who went door-to-door to receive remnants and make products out of them, playing their role in supply chains of old. When the queue went entirely out of fashion, the hair source switched to women. 

The cuticle of the hair, the outermost part of the hair shaft comprised of overlapping dead cells, for many Chinese people is thick and makes better raw material for wigs and hair extensions. These days, the provider of the hair does not hack it off in big clumps. Rather, it is thinned to maintain symmetry. The thinned-out hair is purchased from the provider by the village collector who sells it to a regional collector who is then paid in turn by a national collector who sells it to Porter’s suppliers. China, it turns out, is the best country for processing hair not only because of a long tradition but because the country, well, has a lot of heads. “12 million women a year will participate in this industry and use the money for their families,” said Porter, marveling over the data points. “More than 100 tons of hair are collected every month.” 

We sell to thousands of salons in the United States, providing work to Americans. Without China, the entire industry would be erased.

It takes a lot of workers to comb through this much hair and turn it into 10,000 distinct products for Beauty Industry Group. With more than 1,000 hair extension factories in the Shandong province alone, it is a booming industry. They churn out products for the do-it-yourself market and for professional installation. The extensions come in 65 assorted colors and range in length. The company has an R&D center in Chenyang (near Qingdao), plus a raft of warehouses in China, the United States, Australia, and Europe. From the warehouse, products are sold to professional beauty distributors who then sell to salons and hairdressers for installation on the head of the customer. There are different customer segments in the industry, with Porter focusing mainly on Caucasians, Latinas, and what he calls “multicultural hair customers.”  

He said the biggest markets by revenue are Europe and North America with the United States catching up after Europe got a 10-year head start. The market in China is also growing rapidly. Additional sales opportunities include hair as an additive for horse feed, toys such as Barbie products, and as a device for mopping up oil spills. No need to send your extensions to the landfill when finished with them. Beauty Industry Group also has a recycling program where they repurpose used hair extensions in an environmentally friendly fashion. 

Beauty Industry Group’s product success is largely attributable to how they do business in China, not what they produce there. Bilateral tensions underscore the need for strong operational principles. Missteps can be costly, and the company has spent millions of dollars understanding every aspect of the business. 

Improving Transparency and Traceability  

“We are very careful to ensure we are partnering with the best of the best hair extension factories. Much time, discussion, and effort goes into our Transparency and Traceability programs ensuring we know where the hair is being sourced from, who is working in the factories, what they are being paid, and that everyone in the chain is benefiting from the growing industry. Thankfully, our ESG efforts are sparking real focus and growth across the industry,” said Porter.   

“In my 40-plus visits to China, though none in the past two years because of the pandemic, I describe clearly to the factory owners why we must do business in a certain way and why it is worth it to do it that way even if it is more expensive.” An example is paying good wages and providing benefits to workers. Beauty Industry Group contributes one percent of profits to support workers’ rights and local organizations and is a member of the United Nations Global Compact. 

Some US companies fear being replaced in the China market by local competitors. That doesn’t worry Porter. “We are a category creator and were the first in doing a lot of different things. We do an annual 72-page report that includes the standards we create for the products, the communities where we operate and the workers. We set a high bar for ourselves and our partners. It resonates well with our partners across the globe. A rising tide lifts all boats.” 

Porter believes his company contributes to China’s development by continuing to develop an industry where neither side could win without the other. He bristles at criticism that he and other US businesspeople are being unpatriotic by not publicly criticizing China on certain political or social issues. 

“I don’t think I could be more patriotic by doing what we are doing. We create jobs and employ indirectly thousands of workers in China. We sell to thousands of salons in the United States, providing work to Americans. Without China, the entire industry would be erased. This volume of human hair is not a natural resource in the United States. It can’t be re-shored.” 

“At times, there can be a lot of posturing by both sides. But the US-China relationship is too great to fail, not too big to fail. We are the yin to their yang. I believe there is a path to move forward. It’s interconnectivity that leads to prosperity.”