China/June 18, 2022/Source: https://www.reuters.com/
Shares in China’s New Oriental (9901.HK) climbed for a fourth straight day on Wednesday, with analysts saying its new live-streaming sales strategy could help it recover from a regulatory crackdown that decimated its education business.
The company was once one of China’s largest private tutoring firms but its fortunes changed overnight in July last year when Beijing enforced sweeping new rules on private education that barred tutoring for profit. New Oriental’s shares plunged and it dismissed tens of thousands of staff.
It tried to pivot to sectors unaffected by the regulations, including dancing and drawing classes, and in December ventured into selling agricultural products online via live streaming, with its founder Yu Minhong, well-known in China for his entrepreneurial undertakings, occasionally hosting the sessions.
The company’s sales were lacklustre, however, until late last week when its hosts, former New Oriental teachers, started using the sessions to teach English to viewers as well.
In one video that went viral on Chinese social media, the New Oriental host, after promoting a set deal for steaks, pulls out a small whiteboard where he wrote words including “steak” and “seasoning” in English, explaining how to use them in sentences before encouraging viewers to buy.
Sales from New Oriental’s live-streaming platform, which had been stuck at less than 1 million yuan ($148,858) a day, leapt past the 15 million yuan mark on Friday, according to data from live-streaming tracking platform Huitun.
Shares in Koolearn Technology (1797.HK), which operates New Oriental’s live-stream e-commerce business through a studio called Dongfang Zhenxuan on Douyin, surged 54.2% on Wednesday.
Shares listed in Hong Kong in New Oriental, which holds 55.7% of Koolearn, jumped 22.5% on Wednesday and are up 54% since the open on Friday.
However, they are still only worth about a third of their value before the new rules came in last year. New Oriental is also listed in the United States.
Citi analysts, who have a “buy” rating on New Oriental, called Koolearn’s online live broadcasting a bright spot and estimated it could achieve more than 7 billion yuan in annual gross merchandise value if it maintained the current run rate.
China banned tutoring for profit in an attempt to ease pressure on children and parents, but it also led to a wave of school closures and layoffs across the private education sector.
Some customers who purchased products from New Oriental after watching the live streams on Friday said they were impressed by the company’s never-say-die attitude.
“I burst into tears when I watched it,” said Kong Ling, a tech worker in Hangzhou. “I’m watching a warrior who stands up firmly despite being beaten by the iron fist of life and I wanted to buy to show my support.”
($1 = 6.7178 Chinese yuan renminbi)