Are You Sitting on Your 'Elf on the Shelf?'

If you have a child that still believes in Santa, then it’s likely you have a little elf living in your house.

A “magical” elf that flies back to the North Pole each night to report to Santa whether your child has been naughty or nice, and then reappears the next morning in a new location in your home. This little elf likes to play hide-and-seek, so upon his return from the North Pole, you could find him anywhere, from your freezer (which reminds him of the North Pole) to hanging from your chandelier. Children are told not to touch the elf, as he will lose his magic, but they’re encouraged to tell him any special messages they have for Santa. That is the “Elf on the Shelf® – A Christmas Tradition,” in a nutshell. The product, which comes in a keepsake box with a hardbound book and elf, was developed in 2005 by three women – mother Carol Aebersold and her twin daughters, Chanda Bell and Chirsta Pitts – who say they were determined to share their families’ holiday tradition with the rest of the world. Like the elf’s magic, these “Elf on the Shelf” owners have created some business magic of their own, selling over 4 million copies since the company’s inception.

Fox Small Business spoke with “Elf on the Shelf” owner Chirsta Pitts about how she, her mom, and sister turned a holiday tradition they grew up with into a multi-million dollar business and household name. Pitts -- who left her job as a host on home-shopping network QVC to be in the elf business – also shares some inspiration and advice for those who might be sitting on their own “Elf on the Shelf” idea.

Story of “The Elf on the Shelf” Masterminds

In 2004, Pitts’ mother Carol finished writing the Elf on the Shelf story, created a proposal, and began pitching the idea to literary agents in New York. One agent loved the concept, picked it up, and circulated it to big and small publishers. However, every publisher turned it down, relaying comments such as “children don’t like rhyming books,” “this is destined for the damaged goods bin,” and Pitts’ personal favorite “maybe someone else should write it.”

Nonetheless, the three determined, Georgia natives were not discouraged by the rejection. “We knew we had a good idea and felt it was something worthwhile to share with other families,” said Pitts. So, the three women created a privately-owned publishing company, Creatively Classic Activities and Books (CCA and B), self-published the book that Pitts’ Mom wrote, and packaged it with an elf. Pooling their own money from retirement accounts, the sale of Pitts’ house, and credit card loans, they were able to produce 5,000 “Elf on the Shelf” sets in 2005.

Start “Small”

Apropos for a company that sells elves, Pitts said their strategy from the beginning was to start small.

“I knew we could get ourselves into a lot of trouble by growing too fast,” said Pitts. Starting “small” included identifying a target market, which was Mom’s with small children, and selling to that target market in two locations – Marietta, Georgia and Charlotte, North Carolina.

“Our goal was to personally tell every potential customer exactly what was in the “box,” and get them to know about the story/tradition of the elf,” explained Pitts. The three women began traveling to holiday bizarres and craft shows throughout Georgia and North Carolina, selling their product and telling their “elf” story.

“We knew if we sold enough at the markets, there’d be a void when we left,” strategized Pitts. Word-of-mouth took over and families began asking local stores if they had the “Elf on the Shelf” in stock. Small specialty stores began contacting CCA and B asking to carry their product. By the end of 2005, CCA and B had sold all 5,000 sets and were being carried in 18 specialty stores.

Christmas Magic for CCA and B

In 2007, CCA and B experienced some Christmas magic of their own when actress Jennifer Garner was spotted carrying their “Elf on the Shelf” product while walking through New York. The picture hit all the entertainment sites, spiking sales for “The Elf on the Shelf,” and helped further boost the brand. “Any entrepreneur that finds success has some tipping point moment when something unexpected happens,” said Pitts.

The success of “Elf on the Shelf,” however, was not a result of magic, but rather the focus of three women who strategically built their brand and reinvested in their business. “Elf on the Shelf” experienced steady growth year after year, with annual revenue topping $16 million in 2011. However, “funding a fast growth business can be difficult,” admits Pitts. “Banks don’t necessarily love elves as collateral.” However, CCA and B has been able to remain a privately-owned business, continually reinvesting revenue from their sales to buy more elf sets. All sales, marketing, and distribution remains in-house.

Protecting their brand has been key to their success. Pitts, her mom, and sister make business decisions based on this litmus test: “Is this going to protect the brand and does it create family moments?” They’re also very careful to choose retail outlets that will treat their brand according to specific guidelines laid out by CCA and B. Stores that carry the elf are called “adoption centers,” which have been approved by the big man himself, Santa.

“A child believes this is an elf from the North Pole, so we’re stringent that the retail outlets are a good home for the elf,” says Pitts. For the first several years, “Elf on the Shelf,” was sold only in small specialty stores, then evolved to gift outlets such as Hallmark, larger book outlets such as Barnes and Noble, and this year hit Target. From 18 retail outlets in 2005, Elf on the Shelf can now be found in over 10,000 stores throughout the U.S.

Pitts says social media has also always been an important part of their marketing strategy. The company utilizes everything from Facebook to Twitter to engage families in a “real way,” says Pitts. They even do e-blasts, allowing for “that constant engagement with the brand.”

Elf Expansion

Last year, CBS debuted “The Elf on the Shelf: An Elf’s Story,” an animated Christmas special based on the book. The three CCA and B women started their own production company, Big Canoe Entertainment, this time with four other partners, to create and produce the special.

“If you think about any great Christmas tradition, they all have one thing in common – a Christmas special,” said Pitts. “The movie allows children to “experience our character in a new way.”

In 2012, “Elf on the Shelf” is going global, with mom Aebsrsold hosting readings and book signing in Australia, the United Kingdom and Ireland.

What’s Your “Elf on the Shelf?”

Pitts offered some advice for others who think they might be sitting on their “Elf on the Shelf” idea. Before launching into anything, figure out how your idea/product is different and/or special, suggests Pitts. From there, identify your target market and expand from there.

“Starting small is okay,” says Pitts. She continued, “anybody can have an idea, it’s what you do with it that matters.

“You cannot be everything to everyone,” said Pitts. “Throwing things out into the wind and hoping they work is not a winning strategy. “