Education and training industry “summer vacation” becomes a difficult problem, the next track is aimed at adult education

The official website of the Ministry of Education has updated personnel changes. The newly established Department of Out-of-school Education and Training Supervision is headed by Yu Weiyue, and Chen Dongsheng and Yang Jianbo are Deputy Directors. The long-term and effective management mechanism for off-campus education and training is gradually being improved.

Prior to this, the meeting of the Central Committee for Comprehensive Deepening Reform deliberated and approved the “Opinions on Further Reducing the Burden of Students’ Work and Off-campus Training in Compulsory Education. However, as the “Regulations on the Implementation of the Private Education Promotion Law” and the “Provisions on the Protection of Minor Schools” directly related to the “double reduction” will be formally implemented on September 1, this means that the upcoming summer vacation may be elementary school students and junior high school students. The last summer vacation that can be tutored.

What followed was news of layoffs from many K12 institutions one after another, “We recently went to various education and training companies to see that 40% of the work spaces were already vacant. Actually, there were signs a year and a half ago, but only recently. The policy has come quickly and fiercely.” Li Xue (pseudonym), the investment director of an early-stage investment institution focusing on the education industry, said in an interview with a reporter from 21st Century Business Herald.

It is reported that Morgan Stanley has lowered the rating and target price of the entire Chinese after-school tutoring sector, including New Oriental and Good Future. As of the close on July 1st, Eastern Time, the online education stocks of China Geology have fallen sharply for several consecutive days. New Oriental fell 4.64% from the previous day’s closing price to $7.81 per share; Good Future fell by 7.25% to $23.4 per share; high The way fell 2.78% to 14.36 US dollars per share. Among them, Good Future has fallen by about 75% from the highest of US$90.96 per share in February this year.

From disorder to order

“From a business perspective, the age of 3-8 is also the preschool age. The policy completely prohibits subject training. Therefore, almost all of the junior businesses have been laid off. At this stage, only quality education can be done. The layoffs will probably start at the end of May. Large-scale layoffs began in early June.” Xiaopeng teacher, who was responsible for user growth at an online education institution, left in the layoffs in June this year. He told the 21st Century Business Herald reporter, “From a departmental point of view, Due to the policy’s prohibition on external advertising in the K12 business, the placement staff will be laid off, and then the experience and sales will also have corresponding layoffs.”

In the past, the teaching and training advertisements that can be seen everywhere on buses, subway stations, elevators, variety shows, and TV dramas have changed one after another. Behind the frenzied bombing is the gradual increase in marketing expenses. As of the first quarter of this year, Gaotu’s sales expenses were as high as US$353 million, an increase of 202% year-on-year, mainly due to increased marketing expenses for expanding user base and brand enhancement, as well as increased compensation for sales and marketing staff.

There is no doubt that advertising and user subsidies are the two major money-burning models, but for a highly reproducible education and training platform, such a simple and rude customer acquisition method cannot be avoided.

“In the past, in the education and training industry, especially online education, large-scale launches actually pushed up the cost of customer acquisition.” In Li Xue’s view, this is a manifestation of disorderly competition in the market. “Marketing costs, in turn, have pushed up the pricing of training. In theory, parents can spend less money on educational services. This has also objectively increased the differences between classes.”

Parents have also criticized this for a long time. According to extremely data, as of October last year, more than 60% of users on the K12 online education platform were located in third-tier and lower cities, and more than a quarter of the users had an annual payment budget of no less than 10,000 yuan.

The State Administration for Market Regulation disclosed at a press conference on June 1 that 155,000 complaints and reports on education and training services were accepted in 2020, accounting for 8.2% of the total number of complaints and reports, ranking fourth in service-related complaints and reports. In the first quarter of 2021, education and training service complaints and reports reached 47,100, an increase of 65% year-on-year, and the ranking rose to third.

At the same time, the market supervision department imposed top fines on 15 off-campus training institutions, a total of 36.5 million yuan, of which 8 institutions involved fictitious teachers’ academic qualifications, teaching age, honors, etc., and 9 fictitious teachers’ teaching hours and work history. Even 13 companies involved fictitious original prices and false discounts.

Li Xue further explained that after such a round of rectification, the intermediate profit space or cost space may be released. In fact, it is controlling the excess profit space of the education and training industry.

Where is the future?

The ban is not weak, but the anxiety of the parents is not reduced.

When a reporter from 21st Century Business Herald interviewed the surrounding parents choosing elementary school for school-age children, “On the surface, everyone seems to be very Buddhist, but after school various tuition classes are indispensable. Children from other families go to tuition. If we don’t attend the class, our children will feel more anxious.” A child confronted a parent who was raised and young and said, “The children in the middle class of kindergarten have already started to do their homework every night until half past ten.”

The after-school tutoring during the online education and compulsory education phases was stopped, and the introductory wave did not go away. Li Xue believes that under this current situation, the education and training industry is expected to be embedded in school education in the future. Public schools officially purchase services provided by the education and training industry and reduce the burden on parents through school fees.

In his view, now is the period for the K12 industry to undergo a phased end. The head platform that came out has already built a mature brand image and a complete business chain. In the face of the adjustment of the new policy, there is no need to overcorrect. At a time when educational resources are limited and social classes are still flowing, there is still plenty of room for growth in the education and training industry.

According to data from Frost & Sullivan and Century Securities, the market size of my country’s vocational skills education is expected to reach 161.4 billion yuan in 2022; the market size of vocational examination training is expected to reach 257.7 billion yuan in 2022. When the downward business cannot be extended, there is still a lot of room for upward expansion of the business chain, such as adult education, postgraduate entrance examination and public examination business.

At the same time, capital is also exploring the next “gold mine” of education. With the integration of education, short video, live broadcast and other emerging media, educational MCNs with the main purpose of incubating teacher IPs have begun to emerge. In this trend, new traffic that cannot be covered by high customer unit prices is continuously tapped, and the sinking market is opened up.

“Through short video platforms such as Douyin, people who were not covered by online education with high customer unit prices have also been connected to the Internet. Their education services have room to play, but the unit price for their education service products is no longer Ten to twenty thousand, it is likely to be 40 yuan, 20 yuan or even 9 yuan.” Li Xue introduced the logic of institutional investment education MCN to the 21st Century Business Herald reporter.

From the current point of view, the situation of weakening discipline competition and more encouraging quality education is expected to come. The education and training industry is facing an unprecedented reshuffle. Under the severe pressure of the “double reduction policy”, seeking a new business model may be a top priority.