How 2 friends turned ugly Christmas sweaters into a clothing phenomenon

Evan Mendelsohn, wearing his own likeness on a sweater, is the co-founder of Tipsy Elves. Started in 2011, Tipsy Elves has grown its e-commerce ugly sweater business into year-round irreverent clothing company that has done more than $50 million in total sales.
(JOHN GASTALDO / The San Diego Union-Tribune)

All eyes are pretty much guaranteed to fixate on anyone wearing Tipsy Elves attire — and that’s exactly by design. The irreverent apparel brand, most famous for its ugly Christmas sweaters, was created to be the polar opposite of understated.

Those who don Tipsy Elves’ loud sweaters, tees and ski suits have former college buddies Evan Mendelsohn and Nick Morton to thank for the extra attention.

When they roomed together in 2004, the UCSD undergrads didn’t daydream about outfitting the world in outrageous sweaters. They just wanted to be known as the guys with the funkiest attire at the theme parties they frequented. Off-the-shelf costumes from Spencers or Party City weren’t going to cut it. At the time, they pieced together their own outfits with items found at thrift stores.

Years later, after both moved on to graduate school and then lucrative career paths — Mendelsohn went to work for a law firm while Morton pursued dentistry — they would find a way to harness that same creative energy with a sweater line to capitalize on the trend of off-beat holiday parties. Now the duo, who first opened up their Tipsy Elves online shop in October 2011, can claim more than $50 million in lifetime sales. It doesn’t hurt that their outlandish apparel business was featured on a 2013 episode of “Shark Tank”; or that some of their sweaters have made it onto the backs of celebrities in real life and on the big screen.

But what started it all, and what likely continues to fuel sales, is the relatively newfound cultural appreciation for tongue-in-cheek — some might say, obnoxious — Christmas party garments.

“While he was in training (as a root canal specialist) and I was working at a law job in Del Mar, we did some online keyword analysis and saw, at the time, there was a real emerging ugly Christmas sweater trend,” Mendelsohn said. “We decided there was a lot of online demand for items that no one was really selling. We thought, this could be a great way to ... launch a company that specializes in fun apparel for parties, events and occasions.”

First, Mendelsohn and Morton had to learn how to design their own products, and teach themselves Adobe Photoshop and Illustrator in the process. But by 2011 they were ready to launch. That first year, they ordered around 5,000 sweaters to get things off the ground, all while maintaining their day jobs.

“All of a sudden, around October, the orders started coming in,” Mendelsohn, 33, said. “We did about $500,000 in sales that first year and that’s what really kicked off the business.”

Mendelsohn quit his job the following year. Morton followed suit shortly after they secured $100,000 in funding at a $1 million valuation from “Shark” investor Robert Herjavec. Otherwise, they’ve continued to finance operations through sales, growing their ugly Christmas sweater business year-over-year despite an onslaught of Internet rivals. They’ve also expanded their clothing line to include ostentatious ski suits, Halloween costumes and patriotic wear.

Sweaters typically cost between $65 and $80, while ski gear sells for $225, branding Tipsy Elves items as statement pieces instead of throw-away ones.

“I applaud them for a bold mission (of making outrageous clothes),” said Miro Copic, a marketing and business lecturer at San Diego State University. “They have a pretty impressive social media presence with 68,000 followers on Instagram. There’s a lot of value in that.”

Plus, they’ve moved away from truly ugly products to just plain loud ones, which should keep the company relevant, Copic said.

Today, the lifestyle brand continues to create designs, and employs a core team of 20 staffers at a downtown San Diego office emblematic of the brand’s roots. Their warehouse, where products are shipped from, is in New York. The company is also doing more than $15 million in annual sales and experimenting with a temporary retail footprint.

Better still, the Tipsy Elves collection sells well outside Christmas, which represents just 35 percent of business.

The secret to their success? The founders point to kitsch-plus-quality.

“There’s a pervasive thought that fun clothes have to be cheap, one-time wear and will fall apart,” said Morton, 35.

To demonstrate the opposite, Tipsy Elves opened its first brick-and-mortar pop-up at Westfield UTC during last year’s holiday season. They’re back again this season, commanding around 900 square feet of floor space in a well-trafficked area of the upscale mall near a number of recently opened shops and restaurants.

“We wanted to give our customers the ability to touch and feel our product,” Morton said. “One of the biggest surprises for our customers is how much better the quality is than they expected.”

Still, the very thing that landed Tipsy Elves smack dab in the middle of a pop culture movement could be the eventual death of the business.

“Is it a pet rock?” Copic said. “Is it a fad or a trend?”

One could make the case for both. However, in the trend corner is this: There will always be people who are looking to make a statement, Copic said. The caveat, though, is that there probably aren’t enough of them to boost sales substantially over the years.

“Unless Tipsy Elves changes its business model substantially, the upside beyond $15 million is going to be limited.”

To that, the men would say that dressing up and having fun will always be in fashion.

“We need to make sure that we’re always designing products that fit changing trends,” Morton said. That’s why the company’s ultimate goal is to become synonymous with fun. “Then, we’ll be around forever.”

Of course, there’s one other nagging concern to consider, as Copic sees it. And it’s a valid one.

“Just the name ‘Tipsy Elves’ anchors the company to the holiday season.”

The Tipsy Elves customer

The company specifically markets its gear to people in their late 20s and early 30s. But Tipsy Elves likes to think that its tees, sweaters and ski suits are for anyone who is “young at heart.”

Here’s a breakdown on who’s actually buying:

  • 18-24: 20 percent
  • 25-35: 40 percent
  • 26-55: 30 percent
  • Over 55: 10 percent

Business (619) 293-1840 Twitter: @jbruin