First to Market with Innovative Solutions
By Leah Kellar
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The ambition to grow and the flexibility to quickly adapt to the pace of change in a moment of crisis is what led, Jonathan Morello, President, and Founder of Backstage Commerce Inc., (and martial arts practitioner), to create an award-winning business that manufactures and imports professional hair-care beauty products.
The company took a fifth-place position in PROFIT’s list of Canada’s Top 10 Fastest Growing Manufacturers in 2014. Backstage is also 24th on the PROFIT 500 list of Canada’s Fastest Growing Companies. Morello credits much of what he has learned in the philosophy behind his early martial arts training to success in the business world.
Ultimately, he says, “It’s about learning how to prevail.” The company’s philosophical approach to business is one that is highly agile, flexible and eager to contribute to the industry with pride, positivity, and cooperation.
Morello is quoted on the Backstage company website as saying that the best business advice he has ever received was to simply, “…surround yourself with successful people.” While Morello now serves as a motivating example of young pioneering entrepreneurial leadership, he notes that initially the real challenge was to have the courage to break away from tradition that was not truly open to facilitating growth. Growing up in a family of entrepreneurs, he graduated with a degree in computer science from Concordia University in Montréal. He eventually came to work for his father’s company—a supply channel importer of professional hair-care beauty products. It may be safe to say that Morello learned what not to do from this family owned company before he went on to create Backstage, most recently branded as BSC, Inc.
In the years from 2006 to 2010, it seemed that everyone wanted a professional grade hair flat iron. Morello was limited in the amount of marketing material for branding to cater to the demand. After voicing his concerns about not being able to adequately meet the marketing needs to keep pace, he began to realize that the ambition required was not there to grow the company.
“I started to build up a reservation that this company wasn’t going to go anywhere and wasn’t doing anything strategically for tomorrow,” said Morello. “ I came to the decision that the best thing for me to do was to start my own company. And I did the opposite of my father’s company.”
Having learned the fundamentals of industry, Morello used the time off to explore what was possible by taking a look at the German automotive importing market and a fashion house as a few case examples. He started his own business on an extremely lean budget. Morello sold his condo and used the approximate $75,000 left in excess from the sale to start Backstage in 2010. He soon began to build up a cash flow to purchase more inventory and add a few employees. He anticipated the trends and took on a brand name in hair extensions—HairTreats. Having experience in a similar operation at his father’s company, Morello didn’t even draw a business plan.
After only four short years, Backstage is on course to exceed $10-million in annual revenue in its next term with just under 20 employees. The company also has a team of sales support managers who works effectively with distributors and communicates value propositions to salons, often through promotional specials and tradeshows.
“It’s nice to have coming from very humble beginnings, but it’s very important not to let it get to your head,” said Morello of the PROFIT list recognitions. “What we continue to be focused on, and what matters to our clients, is innovation.”
Backstage is certainly not at a loss in this regard. The company is always striving to be the first to market with differentiating innovative solutions that are often sourced from suppliers who are ahead of the curve in recognizing cutting edge products. As a consequence of staying ahead of the pack in this way, the company has made a number of market firsts including being the first to:
-Market KeraStraight, which is a non formyhair smoothing treatment system that boomed in sales when regulators banned rival industry products using formaldehyde, which is a scientifically proven carcinogen.
-Market with an innovated hair extension applications system known as HairTreats Micro Sphere this reduces application time down by 75 per cent.
-Market with quick blow dry line known as Hairtreats StyleID—launched in over 1000 salons in North America.
-Market with a combined hair fragrance and hair protector known as HairTreats StyleID Protect.
-Market with a real time order fulfillment / drop shipment solution known as HT Portal Order, this eliminates clients (many of whom are salons) from acquiring any capital in inventory to facilitate a sale.
-Market with an economical and versatile salon merchandizing system known as Linear Display, this includes curriculum to educate salons to better retail.
-To be focused to serve partner distributors with educational, technical and sales support.
In the case of the revolutionary KeraStraight – a NON FORMY hair smoothing treatment system, Morello recalls that Backstage was able to establish exclusivity when most other companies had the used carcinogenic formaldehyde in their products and were subject to class action lawsuits.
“We found a different ingredient to produce the same results,” said Morello. “Health Canada and the European Union were banning a product used that contained formaldehyde at the time, so we pretty much intercepted a big market.”
Throughout the company’s development, Morello credits Backstage’s competitive advantage to being performance oriented and having the flexibility to react to situations more quickly than those companies pre-established in traditional ways.
“We run circles around our competition in that regard and companies like to partner with us because they can rely on us,” he said. “We have an open concept office here. We don’t have any managers on the floor. We are a team. There is an immense amount of responsibility put on each person, but they deliver.”
He is also thankful for the loyalty of his clients such as ULTA, Masello Salon Services, and AMI-CO. Looking ahead Morello highlights the importance of flexibility and adaptability. Backstage’s expansion plan for the next few years is based on brand acquisition. This will involve pushing more products through its current established distribution channels by growing skew count, as well as opening up receivables to retail space by partnering to supply various retail and professional networking channels— basically growing wide and deep.
Backstage is looking to grow various layers of revenue. The company currently sells to pro distributors, major salon chain outfits, B2B through an online order portal, retail, mass retail, and markets and sells on QVC and the Shopping Channel.
“Our performance oriented system suits the circumstances and landscape of the current industry. A more industrial approach would have been great years ago, but things are changing. We are a lot more flexible for that change, more than anyone else,” said Morello.
