Coronavirus Crisis Put the Spotlight on China’s Online Education Market
The deadly coronavirus outbreak over the Chinese New Year holiday struck fear in citizens. As the number of confirmed cases surges and the death toll mounts, this crisis has caused a major disruption to student mobility. To curb spread of coronavirus, national and provincial government carried out response educational measures.
China’s Ministry of Education announced to prolong schools’ closure. Plus, large offline gatherings, exams and after-school tutoring activities are suspended in battle against the virus outbreak. To ensure that the teaching activities will normally proceed before schools’ official reopen, the government issued a statement encouraging schools to convert to online class, which sparks more possibilities to online education industry amid the pneumonia epidemic.
The outbreak deals a severe blow to China’s offline education industry. As the crisis has put the spotlight on online education market, many offline institutions had to consider whether to take online business as a transition path to stop loss. But for online education companies who have suffered from capital winter and industry reshuffle, what the epidemic brought is not only more market space but also more fierce competition.
Offline education companies are at risk of cash-flow shortfall
Offline after-school tutoring institutions currently are at the crucial stage for preparing spring semester admissions. Refunds caused by the suspension of class and high cost including rents and remuneration for teachers seem to pose great challenge for small- and medium-sized offline training institutions to find their own way to survive from the epidemic.
Providing online service can only be a temporary measure. When seeking for a long-term transition path, companies have to consider various factors such as cost of operations, course price and teaching process. If institutions lacking experience in online teaching just hastily pivot their business, drawbacks like poor quality of online products will inevitably harm their brand image.
For instance, in terms of STEAM education requiring hands-on practice and use of equipment, there is a big gap between the learning experience of online and offline courses and the needs of different customer groups are also varied. In the long run, core factors of the education industry including teaching faculty, teaching and research quality, as well as operations is still the key for companies to acquire more users.
When looking at each sub-sector, risk of decline in the annual performance of the offline business will be suffered by the tracks such as early childhood education, STEAM and K12 after-school tutoring. But K12 as a rigid demand may revive sooner compared to others.
Leading companies’ response to the outbreak of novel coronavirus
According to iResearch’s report, the market size of China’s online education reached 83.97 billion yuan in 2013 with a year-on-year increase of 19.9%. Since then, Internet giants like BAT have started to tap into this industry with great efforts.
Shown by the incomplete statistics from itjuzi, from 2014 to August 2019, Tencent has invested 27 online education companies while the number of Baidu is 13, and 11 start-ups have raised funds from Alibaba and Yunfeng Capital to promote their business. Now, clear difference can be seen when comparing BAT’s education attempts, Baidu has the DNA of technology and Alibaba targets at transactions while Tencent relies on social networking.
Amid the epidemic, almost all education enterprises have begun to join the advertisement campaigns by offering free online courses. The three Internet giants also accelerate its footprint of online education expansion.
From February 10th, primary and secondary school students across the country can access to free courses offered by Youku and DingTalk, two subsidiaries of Alibaba. Tencent Education announces to provide free services including cloud classroom, telecommuting and instant messaging. Moreover, all the online resources of Baidu “Cloud Academy”(云智学院) are available without charge for users from February 1st to February 8th. Apart from offering free contents for children, the company also cooperates with many partners to provide K12 public schools with a free live broadcast platform.
Leading companies in the education industry like New Orient, TAL, and Beststudy have also switched their offline tutoring class online by guaranteeing there will be no difference in terms of time, content and teaching faculty. Free product provided by top players is a strong hit for newcomers who are aiming for the transition growth in online education.
Wuhan pneumonia accelerates natural selection in online teaching
Online education has always been a hot track that the number of consumers in 2019 is close to 400 million, according to MobTech. In spite of such a large scale of users, only about 5% of the companies are profitable and others are still burning staggering amounts of cash, even facing mass layoffs or collapse due to the shortage of cash flow.
In this context, the outbreak of epidemic unexpectedly makes a batch of companies running online education and telecommuting business usher in a peak of customer acquisition. Students across the country forcing to study online at home has greatly spurred online education to be embraced by an increasing number of parents and students. But at the meantime, competition will be intensified as well amid the industry reshuffle.
On the one hand, the relevant policy has forced offline business operators to vie for the market share of online education, sparking a more crowded space in this industry. On the other hand, launching ads campaigns have been regarded as a crucial marketing strategy by online education institutions during the Spring Festival. For both top players and new comers, they are likely to continuously increase the advertising investment, bringing much pressure on the institutions without clear profit prospects. The epidemic actually accelerates natural selection in the education industry.
For stimulating business growth, offline institutions can follow the way how online players acquire consumers and enhance customer stickiness by community operation. Meanwhile, online education providers can also use offline channels to reach more potential customers with lower cost. In a word, JMDedu believes that OMO (online-merge-offline) will be an inevitable trend for facilitating user experiences in the long run.