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"Starting today, Yuhui Tongxing, a wholly-owned subsidiary of Oriental Selection, will officially become independent from Oriental Selection, with Dong Yuhui personally holding 100% of its shares," said Yu Minhong in an open letter to shareholders and friends of Oriental Selection.

On July 25, Oriental Selection announced on the Hong Kong Stock Exchange that Dong Yuhui has decided to no longer serve as an employee of the company and a senior management of a consolidated affiliated entity of the company. The departure is due to Dong Yuhui's career ambitions, investment in his other careers and personal time arrangements, and will take effect on July 25, 2024. In addition, Dong Yuhui (the buyer), Beijing New Oriental Xuncheng Network Technology Co., Ltd. (the seller) and Yuhui Tongxing (Beijing) Technology Co., Ltd. (the target company) entered into a sale agreement, pursuant to which the seller agreed to sell and the buyer agreed to acquire 100% of the equity of the target company for RMB 76.5855 million.

Prior to this, Dong Yuhui's personal studio was 100% controlled by Oriental Selection, and the GMV of his account was included in Oriental Selection's financial report.

At the same time as the "official announcement", the "Walking with Hui" live broadcast room was conducting a special live broadcast of environmental electrical appliances, and viewers continued to pour in. As of press time, the number of online users had reached more than 60,000, and the comment section was filled with blessings for Dong Yuhui and "Walking with Hui".

"I believe that after experiencing all the storms and uncertainties in the past, Oriental Selection and Yuhui Xingxing will definitely embark on a path of stable development respectively," Yu Minhong said in an open letter.

Formal separation

Oriental Selection’s announcement on the Hong Kong Stock Exchange stated that in addition to paying Dong Yuhui in full the promised benefits and compensation, the chairman of the board, Yu Minhong, has sought approval from the board of directors and the board’s remuneration committee to distribute all remaining undistributed profits of Huixingxing to Dong Yuhui.

In addition, according to the listing rules and the company's articles of association, Yu Minhong has made arrangements for the settlement price of Dong Yuhui's acquisition of Yuhui Tongxing. In order to maintain the normal operation of Yuhui Tongxing, the company will provide Yuhui Tongxing with its self-developed information system free of charge.

After the announcement, Yu Minhong and Dong Yuhui issued open letters in response to the matter. Both sides emphasized that separation was a choice for development and there was no contradiction between them. Yu Minhong said, "There has been no communication barrier between Yuhui and me so far." Dong Yuhui also said, "I personally and the entire Yuhui team have been treated very well."

Just a few days ago, on July 21, "Walking with Hui" officially moved to a new office. On that day, the live broadcast lasted for more than 14 hours, with more than 3 million viewers, a peak of more than 480,000 online viewers, and live broadcast sales of nearly 80 million. In comparison, the popularity of Oriental Selection seemed a bit low. On the same day, the peak number of online viewers in the Oriental Selection live broadcast room was only 13,000.

Dong Yuhui's team had been planning for a long time about the relocation of the office. As early as March this year, Dong Yuhui revealed in a live broadcast that they were looking for a new office location. On July 15, the official Douyin account of Yuhui Xingxing officially announced the news of the move. Moving into a new office means having a larger space and being able to recruit more new people for the team, which seems to represent a brand new beginning.

In the open letter, Yu Minhong also revealed that when moving with Huitong, New Oriental Asset’s professional team was responsible for the entire process from site scouting, transaction negotiation to work area decoration.

In the live broadcast after the move, Dong Yuhui also expressed his gratitude to New Oriental founder Yu Minhong many times, saying that the rapid launch and smooth development of "Walk with Hui" was entirely due to Yu Minhong's support.

"Leaving the protection of the port, I will sail alone to the vast sea with Hui from today on." After the announcement was issued, Dong Yuhui said in an open letter, "The future is unpredictable, and we can only go all out."

Online controversy

The reason for the separation is related to the many public opinion storms about Oriental Selection in the past six months. Yu Minhong said in an open letter, "As a company based on the Internet, the power of public opinion often affects the development of the company."

He said that the complicated public opinion disputes, coupled with the guidance and rumors of a few forces with ulterior motives, led to the estrangement between Dongfang Zhenxuan and Yuhui Xingxing, and also caused both Yu Minhong and Dong Yuhui to be attacked and stigmatized, which has continued to this day. This has led to huge uncertainty in the development of both companies, the stock price fluctuated violently due to external influences, and the company's credibility and reputation dropped sharply.

Looking back over the past six months, Dong Yuhui, as an iconic figure of Oriental Selection, has a personal IP that is deeply tied to Oriental Selection. He has more than 25 million fans across the entire network and has a huge influence on Oriental Selection, which has caused stock price fluctuations many times.

At the end of last year, the Dong Yuhui essay incident continued to ferment, and the stock price of Dongfang Zhenxuan fluctuated sharply, falling by more than 25% from December 11 to 14. In the end, the storm ended with Dongfang Zhenxuan removing Sun Dongxu from his position as CEO and Dong Yuhui "starting his own business" and opening a new account "Traveling with Hui".

In February this year, after a live broadcast, "Dong Yuhui refused to explain underwear three times" became a hot search on Weibo, and he was accused of being "unprofessional" and "discriminating against women". Subsequently, Dong Yuhui cleared the content of his Weibo account as a response to repeated misunderstandings. This behavior caused the share price of Dongfang Zhenxuan to fall by more than 5% during the trading session on February 27, and finally closed at a drop of 3.89%. The share price continued to fall the next day, with a drop of nearly 3%.

In June, Dong Yuhui publicly stated that he was very resistant to selling things, and to this day he does not enjoy the work of live streaming. As the darling of the traffic era, Dong Yuhui showed his intention to escape. On June 11, the share price of Dongfang Zhenxuan fell by more than 10% during the trading session, and by the close of the market, it had fallen by 9.27%. Looking at the long-term trend, the share price of Dongfang Zhenxuan has been nearly halved since the beginning of the year, and hit a new low in two years.

Dong Yuhui's importance to Oriental Selection is self-evident, but an imbalance in management has already emerged. Frequent stock price fluctuations also expose possible problems in Oriental Selection's management of the relationship between the company and individual brands.

Yu Minhong also stated in an open letter that in the past six months, he has personally experienced and faced huge uncertainties in the company's development. This uncertainty not only brought fluctuations in the company's business and stock price, but also caused anxiety among shareholders.

"The remarks of the anchors and management have been amplified, and the capital market is very fragile." Zhang Yi, CEO of iMedia Consulting, told the 21st Century Business Herald reporter that, ultimately, Oriental Selection's business model did not give investors enough sense of security.

Strategic clarity

Previously, according to the financial report of Oriental Selection, the traffic economy represented by Dong Yuhui and the self-operated products he bet on were the key layouts of Oriental Selection. In the last financial report meeting, Yu Minhong said that Oriental Selection is a service provider of agricultural products and daily necessities driven by dual economy and dual engines. Dual economy refers to product economy and traffic economy; dual engine refers to products and traffic. "Both are indispensable for the future development of Oriental Selection."

An industry insider told reporters that Dong Yuhui's departure may allow Dongfang Zhenxuan to focus more on long-term strategic development rather than relying on personal IP, reducing the risk of the company's operations. Dongfang Zhenxuan is also actively adjusting its business model, such as strengthening its self-operated product line.

At present, Oriental Selection's self-owned products are becoming an important pillar to boost performance. Financial report data shows that as of November 30, 2023, the number of Oriental Selection's self-owned products has exceeded 264, bringing in revenue of approximately 1.9 billion yuan, accounting for 78.8% of e-commerce business. This data has increased by more than 10% compared with the 2023 annual report.

According to Dongfang Zhenxuan in June, in the second half of fiscal year 2024 (December 2023 to May 2024), the GMV of Dongfang Zhenxuan's self-operated products exceeded 3.6 billion yuan, a year-on-year increase of 108% and a month-on-month increase of 74%. As of now, the total number of Dongfang Zhenxuan's self-operated products exceeds 400, with 260 products on sale during the same period, and more than 100 products ranked in the top three of Douyin's product rankings.

It is worth noting that the Oriental Selection App has become the core channel for self-operated products. In the second half of last year, Oriental Selection launched an App that combines live broadcasting and shelf modes. At present, 90% of Oriental Selection's self-operated new products will be launched on the App first. Due to the continuous enhancement of membership discounts and App user stickiness, the GMV of Oriental Selection's popular self-operated products on the App has accounted for more than 40% of the GMV of the entire network.

In an open letter, Yu Minhong stated that Oriental Selection’s self-operated products have become a phenomenal product, and “I believe that our self-operated product system and membership system will get better and better.”

He also said that Oriental Selection and New Oriental Group will further cooperate closely to form a more perfect business cooperation model and promote faster and better development of both parties. As the major shareholder of Oriental Selection, New Oriental has an unshirkable responsibility for the healthy development of Oriental Selection. At the same time, the company will continue to increase shareholder value through stock repurchases and other means.

Dong Yuhui’s departure is also a new beginning for Oriental Selection.