Chapter 5 Mobile e-Commerce and Online-to-Offline (O2O)

During the Spring Festival (the lunar New Year), it is a centuries-old custom for Chinese families to hand out red envelopes (called “hongbao”) stuffed with crisp money bills to relatives and friends to wish them good fortune. The traditional “hongbao” scene used to be children in red holiday dress kneeling down and kowtowing to their elders to receive the gift, but now in the digital era it has become a fun game on mobile devices. On the eve of the Year of the Ram (early 2015), internet giants Tencent and Alibaba sent out numerous online “hongbao” collectively worth hundreds of millions of dollars to the public, using the traditional custom as a marketing competition for the control of the digital wallets of Chinese customers.

This marketing strategy was first introduced by Tencent during the Spring Festival season for the Year of the Horse (early 2014) on its popular messaging and social network platform WeChat. Individuals sending greetings to family and friends, and corporations showing appreciation to their employees, could conveniently do so by sending digital red envelopes via WeChat. The “hongbao” giver only needed to link the digital “hongbao” function with their payment channel (a bank account, for example). The giver could then directly transfer “hongbao” money from the bank account to the receiver through Tencent's payment system on WeChat (WeChat Pay). On the receiving end, the receivers also had to link their ...

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