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Oriental Selection submitted a seemingly good financial report for fiscal year 2024. In that fiscal year, Oriental Selection's revenue was 7.07 billion yuan, a year-on-year increase of 56.8%; the profit attributable to the owners of the company was 1.72 billion yuan, a year-on-year increase of 77%; the adjusted profit was about 2.18 billion yuan, a year-on-year increase of about 1 times.

Source: Oriental Selection Financial Report

But a closer look at the financial report reveals thatThe significant increase in Oriental Selection’s revenue and net profit was mostly due to the sale of its education business to New Oriental.Oriental Selection’s after-tax profit of 1.3 billion yuan from the sale of its education business was consolidated into Oriental Selection’s income statement for the fiscal year.

Looking solely at the e-commerce business, the situation for Oriental Selection in this fiscal quarter is not optimistic.

In fiscal year 2024, the revenue of Oriental Selection's proprietary products and live-streaming e-commerce business increased by 68.1% year-on-year to 6.5 billion yuan, but the revenue cost grew at a higher rate, doubling from 2.4 billion yuan to 4.8 billion yuan, and the gross profit margin dropped from 38.2% in the previous fiscal year to 25.9%.

Coupled with factors such as the year-on-year increase of 174.5% in sales and marketing expenses to 870 million yuan, the adjusted net profit of self-operated products and live-streaming e-commerce showed negative growth, falling from 920 million yuan in the previous fiscal year to 710 million yuan.

The reason for the negative growth may be due to Yu Minhong's "Douyin" strategy. In the second half of last year, Yu Minhong accelerated the pace of "Douyin". However, "Douyin" dragged down the financial data of Oriental Selection and dispersed the order volume of Douyin.

Although the number of Douyin orders from Oriental Selection increased by 33% year-on-year to 181 million in fiscal 2024, this was after merging the number of orders from Huitongxing. As of the first half of fiscal 2024, the number of orders from Douyin had dropped by 15% year-on-year to 59.6 million from 70.2 million in the first half of fiscal 2023.If there is no rebound, Oriental Selection’s market will be lost.

The situation faced by Oriental Selection is that the proportion of self-operated products in GMV has increased from 30% in the same period last year to 40%, but the gross profit margin has dropped to 25.9%; the divestiture of Huitongxing in the future will also lose a large part of revenue and profit. The financial report mentioned that in fiscal year 2024, the GMV of Douyin of Oriental Selection accounted for the majority of the total GMV, and the GMV of applications (i.e. self-owned APPs) accounted for 8.4%, and other channels were not mentioned. In this case, Oriental Selection must focus on being the platform with the greatest profit and shrink the battlefield.

Yu Minhong had obviously already felt the chill and began to retreat to his base camp and return to Douyin.

On July 26 this year, the day after Cutting Off and Walking With Glory, Yu Minhong stated at a shareholder exchange telephone conference that the main live broadcast platform of Oriental Selection is currently Douyin, and the cooperation with Douyin will be closer in the future. "I have also repeatedly expressed to Douyin's senior management that Oriental Selection is willing to continue to develop on Douyin. Therefore, it is foreseeable that in the future, Oriental Selection may cooperate more closely with Douyin in various activities, and will also receive better support from Douyin."

This is also the second management reform made by Yu Minhong after the spin-off of "Yuhui Xingxing".

Zizibang found that while strengthening cooperation with Douyin,Oriental Selection has suspended its Taobao live broadcast.

The last playback of the Oriental Selection Taobao live broadcast room was on June 20, and there has been no live broadcast since then, and no plans to broadcast on Taobao have been announced. Regarding the suspension of the broadcast, Zi Zi Bang asked Oriental Selection and Taobao Live for confirmation, but as of press time, neither party responded.

Image source: Oriental Selection Taobao Live Room

You should know that at the end of August last year, one month after Douyin encountered the crisis of suspension, Oriental Selection had entered the Taobao live broadcast room in a high-profile manner, and Yu Minhong also appeared in the Taobao live broadcast room, completing Oriental Selection's Taobao debut.

The reasons why Dongfang Zhenxuan entered Taobao Live are nothing more than "the fragility of a single platform" and "looking for new traffic." Dongfang Zhenxuan stopped broadcasting on Taobao Live less than a year ago, which also means the initial failure of Yu Minhong's live broadcast on all platforms. Tightening the live broadcast business line, Douyin once again became Yu Minhong's only choice among third-party live broadcast platforms (except Dongfang Zhenxuan's own APP).

What is visible to the naked eye is thatThe relationship between Oriental Selection and Douyin is becoming increasingly close.

On the evening of August 19, Oriental Selection and Douyin Supermarket cooperated to hold a live broadcast event for Douyin Supermarket's official subsidies. That night, 186 products were launched in the live broadcast room. In addition to books, Oriental Selection's own products, and Douyin flagship store products, Douyin Supermarket products accounted for almost half of the market, with a total of 84 products, which exceeded the number of Oriental Selection's own products on the shelves, covering fresh food, snacks, daily necessities, small appliances and other fields.

The cooperation between Oriental Selection and Douyin does not stop there.Douyin Hourly Delivery is the only e-commerce platform where Oriental Selection’s self-operated products are available; Douyin Supermarket has also become the only self-operated supermarket of a third-party e-commerce platform where Oriental Selection’s self-operated products are available.

Dongfang Zhenxuan's attitude towards live streaming channels in its 2024 financial report is also worth pondering. Regarding the full-platform operation strategy, Dongfang Zhenxuan mentioned the steady growth of Tmall, JD.com, Pinduoduo and Xiaohongshu channels in terms of shelf e-commerce, but in terms of live streaming channels, it only mentioned the growth of Douyin channels, and did not mention Taobao Live and Free APP. In addition, Dongfang Zhenxuan also mentioned that it will add more than 10 vertical accounts on Douyin in the future.

Source: Oriental Selection Financial Report

With the separation from Huixingxing, Dongfang Zhenxuan had to take another step forward. After leaving for a year, it returned and still focused on Douyin.

01

A year after becoming famous, Yu Minhong tried to step out of the Douyin live broadcast room and "appeared" on other live broadcast platforms three times. The business of Oriental Selection also expanded.

In early July 2023, Dongfang Zhenxuan launched its own APP live broadcast, and Yu Minhong appeared in the live broadcast room of both Douyin and its own APP. At that time, Yu Minhong was full of confidence in the launch of dual platforms, and "will continue to live broadcast on both platforms in the future."

Image source: Oriental Selection’s own APP live broadcast room

Since then, the Oriental Selection APP has launched multiple live broadcast rooms, such as "Oriental Selection", "Book Number", "See the World", "Drinking Song" and other live broadcast rooms with the same matrix as Douyin, and the unique "Member Store" live broadcast room. Later, Oriental Selection also launched live broadcast rooms such as "Zhen Haokan" and "Mountain and River Treasures".

but,Less than a month after its own APP was launched, Douyin showed a "yellow card" to Oriental Selection.At the end of July 2023, Dongfang Zhenxuan's Douyin self-operated product store and self-operated product live broadcast room were forced to suspend operations for 3 days. The suspension of broadcasting also caught Dongfang Zhenxuan off guard, and they temporarily decided to conduct a 15% discount promotion on their own APP.

The official did not respond to the ban on the live broadcast room. However, an insider close to Douyin told Zizibang that the main reason why Dongfang Zhenxuan’s store and live broadcast room were banned was “multiple openings”, that is, distributing a video live broadcast source on multiple platforms. The same live broadcast room uses the same live broadcast source in Douyin and its own APP, which is not allowed on any platform.

Just one month after the crisis of suspension, at the end of August 2023,Oriental Selection has entered the Taobao live broadcast room in a high-profile manner. Yu Minhong, dressed in a white chef's uniform, once again appeared in Oriental Selection's Taobao live broadcast room.On that day, the cumulative sales of the live broadcast room exceeded 100 million yuan, accounting for 1/4 of the monthly sales of Oriental Selection on Douyin at that time.

Image source: Oriental Selection Taobao Live Room

Yu Minhong is full of energy, and the "Doudou" stall is getting bigger and bigger. At that time, Dongfang Zhenxuan was interested in broadcasting on the video account. According to "Shijie", in 2023, Dongfang Zhenxuan sent two vice presidents to visit WeChat to discuss the matter of entering the video account. However, according to people familiar with the matter, although WeChat also welcomes broadcasts, it clearly stated that there will be no traffic support and there will be no discrimination in daily treatment.

In fact, when Oriental Selection was established, it opened a live broadcast on the video account platform. According to E-commerce News Pro, Yu Minhong appeared in the live broadcast room of Oriental Selection's video account in March 2022, with a viewership of 100,000. However, after Oriental Selection became popular on Douyin, it suspended the live broadcast of the video account.

Oriental Selection, which suspended its video account live broadcast, chose to try again in 2024. On February 5, 2024, Yu Minhong appeared again in the video account live broadcast room of Oriental Selection, but it was not a real-person live broadcast, but a playback video of "Yu Minhong and Feng Feng talking to writer Yu Shicun".The slogan is "The video account will be broadcast for the first time, and 20,000 more red envelope covers will be given out."

Image source: Oriental Selection Video Account

In one year, Dongfang Zhenxuan launched live streaming on its APP, Taobao, and video accounts, which can be described as a comprehensive attack. However, from the perspective of actual benefits, it did not achieve excessively high returns.

After the crisis of suspension of broadcasting passed, the live broadcast rooms on the Oriental Selection’s own APP, which had the same matrix as Douyin, rarely broadcast live on both platforms, and Douyin is still the main daily broadcast. On its own APP, except for the member store which mainly broadcasts live, the rest are all playback content.The number of daily online users in the APP live broadcast room is less than a thousand, which also means the initial failure of Oriental Selection’s own APP live broadcast business.

The traffic of Dongfang Zhenxuan's Taobao live broadcast room dropped rapidly after one month of entering Taobao, from 10 million views to 3-5 million views. After one year of entering Taobao, the number of fans of Dongfang Zhenxuan's Taobao live broadcast room was 5.6 million. This is far from the 10 million fans that Luo Yonghao gained after one month of entering Taobao.On June 20 this year, the Oriental Selection Taobao live broadcast room was suspended, and it has been suspended for 2 months.

The plan to restart the live broadcast of the video account was shelved after only one day.The replay of that conversation had only 20-odd comments and less than a hundred likes.

Source: Oriental Selection Financial Report

The massive "Douyin" plan has brought a certain amount of GMV growth. The financial report shows that the GMV in fiscal year 2024 is 1.43 billion yuan, a year-on-year increase of 43%. The financial report points out that self-operated products are the main growth driver of Oriental Selection.

At the same time, it also led to a rapid growth in sales and marketing expenses for Oriental Selection's live broadcast and self-operated e-commerce, which increased by 174.5% year-on-year to 870 million yuan in fiscal 2024, while this expenditure was 320 million yuan in the same period last year.

02

After one year of existence, attempts at Taobao live broadcast, video account live broadcast and APP live broadcast have proven thatYu Minhong naturally understood that among the online channels, Douyin brought him the greatest benefits.

The financial report for fiscal year 2024 also clearly pointed out that the GMV of Oriental Zhenxuan Douyin accounted for the majority of the total GMV, and the GMV of the application (i.e. its own APP) accounted for 8.4%, without mentioning other live broadcast channels.

It can be clearly seen that since this year, the cooperation between Oriental Selection and Douyin has become more frequent, especially after the establishment of Yuhuixingxing.

At the beginning of this year, Dongfang Zhenxuan tried out the "12-hour delivery" service on Douyin and officially entered the Douyin 12-hour delivery business in April. Search for "Dongfang Zhenxuan" on the Douyin 12-hour delivery function page to enter the Dongfang Zhenxuan 12-hour delivery page. You can also enter the page directly from the Dongfang Zhenxuan 12-hour delivery account store.

The hourly delivery service of Oriental Selection is only available on Douyin.It has not yet been launched on other e-commerce platforms such as the Dongfangxuan APP, JD.com, and Taobao. The current business only covers parts of the two major cities of Shanghai and Beijing.

Image source: Oriental Selection Hourly Delivery (TikTok platform)

"Recently I found that many links in the Oriental Selection live broadcast room are from Douyin Supermarket." In fact, since the beginning of August, fans of Oriental Selection have observed that the number of links to Douyin Supermarket appearing in the Oriental Selection live broadcast room is increasing.

Douyin Supermarket is a business under Douyin e-commerce and Douyin's instant retail business. It will be launched in the first quarter of 2023. Most of the products sold are "next-day delivery". As of now, Douyin Supermarket's flagship account has 6.45 million followers, but its store broadcast data is not impressive. For example, in July, Douyin Supermarket brought in 5 million to 7.5 million yuan in total, with an average daily sales of 100,000 to 250,000 yuan.

On August 19, Dongfang Zhenxuan held a special live broadcast of Douyin Supermarket’s subsidies.9.02 million people flocked in, with total sales of 2.5 million to 5 million yuan. For many consecutive days thereafter, the Oriental Selection live broadcast room put multiple Douyin Supermarket products on the shelves, and the anchors frequently introduced the Douyin Supermarket coupon mechanism to netizens in the live broadcast room and taught netizens how to receive coupons and place orders.

"Our products are shipped by Douyin Supermarket, so they are definitely genuine and shipped very quickly. If you buy today, you will most likely receive it the next day, or the third day at most. Currently, most orders placed at Douyin Supermarket come with coupons, but these coupons are not given by us." During the Inner Mongolia special live broadcast on August 20, anchor Tian Quan still introduced the products of Douyin Supermarket in detail.

The cooperation with Douyin Supermarket is not just about live streaming. At the same time, Oriental Selected’s self-owned products have also entered Douyin Supermarket. Currently, the only self-owned products available in Douyin Supermarket are toilet paper and popular sausages. If you click on the product details page of Oriental Selected’s self-owned toilet paper, you can see the words “Douyin Supermarket self-operated” and enjoy Douyin Supermarket’s next-day delivery service.

Image source: Douyin Supermarket

Whether it is the Douyin live broadcast room of Oriental Selection or the Douyin live broadcast room of Oriental Selection's own products, there is only one link to the above toilet paper, which comes from the Douyin supermarket, not from the Oriental Selection's own store. It is worth noting that this toilet paper is not available on the Oriental Selection's own APP.

Image source: Oriental Selection live broadcast room for self-owned products

You should know that for a long time, Oriental Selection’s self-operated products have been firmly in its own hands for sale. Whether it is opening a live broadcast room and store on Douyin, opening a store and live broadcast on Taobao, or opening a store on JD.com, Pinduoduo, etc., self-operated products are all sold in the official store of Oriental Selection and have not entered third-party online supermarkets. This entry into the Douyin supermarket also means that the cooperation between Oriental Selection and Douyin has become closer.

Zhan Junhao, founder of Fujian Huace Brand Positioning Consulting, analyzed that from the perspective of Oriental Selection’s corporate strategy, the launch of its self-operated products on Douyin Supermarket is undoubtedly an important model for the two parties to deepen cooperation.By placing its own products in Douyin Supermarket, Oriental Selection can reach its target consumer groups more directly, thereby accelerating sales growth.

Zhuang Shuai, a retail e-commerce industry expert and founder of Bailian Consulting, also pointed out that as a fast-moving consumer goods brand, Oriental Selection can boost the sales of Douyin Supermarket. For Oriental Selection, channel procurement can increase its own sales and profits.

Yu Minhong is betting on Douyin again. In the past six months, Oriental Selection has opened multiple accounts on Douyin and started live broadcasts. As of now, according to incomplete statistics, Oriental Selection has 16 accounts on Douyin, such as Oriental Selection Youth Time, which focuses on youth consumption, Oriental Selection Clothing, which focuses on clothing, and Oriental Selection Hourly Delivery, which focuses on hourly delivery business.

Image source: Douyin Oriental Selection's live broadcast room

On August 22, the Dongfang Zhenxuan fresh food account started live broadcasting, and many anchors of Dongfang Zhenxuan, such as Xiaoqi, Yoyo, and Tianquan, appeared in the live broadcast room to sell goods. In one day, it attracted more than 5 million people to the live broadcast room, and the sales amount was 5 million to 7.5 million yuan.

03

Oriental Selection's move to shrink Taobao Live took place in June this year. Calculating the time, Yu Minhong had already discussed the separation with Dong Yuhui, and Yuhui had decided to become independent.After solving the problems in personnel management, Yu Minhong focused on changes in the business side, shrinking business lines and focusing on the main business - Douyin live broadcast.

"Although the current cooperation with Douyin is very good, it is still unstable." Yu Minhong will not bet all his hopes on the Douyin platform. After returning to Douyin, Yu Minhong has apparently found a new way out: one leg is traffic, and the other leg is products. "A company that relies solely on traffic is like an education company that relies solely on teachers giving lectures. Without the teaching system and educational products behind it, this education company should be very unstable."

And this leg of traffic is obviously not limited to Douyin. Oriental Selection explained in its financial report that in terms of shelf e-commerce, Oriental Selection has achieved steady growth in Tmall, JD.com, Pinduoduo and Xiaohongshu channels, promoting the rapid growth of its own products.

That is to say,Dongfang Zhenxuan's live broadcast business has returned to Douyin, and its self-operated products are still operated on all platforms.At the same time, this is also the other leg of Oriental Selection: self-operated products. For self-operated products, the ultimate goal of Oriental Selection may be to benchmark against Sam's Club.

Yu Minhong said at the shareholders' meeting on July 26 that he plans to explore an online and offline model based on New Oriental's approximately 800 teaching locations in the future to create Oriental Select Member Experience Stores. In the fourth quarter of fiscal year 2024, the total number of New Oriental schools and learning centers will be 1,025. This is Yu Minhong's next vision: to benchmark Sam's Club, or even surpass it.

For Oriental Selection, the advantage lies not only in its offline stores, but also in the maturity of its own products. The financial report shows that in two years, Oriental Selection has launched 488 SKUs of its own products. In fiscal year 2024, its own products accounted for about 40% of the total GMV.

Oriental Selection needs to focus on Douyin live streaming and opening offline stores to solve the current crisis.

However, at present, Oriental Selection still needs to solve the current personnel turmoil problem. According to Beijing Business Daily, after the independence of Huixingxing, some anchors and behind-the-scenes members of Oriental Selection may face a "choose one of two" situation. And this situation may also occur among senior employees.

Yu Minhong once said that he and New Oriental will not participate in any capital operation, investment and development of Huixingxing now or in the future. After the industrial and commercial changes, Yu Minhong has indeed disappeared as the major shareholder and actual controller of Huixingxing, and Dong Yuhui has replaced him as the major shareholder and actual controller.

However, according to Qichacha, among the main personnel, Wang Jielin, who is the financial director of Yuhui Tongxing, has not disappeared from Yuhui Tongxing. Wang Jielin served as the financial director in the early days of Yuhui Tongxing.

According to iQiyi.com, Wang Jielin also served as a senior executive of Dongfang Youxuan (Beijing) Technology Co., Ltd., Yuhui Xingxing (Beijing) Technology Co., Ltd., and Dongfang Zhenxuan (Zhuhai) Tourism Culture Co., Ltd. Wang Jielin's higher-level identity is the head of Dongfang Zhenxuan's financial management line.

Obviously, there are still many problems that Oriental Selection needs to solve. And for the 62-year-old Yu Minhong, who has long wanted to retire, it is still unknown how many more years he will have to stay in the CEO position before he can lead Oriental Selection to a stable development track like New Oriental after its listing.