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Analysis

Chinese Edtech Pivots: Well-rounded Education, Hardware, Agriculture E-commerce, Fast-Food, Garments, and More

Some companies are exploring entirely new markets: from hardware sales to TikTok e-commerce.

In response to the “Double Reduction Policy” introduced in China to curtail the abuses of the for-profit tutoring industry, Chinese education companies have shuttered their once-lucrative curriculum-based tutoring businesses that targeted young learners.

For these companies, pivoting has become a necessity to palliate losses, and in some cases, to avoid bankruptcy.

In this article, we go over major pivot strategies Chinese education companies are adopting or planning for the near future. Most companies remain within the education industry, but several are exploring entirely new markets.

Well-Rounded Education for Children

Official Website of Pumkin Science from Yuanfudao. Source

Pivoting towards well-rounded education is the obvious choice for most education companies, even though this is a market for-profit companies have never been keen to pursue, nor favored by most Chinese parents. As the second-largest market in China, well-rounded education is still underestimated compared to after-school tutoring.

Let’s explain what these mean in China’s context. In China, “well-rounded education” is the antithesis of “curriculum-based education”. Curriculum-based education is for getting high scores in all kinds of school and entrance exams. Well-rounded education focuses on holistic learning not necessarily attached to performance metrics, cultivating more general student interests in art, music, chess, dance, math, or programming.

New Oriental Education has established several Well-rounded Education Growth Centers in multiple cities like Beijing, Shenzhen, and Yunnan. In the Beijing Center, education topics cover art creation, humanities, speaking, STEAM, sports, and parenting. New Oriental Education closed over 1500 K12 tutoring centers after announcing that they would fully exit the young-learner tutoring business due to the “Double Reduction Policy”.

Another giant edtech company, TAL Education Group, has opened Xueersi learning centers for well-rounded education that focus on science, nature, and liberal arts. According to a report, TAL Education Group has over 1000 K12 tutoring centers in 109 cities in China. On November  12, TAL Education Group announced that they planned to cease offering young-learner tutoring services in mainland China by the end of December 2021.

Yuanfudao, which had raised $4.1 billion at a value of $15.5 billion before the policy, launched “Pumpkin Science” officially on July 28, 2021. The product provides interactive learning content, including Q&As, scientific picture books, experimental inquiries, life development, science radios in STEAM for kids over 3 years old.

Vocational Education for Adults

Vocational education means training for learners 18 and older that have graduated from high school. People pursue vocational education mainly for career development. It covers a wide range of topics, from English to computer science, from civil service exam preparation to CFA exam preparation. But most vocational education programs focus on exam training for adults. 

TAL Education Group has established a new brand called “Qingzhou” to expand its vocational education business. It covers three main business lines with different products: Postgraduate Admission Test training with Kaoyanabng, English Test (IELTS, TOEFL, GRE, GMAT) training with Kaomanfen, and Studying Abroad Consulting with Liuxue.

Zuoyebang, a edtech company backed by Baidu and Alibaba, launched a new productm “Bufan Classroom”, focusing on four types of exam training in English, Finance, Teaching, and Civil Service.  

Education Hardware 

NetEase Youdao’s CEO announced the end of curriculum-based tutoring services on the last day of 2021. The company would move further into education hardwares, which accounted for 17% of the company’s total revenue in 2020. Since 2017, when the first education hardware “Youdao Translation Egg” was launched, the company has released 12 hardware products for learning. 

Several companies have launched so-called intelligent learning lamps. Dali Education, an education brand under ByteDance, launched the “Dali Intelligent Learning Lamp”. The product merges a lamp with a mobile phone-like device, delivering different types of learning materials for children. There are four versions of the product, costing 799–1698 Chinese yuan ($126-$268).

Overseas Expansion

Allschool homepage

Spark Education is accelerating the expansion overseas, having launched two products in Singapore: Allschool and Classpod. The company aims to target international markets in Southeast Asia and North America. 

According to the product page, Allschool is an online platform for live small-group classes hosted by local teachers worldwide. Classpod is a learning management system for both teachers and students.

Currently, there are over 200 multi-language courses on the platform for students 3–18 years old. Courses cover a wide range of subjects including art, coding, lifeskills, music, science and nature, and social studies. Course prices range from $5 to $25. No free courses are offered.  

In China, Spark Education is called “Huohuasiwei”. It supports small-group classes for 3–12 year-olds. It has raised a total of $593 million dollars and submitted its IPO application in June 2021. However, due to the “Double Reduction Policy” in mainland China, it withdrew its IPO application Form F-1 in December 2021.

Agriculture E-commerce Livestream

Dongfang Zhenxuan’s Livestream by Yu Minghong and colleagues on Douyin. Source

On December 28, 2021, the CEO of the New Oriental Education & Technology Group Yu Minhong hosted his first livestream selling agricultural produce, such as fruit, on Douyin (TikTok China).  Over 180K Douyin users watched the livestream. The number of total orders reached 57K.

Back in November 2021, Yu shared in his livestream that New Oriental Education planned to set up a large agricultural platform and he would sell agricultural products through livestreams with hundreds of teachers from New Oriental. A new brand, Dongfang Zhenxuan, has been established under a new company, Dongfang Youxuan Beijing Technology Ltd.

By the end of February 2022, the new brand had hosted 26 livestreams and generated nearly $718K in sales. But for New Oriental Education and Yu, selling agricultural products via streams is not easy. According to a report, Smartisan founder Luo sold $15.5 million in goods, including laundry pods and snacks, on Douyin after his first e-commerce livestream.

After the “Double Reduction Policy”, New Oriental Education has closed 1500 learning centers around China and dismissed 60,000 employees, after “losing over 90% of its market cap and more than 80% of revenue in 2021”, as Yu shared on his personal WeChat account. On November 14 2021, the company announced that it would fully exit the young-learner tutoring business by the end of 2021, which once contributed to 50-60% of the company’s revenue. 

Food Industry

US-listed Chinese education company Puxin (NYSE: NEW) recently announced that it contemplated “entering the fast-food market in China”, according to a public document from The U.S. Securities and Exchange Commission published on February 4, 2022. The company would provide software services predicated on 3000 management modules, but also, encourage the implementation of restaurants near or within the company’s schools.

Puxin Limited was founded in 2014 and mainly provides K12 and study-abroad tutoring programs. It has strong expertise in acquisition and integration and has expanded to over 30 sites in China with over 400 schools by acquiring over 50 education institutions.

Due to the “Double Reduction Policy”, the stock of Puxin has decreased from $85 (Feb 15, 2021) to $2 (Feb 15, 2022), losing 97.5% of its market cap in one year. On August 19, 2021, the company was notified by the New York Stock Exchange that it was below compliance levels, as the average closing price of its security was less than $1 over a consecutive 30 trading-day period. 

On December 24, 2021, Puxin announced that they were discontinuing their tutoring services targeted toward young learners.

Clothing Industry

In October, Yuanfudao was reported to be preparing to set up a team to make down jackets. Information from a third party shows that the parent company of Yuanfudao, Yuanli Weilai, has registered a new clothing company: Beijing Bing Yuan Clothing Ltd. Yuanfudao has listed several positions, such as clothing designer and supply chain associate, on Chinese hiring platforms.

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Rui Ma

With a background in Health Statistics and Sociology, she has built a career path in Data Analytics. She joined the team as a Data Analyst and is helping Class Central to improve its services for global MOOC learners.

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