news

The result is inevitable.

At 3 pm on July 26, at the Oriental Selection shareholder communication meeting, Yu Minhong said that regarding Dong Yuhui's resignation, "Of course, the outside world may not buy this, otherwise the day after the news was announced, New Oriental and Oriental Selection would not have both plummeted, with Oriental Selection's largest drop of 28.06% that day, and New Oriental's drop of only 5.46%, but because of its large market value, it actually lost about half of Oriental Selection."

This is consistent with many people's evaluation of Dong Yuhui - half of the Oriental Selection. But there must be many people who disagree.In the eyes of this group of people, Dong Yuhui is more than half of Oriental Selection, he should be half of New Oriental, or even "the hope of the whole village."

In the opinion of "Zui Hua", there is really no need to overestimate Dong Yuhui's value to New Oriental. From another perspective, the departure of an anchor can make New Oriental lose half of its Oriental Selection, which can only mean that,The live e-commerce business is not that important to New Oriental.

No matter how lively live e-commerce seems, New Oriental’s main channel has always been education and training. Many people may not have noticed it.For this education and training aircraft carrier, the proportion of live e-commerce business is really small, and the profit contribution is also very limited. It does not even meet the established standards of a company's second curve, which is most of the time an easier business to make money.

New Oriental's interim report for fiscal year 2024 shows that in the six months ending November 30, 2023, New Oriental's operating income was HK$15.375 billion, Oriental Selection's revenue was HK$3.072 billion, New Oriental's net profit was HK$1.526 billion, and Oriental Selection's was HK$274 million, both accounting for less than 20%.

Another huge difference is the ability to make money. During the period, Oriental Selection's gross profit was HK$1.203 billion, with a gross profit margin of 39.1%. Taking New Oriental's university education business as an example, its gross profit margin in fiscal 2023 has reached 74.6%.

Of course, it is not easy to find a few businesses with higher gross profit margins than education and training in the non-entry market. However, at the time point after the double reduction, whether the education and training business can continue is indeed a question. Even Lao Yu once lamented that "the era of education and training is over."

At that time, it was certainly a good idea to find a business with a low entry threshold and low investment, and to try to break through by sending a small team of cavalry. In fact, in addition to New Oriental, almost all leading education and training companies chose to diversify at this stage.

However, as policies and market expectations stabilize, everyone has gradually returned their focus to the education and training business. It can be said that for New Oriental, the live e-commerce business has completed its historical mission.

Even if Dong Yuhui is still there, the revenue, profit and market value of Oriental Selection only account for the tip of the iceberg of New Oriental. That only shows that the commercial value of Dong Yuhui and Oriental Selection to New Oriental after the split is even lower.

Therefore, when Dong Yuhui's stay or departure has brought huge uncertainty to New Oriental and Yu Minhong's personal brand, as long as he can use money to solve the problem, why not do it? Didn't he also say that the result is beneficial?

01

There is no doubt that the live e-commerce business once served as New Oriental’s escape hatch, or at least it had such a possibility.

The "double reduction" in July 2021 brought New Oriental, the education and training aircraft carrier, to the brink of collapse. Under the influence of the "double reduction" policy, New Oriental's revenue shrank by 80% and more than 60,000 employees were laid off. It is said that Dong Yuhui was ready to leave at that time.

At that time, New Oriental's stock price fell to less than HK$3. Yu Minhong was surrounded by difficult problems, such as how to make shareholders regain their confidence in New Oriental and how to give New Oriental a chance to catch its breath and make a comeback after recuperation.

It was with the motive of "extending his life" that Yu Minhong started live streaming to sell goods (agricultural products) at the end of 2021. Due to coincidence, the right time, place and people, he finally created the "Dong Yuhui myth."

Dong Yuhui’s sudden popularity made the live broadcast room of Oriental Selection very popular. It was so lively that people seemed to have forgotten that New Oriental also had education and training business.

Especially when Yu Minhong paid off the wages and severance pay of the laid-off employees and donated 80,000 sets of desks and chairs to rural primary and secondary schools, everyone admired his indomitable spirit and thought that New Oriental was really going to transform.

Looking back now, it is precisely because Oriental Selection has come to the forefront that New Oriental’s education and training business has gained a buffer zone after the double reductions, allowing it to explore and get back on track in a relatively stable, benign and low-exposure environment.

New Oriental’s financial report shows that2022Fiscal year (ending2022Year5moon31Its net revenue is31.05US$ billion, with a net loss of12.2billion dollars;2023Fiscal year (ending2023Year5moon31), New Oriental's net revenue was29.98billion US dollars, with a net profit of2.35US$ billion, turning losses into profits.

02

Of course, since the live streaming e-commerce business belongs to the content industry, in addition to transactions, it also has great brand promotion value.

It is undeniable that whether it is finding a way out for the company or helping farmers, the newly started Oriental Selection has won a huge reputation for New Oriental. When we return to the end of 2021, we will find that both New Oriental, the leader in education and training, and Yu Minhong, the big boss of education and training, really need this reputation.

To a large extent, the education and training industry before and after the double reduction has been controversial both on the government side and the market side. For a period of time, the live e-commerce business helped New Oriental to restore its image, which can be said to be both face-saving and profitable.

At the end of 2023, the "small composition incident" occurred in Oriental Selection. It can be said that it was from then on that the live e-commerce business has completed its historical mission.

This incident was originally just a dispute between the creative team and the anchor, but it unexpectedly revealed the resentment and contradictions within the Oriental Selection. Although this incident ended with "Sun Dongxu being dismissed", this drama of mutual sabotage actually ended up sabotaging "Oriental Selection".

After the "Little Composition Incident" occurred, the share price of Oriental Selection fell by nearly 20%, and the market value evaporated by about HK$7 billion. As of today, the share price of Oriental Selection is HK$9.5, and the decline is still as high as nearly 70%.

Of course, the "downward trend" of Oriental Selection is not only reflected in the stock price. Data shows that on December 9 last year, the number of fans of Oriental Selection on Douyin was more than 31 million, but now the number of fans is only 29.842 million, which means that nearly 2 million people have stopped following it.

On the other hand, the GMV of Oriental Selection has also declined significantly. According to the 2024 interim report of Oriental Selection, its GMV reached RMB 5.7 billion in the six months ending November 30, 2023, with the majority of GMV coming from Douyin. The total number of paid orders for third-party products and self-operated products on Douyin was 59.6 million.

According to reports, in the month ending June 12, the GMV of Huixingxing was 467 million yuan, more than twice that of Dongfang Zhenxuan. Based on this calculation, Dongfang Zhenxuan's GMV is already far lower than the level in the second half of 2023. This is exactly the sequelae left by the "Little Composition" incident to Dongfang Zhenxuan.

Compared with the declining performance of Oriental Selection, the performance of Yihui Tongxing, which started from scratch, is booming.

On January 9 this year, the GMV of "Yihui Xingxing" exceeded 100 million on the first day of its launch. The average daily GMV in the following days also exceeded 25 million. In March and April this year, "Yihui Xingxing" ranked first on the Douyin influencer list, and ranked second in May.

The "downward trend" of Oriental Selection is related to the fact that Dong Yuhui took away a large number of fans after starting a new business. It is not difficult to understand why Yu Minhong said at the shareholder communication meeting that "In the future, anchors will never be allowed to set up their own platforms independently."This sentence.

03

There is a Chinese idiom called "the tail is too big to fall off", which means that when the tail grows too big, it can no longer swing with the will of the subject.For the main body, the huge tail is not a capital to boast about, but a negative asset.

Before Dong Yuhui left, he had actually already shown such a trend towards New Oriental and Yu Minhong, which was of course dangerous.

For example, entrepreneur Yu Minhong has become a professional apologist. In an open letter to shareholders of Oriental Selection, Yu Minhong mentioned that he has reduced the number of times he appears in front of the camera, because he will be intensively attacked whether he appears in the camera of Oriental Selection or in the camera of Walking with Hui.

In Yu Minhong's own words, the number of times he has been abused, accused, and even insulted on the Internet in the past year is more than in 100 lifetimes combined.

Yu Minhong had to apologize because of the "short essay incident"; Yu Minhong had to apologize because the anchor of Oriental Selection mocked netizens for not being able to afford egg yolk pastry; Yu Minhong also had to apologize for making the statement that "Oriental Selection is a mess"... Why bother?

Public opinion has repeatedly pushed Yu Minhong and Dongfangzhenxuan to the forefront. If no choice is made, Yu Minhong's reputation accumulated over the years may be "ruined in an instant", and New Oriental will be implicated, and the brand damage caused by this will be immeasurable.

Dong Yuhui's fans often refer to themselves as "mother-in-law". Reports have mentioned that most of these "mother-in-law fans" are between 40 and 60 years old and have a well-paid job. The products in Dong Yuhui's live broadcast room cover every aspect of their daily life.

This group is actually the main force of "education consumption". Yu Minhong does not need to affect New Oriental's reputation among "mother-in-law fans" because of live e-commerce, a non-core business. It is simply not worth the loss.

In this way, it is really moving further and further away from the original intention of "restoring shareholders' confidence in New Oriental".

From this perspective, Lao Yu's personal expense to cut ties with Dong Yuhui was nothing more than a timely measure to stop losses. By "compromising", he not only restored his personal reputation, but also avoided the risk that the bigger the tail, the harder it would be to get rid of it.

After the "breakup", to some extent, Dongfangzhenxuan and Yuhuixingxing became competitors. Facing this new relationship, Yu Minhong said at the communication meeting, "When he (Dong Yuhui) needs my help, as long as it is within a reasonable range, I will do my best to provide help. I express my deep gratitude to him."

He spent more than 70 million yuan but was still able to maintain self-discipline and return to propriety. This is Yu Minhong. Now his burden is finally off his shoulders.

The pressure may be on Dong Yuhui. In the past, people's support for him, besides his talent, also came from the empathy among workers. For the sake of their bosses, workers can only make a living and cannot pursue poetry and distant goals. Why?

So, does the current boss Dong Yuhui want the moon or six pence?