Ugly Christmas Sweater is building off its 2018 holiday strategy of influencers and licenses to boost sales this season. Tariffs, however, are cutting into its bottom line.

The holidays are just about everything to web-only merchant Ugly Christmas Sweater’s success. Web traffic to UglyChristmasSweater.com swells more than 350% in December compared with an average month in the summer or fall, according to SimilarWeb Ltd. data. And the holiday season of November and December accounts for 90% of the retailer’s sales, which is why it begins planning for the season in February, says co-founder Fred Hajjar.

UglyChristmasSweater.com launched in 2012 to capitalize on the wave of consumers wearing ugly Christmas sweaters to parties. Luckily, the fad has yet to fade, Hajjar says.

During the 2018 holiday season, the retailer sold 115,000 items, mostly sweaters, which was a 12% jump over 2017, Hajjar says without revealing specific sales numbers. That growth slightly outpaced its expected 10% growth thanks to a few key factors including several successful influencer marketing campaigns, exclusive licenses and deals with businesses to produce custom sweaters.

Hajjar aims to apply the lessons he learned last year to this year’s 2019 holiday strategy.

Ugly Christmas Sweater uses influencers big and small to promote products

In the lead up to the 2018 holiday season, Ugly Christmas Sweater secured two high-profile influencers: PewDiePew (pronounced Cutie Pie), who is a Swedish YouTuber, actor, comedian and gamer, and Ninja, an esports gamer.

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The relationships were collaborations; the retailer and PewDiePie worked together to design a holiday line that included a sweater, pants, knit hat and jumpsuit. He wore the clothes in his YouTube videos, which Hajjar says helped sell the products. PewDiePie sold 3,500 items within the first 24 hours of his first post, and a total of 10,000 items over the course of the 2018 holiday season.

Product integration doesn’t feel like an ad when an influencer created the products and wears then instead of just posting about them, a picture of them, Hajjar says.

“Influencers help build awareness of our site and obviously help with retail sales,” Hajjar says.

The retailer also worked with a handful of micro-influencers, typically people with less than 10,000 followers, to promote its products.Ugly Christmas Sweater sent these influencers a free product and sometimes a little bit of money, from nothing to more than $100,000, to promote its products. Often, an influencer will select a certain sweater as the one he will promote throughout the season. There is not too much risk involved with these influencers with smaller followings, he says, given the minimal cost and the potential for a “huge return,” which is typically three or six-times the investment, he says.

For the 2019 season, Ugly Christmas Sweater again secured two higher-profile influencers, one from YouTube and one from Instagram, says Hajjar, who says he cannot yet reveal who they are. The retailer is also working on securing about 50 micro-influencers. It has its social media team and software it built in-house to find an influencer who is a good fit with its brand and whose followers engage with their posts, Hajjar says. The software factors in keywords, average amount of likes each posts receives, and number of followers. The retailer emails influencers directly or their management team.

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“The humor of the sweaters help get their attention and managing the project is usually done through email,” Hajjar says.

Licenses allow Ugly Christmas Sweater to offer unique products

It also works to obtain licenses to use fictional characters or movie quotes on its sweaters, such as “Home Alone,” “A Christmas Story” or “The Office.” Those types of exclusive agreements give shoppers a reason to shop at UglyChristmasSweater.com because they can’t find the designs elsewhere. A larger retailer may have licenses for its sweaters, however, it would likely appeal to a mass audience, such a sweater with a Disney character on it, whereas UglyChristmasSweater.com goes after a more niche audience. Plus, some of its sweater design are more “PG-13,” Hajjar says, so a mass merchant may not sell it.

“Even ‘Merry Christmas you filthy animal’ could be considered pretty vulgar for the mass audience,” says Hajjar referring to the quote from the movie “Home Alone.”

Ugly Christmas Sweater has already secured a few licenses that enable it develop products featuring The Beatles and “Napoleon Dynamite.” It also plans to sell a “Dunder Mifflin” sweater, which is the fictional workplace from popular TV show “The Office.”

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In the past few years, several corporations have used Ugly Christmas Sweater to manufactured their own custom-branded holiday sweaters to distribute to employees, such as McDonald’s Corp., Twitter Inc., Drop Box, Bud Light and Frito-Lay Inc., Hajjar says. About 15% of its orders are now custom, he says. Its custom orders are made in Michigan, opposed to its full-knit sweaters which are manufactured in China.

How tariffs will factor into the holidays

Ugly Christmas Sweater is working to bring all of its manufacturing over to the U.S. from China. However, that change isn’t likely to occur anytime soon, he says. If its sweaters are made in the U.S., it will have faster turn around times and it will not have to contend with the current tariffs.

Because of the recent trade war with China, tariffs have increased almost 10% on most of its products, Hajjar says. This will definitely eat into the retailer’s bottom line, and impact profit during the holiday season, he says. “We don’t feel like we can raise the price of the sweater,” Hajjar says.

Ugly Christmas Sweater’s products range from $29.99-$59.99, which is more expensive than the $20 a consumer might pay at a mass merchant for an ugly holiday sweater. The retailer points to quality and uniqueness as its justification for its prices. Even so, it doesn’t want to increase it any more given that it already has a large enough margin that it can still afford to eat the tariffs’ cost, he says.

To make up for the increase in tariffs, the retailer plans to cut other costs, he says. For example, about 85% of its products are made in China. Of those, 25% arrive in the U.S. via air and the remaining 75% via boat. The products that arrive by air are the ones that are typically selling really well, that Ugly Christmas Sweater needs to fulfill orders quickly. It’s also about $3 more expensive to ship via air compared with water. It’s goal is to reduce the volume of its products arriving by air to 15%, Hajjar says.

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In the past, Ugly Christmas Sweater would usually reserve air space for its products once they were ready with only a few days notice. If Ugly Christmas Sweater commits to air space 60 days early, it is about 30% cheaper, which would help the retailer “quite a bit,” he says.

To attain these goals, Ugly Christmas Sweater is working at better forecasting sales. For example, analyzing sales from last year, knowing how many times a popular Christmas movie will run on TV during the holiday season and tracking Google searches to see how many times shoppers search for popular terms. It also plans to be more conservative in new items, so it is not saddled with a bunch of inventory, he says.

As the holiday season is still months away, Hajjar says it’s hard to estimate how sales will go as a lot could change and many of its influencers and licensing deals aren’t fully secured. Right now, it is conservatively estimating a 7% increase in sales, he says, but that forecast could change depending on how the next few months go, he says.

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