Why Luxury Loves Virtual Red Envelopes

Overview: It is a time-honored Lunar New Year tradition for Chinese families to give and receive "Hong Bao 红包" (red envelopes) to and from friends and relatives. The red envelope consists of a monetary gift inserted into an ornate pocket of red paper and offers good luck wishes to the recipient for the upcoming year. And with the introduction of the electronic red pocket feature on WeChat, citizens can now send virtual red envelopes, which are especially useful for those who cannot physically reunite during the season. It has been an innovative way for luxury brands to adapt their strategies for local consumers. What happened The convenience of electronic red envelopes has led more locals to send online versions of this traditional gift. However, plain envelopes are no longer satisfying domestic users, and users now seek glamorous graphics and decorations to customize and embellish their envelopes like they do with their physical counterparts. In 2019, WeChat officially launched its "custom red envelope cover" function for corporate users, enabling companies to offer WeChat’s 1.2 billion users sophisticated red pocket covers for them to send to friends and families. The following year, Gucci tested the function and launched Year-of-the-Rat, limited-edition red envelope Mickey Mouse covers. And in 2021, numerous luxury brands followed Gucci’s lead. This year, brands are taking the platform’s red envelope customizable function to the next level. Alongside exquisite and festive illustrations, Maisons have added sophisticated and entertaining features to these virtual red pockets. For instance, Hermès allows users to personalize their red envelopes with animations and joyful tunes. Meanwhile, jewelry label Van Cleef & Arpels created GIFs to be downloaded and embedded in their pockets. Saint Laurent also allows users to play interactive mini-games to open their red envelopes. Why it matters: The online platform charges ¥1 (0.16) for each customized red pocket released. Therefore, if one million users download them, that would cost brands 160,000. “[The red pocket] is a relatively inexpensive way to generate a buzz around the brand,” says Olivia Plotnick, founder of Wai Social. “It is personalized, highly shareable, and affordable content on one of the most valuable social media platforms for luxury brands in China.” Plus, the initiative is undoubtedly tying brands closer to local traditions — a strategy that fully mobilizes the psychology of consumers. Now, many luxury brands are taking this initiative a step further. Versace, Louis Vuitton, Fendi, and others have elevated their marketing strategies with a strategic data collection move — offering a limited number of covers daily and requiring user info or compiling surveys in exchange for access. “To a certain extent, this is a good CRM strategy directed to either VIP clients or new fans,” notes Danni Liu, the founding partner at iBlue Communications Europe & US office. But Liu warns that “if the limited red envelopes are bought and then resold by scalpers [resellers], then the brand will no longer be able to procure useful data.” The bottom line: Customized virtual red envelopes are tactics commonly adopted by luxury and fast-consumption brands. To differentiate themselves, Liu says that “Maisons should place more importance in the design of the interaction mechanism, rather than merely its aesthetics.”

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Why Luxury Loves Virtual Red Envelopes