The new marketing tool in China – the virtual ‘red envelope’ hóngbāo

In China, the red envelope, hóngbāo (Mandarin) is an important monetary gift with a long history. Passing a bit of money in a red envelope at special occasions such as weddings, graduation or the birth of a baby is a tradition, that effortlessly moved into the digital 21st century. Thanks to WeChat Pay and AliPay, the red envelope – aka ‘lucky money’ – has turned digital. The red envelope has also become a crucial marketing tool in China.

In China weddings and holidays such as Chinese New Year are peak periods for offering red envelope – and it is more than just a small token of appreciation. The red colour of the envelope symbolises good luck and is a symbol to ward off evil spirits. The envelopes are part of a long tradition; the amount of money in the envelope usually ends with an even digit, following Chinese beliefs; odd-numbered money gifts are traditionally associated with funerals.

Contemporary interpretation

The hóngbāobecame extra popular in 2014 when WeChat introduced a contemporary interpretation of the traditional practice. During the Chinese New Year holiday, the mobile instant messaging service launched the concept of virtual red envelopes of money – and the ability to distribute this ‘lucky money’ to contacts and groups via its mobile payment platform.

The innovation took off immediately. Two years later – in 2016 – over 32 billion virtual envelopes were sent over the Chinese New Year holiday. A historical competitor Alibaba Group joined the competition, adding new features to the digital red envelope. Its introduction resulted in a red envelope war. Estimates say that over 100 billion digital red envelopes have been sent during the latest Chinese New Year festivities. During this year’s Spring Festival season, 768 million people exchanged red envelopes through WeChat, up 10 percent from last year. The digital red envelope is here to stay.

Sending a ‘red envelope’ in seconds

Today, even candidates in popular games shows on China TV can win virtual red envelopes. With hundreds of millions of Chinese consumers using WeChat on a daily base, sending a small gift in a virtual red envelope is done in seconds – as it is now part of China’s mobile payments ecosystem. The red envelope has evolved into a modern gift certificate – and international brands like Dolce and Gabbana and Mulberry saw their turnover reach new heights because of it.

Digital versus paper

WeChat is leading, and digital is becoming more popular than the traditional paper version. According to a survey by Lightspeed Research among consumers in China, 80 percent of users had planned to exchange red envelopes on WeChat this year, while only 69 percent had planned to share physical red envelopes. It seems that Alipay is lagging behind in market share, as one-third of respondents had plans to use the Alipay red envelope function.

International brands have started using red envelopes dor incentivised marketing – for special deals and discounts. The virtual red envelope has become today’s new voucher, with the smartphone as the all-important linking pin. Also, the red envelope has become the new ‘thank you’ note. It is quick and easy to send a small present, like a cup of coffee, to a friend:

You can even send a Starbucks cup of coffee in the form of digital red envelopes to a friend using its WeChat app.

More creative

Brands get more creative every day. Some brands send a red envelope with a surprise discount to customers after buying something in-store using WeChat Pay. Some brands even prompt customers to send part of the ‘lucky money’ to a friend, which obviously helps the brand expand its customer base. Some brands even joined last year’s global Pokemon Go phenomenon, by hiding virtual red envelopes in their stores.

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