(Report produced by Author: Hua Chuang**, Liu Xin).
Founded in 2005, Oriental Selection Line, formerly known as New Oriental**, covers four major business segments: preschool education, K-12 education, university education, and institutional business. New Oriental** was spun off from New Oriental Group in 2014 and ceased its K-9** training business on October 25, 2021 due to the impact of the "double reduction" policyIn the same year, it tested the waters of live broadcast e-commerce for business transformation, and founded Dongfang Selection on December 28, 2021. On March 14, 2023, the company's Chinese and English stock abbreviations were changed from "koolearn" and "new oriental**" to "east buy" and "oriental selection" respectively. At present, Oriental Selection continues to provide university education (domestic university preparation courses, overseas preparation courses) and institutional business (universities, public libraries, e-commerce operators, and business services).At the same time, we will vigorously develop the live broadcast e-commerce business, take agricultural products as the core, and gradually build an influential live broadcast matrix. According to the latest financial disclosure (FY23 annual report), self-operated products and live streaming e-commerce business have become the company's core business.
(1) The live broadcast e-commerce business has developed rapidly, and the strategic transformation has achieved results
Affected by the "double reduction" policy in 2021, the company's operating income in fiscal year 2022 (ended May 31, 2022) fell significantly, to only 60.1 billion yuan (YOY-58%). With the launch of Dongfang Selection's live broadcast on the Douyin platform in June 2022, the company's live broadcast e-commerce business has entered the fast lane of development, and its operating income has increased to 45 in fiscal year 20231 billion yuan (yoy+651..)0%), while non-GAAP adjusted net income improved significantly to 10$8.9 billion. The revenue of the live streaming e-commerce business reached 388.1 billion yuan, accounting for 86% of the company's total revenue, has become the company's main income**, marking the company's strategic transformation has achieved results.
After divesting K-12 education and pre-school education, although the business of the education segment shrank, the gross profit margin of university education remained stable at more than 65% and rose to 75% in 2023, which is related to the reduction of labor costs and customer acquisition costsThe gross profit margin of the institutional business is stable at more than 80%;The gross profit margin of e-commerce was 38%. With the increase in the proportion of e-commerce business, the overall gross profit margin level decreased to 43% of FY23. In terms of expense ratio, the live broadcast matrix has been gradually completed and the company's investment flow is small, and the cost of customer acquisition is decreasing, which is relatively offset by the sales expenses brought by the amortization of equity incentive expenses, and the overall expense ratio is on a downward trend. At the same time, after the business transformation, the company has a low dependence on R&D, and R&D expenses remain low. FY23 Sales, Management, and R&D expense ratios were 14%, 3%, and 2%, respectively. As the company's strategic focus is to continue to develop its own products business and invest in and build a more complete first-chain system, it is expected that the expense ratio may increase slightly in the next fiscal year.
(2) Equity concentration, a number of senior executives from New Oriental Group
As the parent company and actual controller of Oriental Selection, New Oriental Group holds as much as 55% of the shares, and the highly concentrated shareholding structure makes the strategic transformation and decision-making speed of Oriental Selection relatively rapid. The senior management team selected by Oriental is closely related to New Oriental, and the four core executives are from New Oriental Group, or continue New Oriental's corporate culture and management style - Yu Minhong, Chairman of the Board of Directors, is the founder of New Oriental Group, Sun Dongxu, Chief Executive Officer and Executive Director, former President of New Oriental Hefei and Anhui, Yin Qiang, Chief Financial Officer and Executive Director, former Chief Financial Officer and Executive Director of New Oriental Group, and Sun Chang, former Co-CEO of New Oriental Group who joined New Oriental Group in 2005.
(3) Review of historical business changes
Started the education business (established - December 2019): The predecessor of New Oriental** was established in 2005, launched the Dona English learning Xi application in 2012, and launched Oriental Youbo in 2017, and the business continued to expand, gradually forming four major business segments: preschool education + K-12 education + university education + institutional business. In 2019, New Oriental** was listed on the Hong Kong Stock Exchange, deeply cultivating the online education brand, and the company has developed steadily. Catalyzed by the epidemic, ** education business has been developed and gradually involuted (December 2019-July 2021): Affected by the epidemic, offline education has been hindered, and ** education business has been favored and developed rapidly. With the triple pressure of intensified competition in the same industry, the recovery of offline education, and the increasing call for burden reduction, New Oriental's online business has declined. Transformation attempts under the impact of "double reduction" (July 2021-June 2022): In July 2021, the "double reduction" policy was introduced, pre-school education and K-12 education were severely impacted, and New Oriental** entered a trough period;In November, Yu Minhong increased his shareholding to save the market, and the stock price rose slightly. At the end of 21, New Oriental** set foot in the live broadcast e-commerce business to seek transformation, and officially changed its name to "Oriental Selection" on March 14, 2023.
Live broadcast e-commerce out of the circle + development of self-operated products (June 2022 to present): In June 2022, Dong Yuhui went out of the circle live, and the direct broadcast e-commerce business drove the continuous growth of GMV, exceeding 4.8 billion yuan in half a year. After mid-January 2023, GMV declined significantly due to the impact of the Spring Festival holiday and the return of offline consumptionCoupled with the tightening of liquidity in the Hong Kong market, the stock price affected by beta has seen a significant **. According to the data of the Daily Economic News Network, in July 2023, one of Dongfang Selection's Douyin live broadcast rooms, Dongfang Selection's self-operated products, was shut down for 3 days, and at the same time, the sales of self-operated apps were outstanding, and the company's strategic direction for developing self-operated products was obvious. *Education business, wholeheartedly focusing on e-commerce: On November 21, 2023, Oriental Selection announced that "it will pay the parent company New Oriental ** education business at a consideration of 1.5 billion yuan and cash payment, and is expected to record a revenue of about 16."$5.3 billion with a delivery date of 1 March 2024 or a date otherwise agreed by the parties". This initiative enables the integration of the education business of Oriental Selection with the education sector of the parent company, New Oriental, so that the business lines of the two parties no longer overlap, but each performs its own duties and gives full play to its advantages. It is foreseeable that Dongfang Selection will concentrate resources on the operation of e-commerce and self-operated products business in the future.
On December 28, 2021, the "Oriental Selection" live broadcast room was officially opened on Douyin, and according to Gray Dolphin data, its first live broadcast sales were 590,000 yuan, and the number of people was 1550 thousand. On June 9, 2022, the live streaming data changed significantly, and the number of fans and GMV increased at the same time. The sales volume on June 9 was 3.47 million yuan, and from June 10 to 13, it has increased to 1469 1992 1513 22.1 million yuan respectively. The Douyin fan soaring list of the month shows that Dongfang Selection has more than 20 million followers within 30 days. As of October 2023, Dongfang Selection's main Douyin account "Oriental Selection" has reached 30.9 million followers, and there are 5 sub-accounts under the banner (Oriental Selection's Beautiful Life, Oriental Selection's Books, Oriental Selection's Self-operated Products, Oriental Selection's Wine Selection, and Oriental Selection's World Selection) to further expand the fan audience.
(1) To be seen: rely on the long-term precipitation of brand power and trust foundation
The "Oriental Selection" live broadcast room can be seen by the public in the early stage of development, on the one hand, it is the natural traffic brought by the "brand effect". Thanks to the parent company New Oriental's leading position in the education and training industry, New Oriental has been established for nearly 30 years, and its influence is of epochal significance, and its transformation trend has also attracted market attention. The track that Oriental Selection has entered is the live broadcast of agricultural products, involving two major fields: online trading and food safety, while New Oriental's reputation in the education and training industry has formed a brand endorsement for live broadcast products and laid a foundation of trust between consumers and anchors. With the success of Dongfang Selection in the live broadcast e-commerce, another leader in the education and training industry, Good Future, also launched the first live broadcast on location on December 20, 2022, focusing on agricultural products, with on-the-spot sales of nearly 2 million yuan and the number of fans from 660,000 to 740,000 people. The sense of reliability brought by the teacher's image to the audience will be more easily and naturally transferred to the audience's trust in the quality of the product.
(2) Being promoted: stepping on the Douyin live broadcast outlet, the first degree has been improved
The premiere is to ask for directions, and Dongfang Selection needs the blessing of platform traffic to truly enter the public eye. According to Gray Dolphin data, on June 9, 2022, with Dong Yuhui's bilingual live broadcast to bring goods out of the circle, the GMV of Dongfang Selection's live broadcast room reached 3.47 million on the same day, and the number of fans exceeded 1 million. Then the popularity continued to ferment rapidly, and the number of fans of the main account exceeded 10 million on June 16, and the number of fans increased by 4.24 million in a single day. Choose the Douyin live broadcast room to expand your territory and target the traffic pool with great marketing value. According to QuestMobile data, in 2022, short** users in China spent 168 minutes in a single day, which is more than 2Within five hours, Douyin had 700 million monthly active users. The short ** platform has a significant layout in interest e-commerce, local life and other tracks, continues to seize the attention of users, and provides a broad traffic pool for live broadcast merchants.
Step on the traffic distribution logic of Douyin, pay attention to content construction, and maintain high-quality output. Douyin's decentralized recommendation algorithm enables traffic not only to revolve around the head account, but also to get a certain amount of traffic through intelligent recommendation. High-quality content will rely on better data feedback, get more recommendations when it is distributed in the overlay, so as to enter a larger traffic pool and generate exponential traffic growth in the continuous overlay. Dongfang Selection's traffic remained at a high level within a few days after it came out of the circle, and Gray Dolphin data shows that in about 30 days after June 9, 2022, the main account has more than 20 million followers.
The traffic distribution strategy is also related to the platform's cooperation with the general policy. **Continue to promote rural revitalization, support agriculture, rural areas and rural areas, and support agricultural products on the live broadcast platform are in line with the national policy direction. For a long time, the rural e-commerce live broadcast has been subject to factors such as lack of talents, backward equipment, and lack of brand concept, resulting in the slow development of agricultural products.
(3) Being needed: The unique "knowledge-based delivery" arouses the audience's interest and emotional resonance
Unlike other live broadcast rooms, the anchor team selected by Dongfang has transformed from teachers, and most of the anchors have graduated from well-known colleges and universities, have teaching experience, and show a certain knowledge base and unique personal direct broadcast style during live broadcasts. The bilingual live broadcast that made Dong Yuhui out of the circle led the upsurge of "knowledge-based delivery", and the frequent golden sentences made the product explanation poetic and interesting, and the audience jokingly called "100 yuan famous teacher class for free" and "free steak while paying for knowledge". In the past few years, the self-confidence of national culture has been continuously enhanced, and users' desire for high-quality content has found excellent answers in the Dongfang Selection live broadcast room, and the content out of the circle has helped the anchors of Dongfang Selection to quickly accumulate fans in a short period of time.
(1) Multi-platform strategy: Douyin's performance is stable, the GMV of consignment sales is eye-catching, and the self-operated APP ecosystem is closed-loop
From the perspective of traffic, with Dongfang Selection's clear strategy of "creating its own brand products and live broadcast e-commerce services", the importance and urgency of attracting global traffic has become prominent. On August 29, 23, Oriental Selection opened the first show of the "Oriental Pantao Fair" with the logo of Taotao;At the same time, it also accelerates the construction of Dongfang Selection's self-operated APP, so as to expand private domain traffic and improve consumer stickiness. The company has gradually formed a three-legged model with Douyin as the basic content live broadcast and ** and self-operated apps as the shelf e-commerce and consumer value-added services. From the perspective of products, Dongfang Selection has developed into a consignment + self-management model. Among them, the consignment products do not charge pit fees, which is a pure commission model, and the sales of consignment products are outstanding on the top platformThe category of self-operated products continues to expand, and the sales of explosive products are considerable, and the company has taken self-operated products as a strategic focus. The app is more flexible, the brand is stronger, and it is a fertile soil for self-operated products.
1. Douyin: The matrix account has a stable performance and high traffic conversion efficiency.
Douyin channels are further divided into Douyin live broadcast channel and non-live broadcast channel (** with goods and product card with goods). The live broadcast channel contains 6 matrix numbers selected by Dongfang;In the non-live streaming channel, ** delivery refers to the user placing an order to purchase through the small yellow car mounted on the **slice of the Douyin matrix account ** of Dongfang Selection, and the commodity card delivery refers to the user directly through the "enter the store" on the homepage of the Dongfang Selection Douyin account, and purchase and place an order in the Dongfang Selection store. The Douyin channel is an important channel for the company's e-commerce sales**. According to the financial report data, FY23's live broadcast e-commerce business has paid about 10 billion yuan in GMV, almost all of which comes from Douyin channels. According to Gray Dolphin data, among the matrix accounts on the Douyin platform, Dongfang Selection Main Account and Beautiful Life account contribute most of the GMV. The starting speed of Beautiful Life is relatively fast, and the proportion of GMV is on the rise month by month, while the proportion of GMV on the main number of Oriental Selection is on a downward trend. During Douyin's "Double 11" period (October 24 to November 11, 2023), the GMV of the Beautiful Life account exceeded the GMV of the main account, accounting for 44% of the total GMV of multiple accounts on the Douyin platform.
On the traffic side, Dongfang Selection's live broadcast penetration rate is stable, and the overall traffic conversion efficiency is high, saving streaming costs. Live broadcast penetration rate = live broadcast ** number of live broadcasts * 100%, the average live broadcast penetration rate of the main account of Dongfang Selection has remained above 30% in the past six months, which means that for every 100 live broadcasts**, there are 30+ people entering. At the same time, the traffic structure of the main account is based on the recommendation feed (46.4%) and concerns (260%)-based, paid (14..)1%), which means that the cost of buying volume and investment is relatively low. Looking at the Beautiful Life account again, the live broadcast penetration rate is above 40% on average, and the traffic structure is similar to that of the main account. Dongfang Selection's traffic on the Douyin platform is mainly based on fan attention and algorithm recommendation, with low purchase pressure and good conversion degree, which is a healthy and sustainable traffic structure.
2. Actively enter the game, and the sales of consignment products are eye-catching.
Dongfang Selection made its debut on the ** platform on August 29, 2023, and achieved GMV 1 on the same day7.5 billion yuan, and the number of fans of a single direct broadcast on the first day increased to nearly 2 million. As of November 8, the number of fans on the Oriental Selection platform reached 50090,000, with two matrix numbers (Oriental Selection** store fans 47640,000, the number of fans of Oriental Selection Tmall*** is 2450,000), and at present, the total number of fans on the ** platform has exceeded the Dongfang Selection Beautiful Life account on the Douyin platform. Analyzing the GMV structure of the company's three platforms in October, ** the platform has a strong ability to carry goods (related to the popularity of Double 11), and the GMV reaches 70% of Douyin, and almost all of them come from consignment. We believe that the company chose the ** platform, not only because of the platform's broad live broadcast e-commerce space, but also because the ** live broadcast has accumulated two unique genes in the historical development: the talent effect (such as Li Jiaqi and Wei Ya and other head anchors) and the big promotion effect (such as double 11,618 and other platform promotions) to the strong pull of brand GMV;These two aspects can fully develop the consignment space for Dongfang Selection and other brand cooperation.
3. Oriental Selection APP: "Small and Beautiful" selection scene to serve high-frequency buyers.
Since the launch of the app in the second half of 22, it mainly sells self-operated products, and according to third-party data, the monthly GMV of the app is about 10 million in a single channelThe GMV in October '23 was close to 90 million, of which self-operated GMV accounted for more than 75%. On October 17, 2023, the company officially launched a paid "selection membership" on the app, priced at 199 yuan per year. The rights and interests include 88% off 100 self-operated products, 12 non-self-operated product coupons a year (12 yuan off for 100 yuan, and 3 rights and interests for the limited-time coupon package of 100 yuan.) We believe that the membership payment strategy is attractive to high-frequency buyers, and is expected to further increase the purchase frequency after pulling loyal customers into the private domain scene. Taking the Douyin channel as an example, according to the company's 23-year financial report data, as of May 31, 2023, the total number of orders for Douyin for the whole year is 13.6 billion orders, with Douyin's self-operated products orders accounting for 30% and Douyin's self-operated products buying 9 million customers, the purchase frequency is calculated, that is, 13.6 billion orders*30% 9,000,000 people=45 singles. Based on the average unit price of 66 yuan and 88% off per order, members spend more than 252 Self-operated products alone can earn back membership fees, which is 56x. At the same time, we believe that the launch of membership payments before Singles' Day will lead to revenue growth in FY24. Assuming that the app's paying members convert from the Douyin platform's self-operated product buyers (estimated base of 9 million): in the conservative scenario, when the penetration rate of paying members is 5%, it will bring in 60 million yuan in membership revenue by FY24In the optimistic scenario, when the penetration rate of paying members is 30%, it will bring 3$600 million in membership revenue.
Judging from the number of apps, Dongfang Selection App is still far from catching up with similar online retail stores with first-mover advantages. As of November 9, 2023, the cumulative number of Dongfang Selection apps has exceeded 11.6 million times (more than 9.73 million times in the Android market and more than 1.88 million times in the iOS market). Compared with the same time dimension, the number of ** of Sam's app has accumulated more than 2600 million versus 1.5 billion for the Hema app.
(2) Goods: With agricultural products as the core, we will continue to expand our own products
1. Self-operated products are developing rapidly, and SKUs are added in double digits every month
In October, the Douyin hot-selling products selected by Dongfang were all self-operated products, and the total GMV of the top 3 products was close to 50 million yuan: the GMV of barbecued sausage with burst sauce reached 23.51 million yuan, the South American white shrimp was 10.2 million yuan, and the low-fat fried chicken breast was 10.06 million yuanAnd the live broadcast sales of top products account for more than 60%. Since March this year, the company has accelerated the launch of new self-operated products, and currently has about 200 self-operated SKUs, covering 10 categories including meat, eggs, fruits and vegetables, beverages, snacks and vegetarian food, etc., with a high proportion of seasonal fruit and vegetable products.
2. Self-operated products leverage the original intention of online member stores
On October 17, the Oriental Selection app started membership payment and officially entered the track of online membership stores. Compared with other membership models in the industry, the membership payment of Dongfang Selection is similar to that of the membership-based warehouse supermarkets "Sam's Club" and "Hema Fresh" - both in the form of annual membership cardsReserve and promote self-operated products, and the proportion of SKUs of self-operated products is about 20%;It has the ability to manage the chain including strict selection of first-class merchants and logistics distribution. However, compared with the latter two, the current Dongfang Selection lacks offline stores, and there is also a certain gap in the number of SKUs. Sam's is a high-end membership store owned by Wal-Mart, a Fortune 500 company, which opened its first store in the United States in April 1983 and has been in the Chinese mainland market since the 90s. According to the Retail Business Review, "Sam, Costco Rush to Open Stores, Membership Stores Are Still "Running Wild"?It is expected that Sam's will open 47 stores in 25 cities in China by the end of 23, including 5 in Shanghai alone. Sam's is only open to members, with an annual fee of $40,100 depending on the membership level in the U.S., and $260 per year for Puka and $680 for Excellence in China. Backed by Alibaba, Hema Fresh has continued to expand its offline stores since its inception in 2015. According to the "2022 China Chain Top 100" list released by the China Chain Store & Franchise Association, Hema Fresh's sales in 2022 will be 61 billion yuan, and the number of stores will be 300. Hema stores include the Hema x Membership Store, which is only accessible to members, and the Hema Fresh, Hema mini, Hema Neighborhood and Hema Outlets, which are also available for purchase by non-members. The total number of SKUs in the store may reach 5000+, and it is constantly being updated and eliminated.
We selected the top 4 self-operated products of Dongfang Selection in October sales: grilled sausages, chicken breast, South American white shrimp and toast, and compared similar products from Sam's and Hema Fresh. From the point of view of the list price, none of the four products selected by Dongfang have the best advantages, and Hema has more advantages in the list price;In terms of unit price (yuan kg), among the four products, only chicken breast has the best advantage in Dongfang selection. In terms of specifications, Dongfang Selection and Sam both take the route of large-scale "family packs", while Hema has the choice of small packaging. It is not difficult to find that even if it is a popular product selected by Dongfang, the homogenization competition in the market is still fierce. For a single user, the purchase of membership supermarket services is exclusive. Dongfang Selection has seized the market of Sam's and Freshippo, which are deeply involved in the middle-class consumer group, and whether it can make high-quality products with memory points and differentiated membership services is more important in the case of not having the advantage of strength. Dongfang Selection has a traffic moat, and uses the advantages of doing content and live broadcasting, and can create product memory points (such as various traceability special live broadcasts) with ingenuity, but if you want to attract and retain users for a long time, you need to improve the control of SKU cost and quality, and behind it is the control of the entire ** chain.
(3) Fans are mainly women with strong spending power, and the overall traffic structure is healthy
Douyin is currently the channel with the highest number of followers in Dongfang Selection (Douyin 45.35 million vs. Douyin*5.01 million). Judging from the user portrait of the main account of Douyin, Dongfang selects female users to account for 65%;Among them, the Bao Ma family, urban white-collar workers and the urban middle class constitute the main group, accounting for 62%, belonging to the group with high consumption tendency and strong consumption power. The regional distribution of fans is scattered, but it is mainly concentrated in provinces with strong consumption power, and the top three are Jiangsu, Guangdong, and Shandong. 1%。The main categories that fans focus on are food and beverage and fresh fruits, accounting for 47% and 32%, respectively*The acceptance range is mainly concentrated in 20-50 yuan (51%).
This article is for informational purposes only and does not represent any investment advice from us. To use the information, please refer to the original report. ）
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