Tipsy Elves: How Two Friends Grew a $50m Business Selling Holiday Sweaters

There’s usually only one time of the year when you can wear a ugly Christmas sweater. The trend has gone from a once frowned upon gift to a hip way to showcase yourself at holiday parties.

For Evan Mendelsohn and Nick Morton, the founders of Tipsy Elves, this realization has turned into one of the fastest growing companies in San Diego. Evan, a former lawyer, felt there was a huge opportunity for owning this ugly sweater market.

In 2011, he launched Tipsy Elves, a brand that started with a focus on ugly sweaters. In their first year, they did about $500,000 in sales. The concept quickly took off and Evan found himself having to decide whether to dedicate himself full time to the company or continue working as a lawyer.

Evan left the world of law and started running Tipsy Elves full-time. “My mom said my dad was eating soup, and he spit it out when she told him,” he said. “I don’t think he was too happy about it at the time.”

First Signs of Growth

Their first steps were to setup their ecommerce site and figure out how to get samples. The two partners put in about $40,000 each and started making sweater samples and eventually went to a trade show. “We had really bad samples, they didn’t look good, we kind of pinned them together,” Nick said. “The response, despite that, was really strong, and it gave us confidence that this was actually going to do pretty well.”

The two quickly learned how to handle overseas manufacturing and read up on shipping and fulfillment. “We taught ourselves Photoshop, design, it was low level but enough to be able to make designs,” said Nick. “You can figure out pretty much anything.”

They decided to design unique sweaters that were more humorous than ugly. One of their first hit sweaters shows the back of Santa as he stands over the snow. “Merry Christmas” is written in the snow … in yellow. “We sold about 5,000 sweaters, and it was about $400,000 in sales,” said Nick.

This creative thinking is what really enabled Tipsy Elves to stick out. They always tried to think outside of the box when it came to design and brand.

The two then made it onto ABC’s hit show “Shark Tank” in 2013 and persuaded Robert Herjavec to invest $100,000 for 10% of the company. Herjavec says that Tipsy Elves has definitely been his favorite investment over six seasons of “Shark Tank,” not only because the business keeps growing but also because he finds both founders to be competent and knowledgeable about their customer base.

For an ecommerce brand, knowing your customers is the key to enabling growth. For Evan and Nick, this meant transitioning from a ugly sweater company to a full lifestyle driven clothing brand. Their original focus on the holidays made the company too seasonal.

Diversifying to Expand

If you check out the Tipsy Elves website right now, it doesn’t look like a holiday store. They sell everything from pants to hats, enabling them to have a customer base around the world. According to UT San Diego,  the Tipsy Elves collection sells well outside Christmas, which represents just 35 percent of business.

Tipsy Elves also opened its first brick-and-mortar pop-up at La Jolla, California during the 2016 holiday season to test a retail presence. They were back again last season, commanding around 900 square feet of floor space in a well-trafficked area of a upscale mall near a number of recently opened shops and restaurants.

This pop-up shop method follows a similar route to fast growing ecommerce brands like Away and Gym Shark. Though setting up a physical presence may not make sense for companies doing under eight figures in sales, it can show a significance boost in revenue while deepening connections with customers.

As the brand has grown, they’ve also faced a lot of supply chain issues. As Nick explained, “We had major issues this past holiday season with our fulfillment company. They fell way behind on shipping orders during the busiest time of year for us which caused a major backlash from customers and cost us over $1M in profit due to returns and cancellations. We learned that you can never take anything for granted and need to have extreme diligence in every aspect of the business even those areas that seem very safe or reliable. Ask yourself: if a certain aspect of your business were to fail, what will you do? How could that happen and what safeguards can you take to prevent those big issues? We didn’t ask ourselves that question enough with regards to fulfillment before this season. Also when possible, don’t be the guinea pig for any service provider. Let them practice on other companies.”

For companies that use Sourcify, their fortunate enough to work with our fulfillment partners who know how to work with fast growing ecommerce brands.

Thinking Outside the Box

Besides the funky designs on their sweaters, the team at Tipsy Elves always thinks outside the box when it comes to marketing. They always promote fun and showcase that message across social media but how could they run a campaign without having people realize it’s a direct advertisement.

For Tipsy Elves, this turned into a cool partnership with Tinder, where they created the “Swipe Right on Ms. Clause” campaign. Tinder created profiles for the newly-single Mr. and Ms. Claus and the profiles were integrated into the user platform in early December. If users swiped right on either of the profiles they would receive a message from their match detailing how they could enter to win a customized Tipsy Elves x Tinder sweater.The team usually relied heavily on email marketing and Facebook ads, so a marketing partnership with Tinder was something new and innovative for Tipsy Elves and for Tinder.

With this new type of campaign, the company was taking a risk with a new message to their audience. The social reaction was mostly positive and people were excited to see Santa on Tinder. During the time Santa and Ms. Claus, their profiles reached almost 7 million users, with over 100k clicks to our site and 15,000+ entries to win a custom Tinder sweater.

For the Tipsy Elves team, they are always thinking outside the box when in comes to marketing. In 2017, this lead to a partnership with Swarovski crystals to create one of the most expensive ugly Christmas sweaters ever — a $30,000 bedazzled sweater featuring Santa riding a unicorn in space. It instantly went viral, and was a real success.

To think virally when it comes to marketing, Evan suggests, “For other retailers looking to do an over-the-top or innovative stunt, think of your core values as a company and your marketing goals, and make sure that no matter what channel or method you use, the campaign fulfills both of them equally. The best campaigns come when your customers don’t even realize it’s marketing!”

What’s Next

For any ecommerce company looking to grow, one of the most effective ways to continue to scale is by running new products to your existing audience. For Tipsy Elves, what started as a ugly sweater company has now become a full fledged lifestyle brand. For the business to spark further growth, they will definitely continue to launch new lines of products.

What stays true, is that their branding across these products will reflect their vision. Their core audience will continue to expand and live up to the fun they look to replicate in their products. For you as a ecommerce entrepreneur, this means find your brand focus when starting and then scale across products with that focus.