LatePost reported on Friday that New Oriental would be undergoing a drastic reduction in staff numbers and service options. At an executive meeting on September 17, Yu Minhong, Founder and Chairman of New Oriental, announced that offline enrollment of primary and junior high school subjects would be stopped after the autumn semester, and service points would be gradually closed in various cities.
This means that New Oriental will give up its most important source of revenue. According to UBS’s research report at the end of July, after-school tutoring businesses specializing in primary and secondary schools accounted for 80% of New Oriental’s revenue in the fiscal year of 2021.
Established 28 years ago, the education firm provides overseas study training for college students at the very beginning. In 2005, it divested its online business and established Koolearn. Since 2017, its business revenue from its primary and secondary school services has accounted for more than 50% of the company’s total revenue.
Yu said at the meeting that the decision was mainly due to time and price constraints. Under the current policy environment, adjustment is imminent for the company.
Since July, a number of policies restricting the off-campus training industry have been issued one after another. Beijing issued a notice on September 15th, requiring companies that offer tutoring on the school curriculum to become non-profit before the end of the year.
With the contraction of its business, layoffs followed. Yu said internally that the original plan was to lay off 40,000 people by the end of August, but by mid-September, fewer than 10,000 people had been laid off. Two people close to the matter said that New Oriental had about 100,000 employees at the beginning of this year.
New Oriental usually sets up a campus in each city it enters, with multiple teaching centers under its jurisdiction. The campus is rated according to the revenue and profit of each fiscal year. After the autumn semester, New Oriental will gradually close its primary and junior high school subject businesses in the campuses that fall below the B-level. Before that, at least one teaching center will be reserved in the B-level and above campuses. There are 12 B-level campuses in China, and they have a revenue of more than 200 million yuan or profits of more than 50 million yuan in fiscal year 2020.
However, even A-level and B-level branches have begun to close their teaching centers. A person close to the matter said that 10-20 teaching centers have already been closed in Nanjing, Guangzhou and other locations with higher revenues.
Xueersi Peiyou under online education giant TAL also began to close teaching centers. According to the 21st Century Business Herald, Xueersi Peiyou has 53 teaching centers in Beijing, and only 26 of them were operating normally. The brand has recently set a goal to transfer online all of its subject courses in primary and junior high schools after the semester ends this fall.