After disappointing earnings reports (revenue and profit were below consensus expectations), the stock price of New Oriental Online (soon to be renamed Oriental Selection) has fallen by about a third from its high. A few days ago, the company's CEO's big sell-off triggered a new round of sell-off. What is certain is that if New Oriental Online wants to maintain its current market value of up to HK$50 billion, the existing live streaming scale is far from enough. This year's live streaming e-commerce market is becoming more and more crowded, and it is not easy for any live streaming organization to achieve sustained high growth, and it is even more difficult to expand profit margins.
It's easy to see that Oriental Selection is quite special compared to other well-known e-commerce anchors or institutions, which is why it has caused great controversy. Yu Minhong and Dong Yuhui are neither Li Jiaqi, Wei Ya, nor Luo Yonghao, nor Simba. We can see the "particularity" of Oriental selection from the following dimensions:
In terms of business model, the vast majority of e-commerce anchors are advertising models, while Oriental Selection is self-operated + advertising model, and has been working hard to expand self-operation. In this dimension, it is similar to Simba, which is famous for its self-operated model.
In terms of categories, the vast majority of e-commerce anchors cover multiple categories, and even if there are one or two advantageous categories, they will strive to maintain balance; The Eastern Selection focuses on "agricultural products of origin" (and a small number of books). From this dimension, it is more similar to Li Jiaqi, who focuses on the beauty category; However, Li Jiaqi's proportion of "non-beauty categories" is much higher than the proportion of "non-agricultural products" selected by Oriental.
In terms of relationship (or "independence") with the platform, Taobao platform anchors have almost no independent tendency, after all, Taobao e-commerce is the basis for them to obtain brand resources; Due to the deep operation of private domain traffic, the anchors of Kuaishou platform often have a certain tendency to be independent, and they have a relationship of both union and struggle with the platform; The Douyin platform previously lacked special head anchors, and the traffic mechanism recommended by the public domain determined that it was extremely difficult for anchors to develop independently. Oriental Selection, on the other hand, showed a strong tendency to independence and quickly launched an independent APP. Even Simba, who has been shouting the slogan "self-built platform" for many years, is out of reach for the selection of the East in this regard.
In terms of target users, Taobao and Douyin's e-commerce anchors are basically young women as the core, and expand to middle-aged women and a small number of male users on this basis; Kuaishou anchors are basically centered on users in the sinking market (still dominated by women in terms of gender). Oriental Selection is a unique live broadcast organization in the whole market with "intellectuals" as the core target users. Specifically:
By creating the artistic conception that "life is not only about the present, but also about poetry and the distance", Oriental Selection captures the idealistic feelings of all intellectuals. It is well known that for Chinese white-collar workers in the midst of reinforced concrete forests, the idyllic lifestyle has always been attractive.
By emphasizing commercial slogans such as "helping farmers", "rural revitalization" and "supporting new farmers", Oriental Selection captured a group of intellectuals who were sympathetic and concerned about the three rural issues. In recent years, among the urban "two highs" (high income, high education) people, science and technology to transform agriculture has become a common trend of thought, of course, there are speculative ones, but there are also some who sincerely believe. These people are certainly happy to pay for the agricultural products of origin.
By telling inspirational stories and giving young people psychological massages (high-grade chicken soup for the soul), Oriental Selection captures college students and newcomers who are confused in the current employment situation. These overwhelmed young people are even willing to pay high prices for job counseling, but they still can't solve the problem. Of course, Dong Yuhui can't solve their problems, but the free chicken soup for the soul is not bad, and the audience can also produce the pleasure of "watching live broadcast to learn knowledge".
By telling the arduous story of transforming from the education and training industry to doing live broadcasts, Oriental Selection captured the hearts of middle-aged people who also fell into "transformation anxiety", and even the hearts of all white-collar workers who were anxious due to the economic slowdown. The scene of Dong Yuhui wiping his tears in the live broadcast room is also a famous scene in the history of live streaming e-commerce, because it has achieved "empathy" with hundreds of millions of viewers.
At the level of the implementation of the above strategy, the personal eloquence of the anchor selected by Oriental plays an irreplaceable role. Although all e-commerce anchors have a certain eloquence, this eloquence is often not in line with the "intellectual aesthetic" - Li Jiaqi's "All Girls" and "Oh My God" may make the heartbeats of female college students in their twenties, but in the eyes of male business executives in their forties, it is tantamount to engaging in pyramid schemes; Simba's "the world is out of my generation" and "I have never forgotten who I am" may make the blood of young people in small towns boil, but in the eyes of returnees in first-tier cities, it is simply the onset of secondary disease.
Therefore, we can fully understand the sense of surprise and belonging that the above-mentioned "intellectual users" have when they see Yu Minhong and Dong Yuhui. This group of New Oriental teachers who are good at teaching skills have found their own narrow blue ocean in the live broadcast e-commerce market with a red ocean. Strictly speaking, this blue ocean does not even belong to live streaming e-commerce at all, but should be called "emotion-based content payment", and the harvesting object is completely different from traditional e-commerce anchors.
The anchors selected by Oriental can feed everyone chicken soup in classical Chinese, which can be called "dimensionality reduction strike" to some extent
So far, the proportion of self-operated and agricultural products in the live broadcast room of Oriental Selection is significantly higher than that of most competitors. This is both its characteristic and its limitation. Among the top e-commerce live streaming agencies, we can't find the same case. Is this a helpless choice in the early stages of development? Yes, but not quite.
Objectively speaking, Oriental Selection, which only started at the end of 2021, is difficult to quickly win high-quality brands by taking the advertising model. If you only get a small budget for some small and medium-sized brands, it is meaningless for the volume of New Oriental. Therefore, the best choice to expand the e-commerce business is to expand self-operation. However, the difficulty of self-operation of industrial products is too great, even if it is not deeply involved in the supply chain, the water of just the investment link is too deep. Agricultural products are a relatively better choice for novices on the road.
Subjectively speaking, Yu Minhong himself has a deep "local feeling", or "the reserved reader". As mentioned above, there are not a few intellectuals who sincerely hope that science and technology will transform agriculture, and there are not a few entrepreneurs who sincerely believe that agricultural products will become the next super outlet - and Yu Minhong belongs to both groups. Even after the Oriental selection fire, we can clearly observe the obsession of New Oriental management with "ideal" and "tonality", whether this obsession is from the heart or not.
At first glance, agricultural products seem to be a full-fledged "bulk standard"; However, if the label of "place of origin" or even "local product" is added, it becomes a non-standard commodity with a certain premium; If you add the label of "helping farmers", you can add a layer of emotional premium. In a word: for agricultural products, the "original product" or "specialty" label is like IP, responsible for creating a premium. Moreover, the origin IP is readily available and can be used by anyone. Unauthorized use of Disney or Nintendo IP will be sued by the other party's lawyer; But in the field of agricultural products, there is no need to spend so much time. As long as you sit between the vast world, the great rivers and mountains of the motherland will become a free resource for live broadcast agencies, and if you can still photograph a few farmers and herdsmen working behind you, the audience in the live broadcast room will boil!
Everything looks so good, the only fly in the ointment is that everyone wants a piece of the action. Since 2021, "agricultural specialties" have become a battleground for the e-commerce industry. At any given time, at least one mainstream e-commerce platform will hold "Agricultural Goods Festival", "Agricultural Products Festival" or "Agricultural Assistance Festival". The success of Oriental Selection at this stage will attract more live broadcast agencies to enter this track. Remember Simba's roar at Oriental Selection in the live broadcast room? It wasn't for the sake of simple jealousy, but Simba really wanted to eat this cup of soup himself.
From left to right, there are Taobao, Jingdong, and Pinduoduo's agricultural specialty zones or event product lists
We know that for a long enough time, any market barriers will be broken down by excessive competition, not to mention that "agricultural specialties" are not decent market barriers at all. So far, Oriental Selection has not established real capabilities in the selection process; In other words, in the "capability triangle of e-commerce live broadcast agencies" (product selection ability, personal persuasion, and operation support ability), it is missing a corner. To overcome this shortcoming, there is not no way, but it is always more difficult:
Lower prices. As we all know, the goods in the Oriental Selection Live Room are obviously not the lowest prices of similar products on the whole network, or even cost-effective. Can price cuts bring a new wave of increments? It is doubtful, because this strategy contradicts the consistent tonality of the Eastern selection. Moreover, unlike industrial products, the scale effect of agricultural products is quite limited.
Further pursuit of high-quality high-end goods, such as sky-high fruits, sky-high ham, high-end organic food. This path may be suitable for some smaller anchors who only cover a few high-end users, but it is not very suitable for Oriental Selection of institutions of this size. Moreover, judging from Yu Minhong's business ideals, making money from a handful of "IQ tax" products is clearly not what he wants.
Expansion into self-operated categories other than agricultural products. This is a realistic path. However, the threshold for self-operated industrial products is much higher than that of agricultural products, and there are pits everywhere in all aspects of investment, quality control and operation. If it is to expand to categories such as clothing and 3C, I am afraid that the SKUs selected by Oriental Selection will need to be expanded at least tenfold.
Shift to advertising across the board. In fact, this is the most realistic path! Although the ability of Oriental selection anchors to carry goods is not yet comparable to Li Jiaqi, Wei Ya, etc., it is enough to win the budget of many brands. The problem is that New Oriental's management does not necessarily appreciate this model, and the capital market also feels that it has reduced the imagination.
Under normal circumstances, the profit margin of the self-operated model is almost certainly not as good as that of the advertising model, because the latter is essentially a "no-capital business", and the former often needs to eat inventory and put into the supply chain. At the same time, no matter which model, the profit margins of agricultural products are questionable - the so-called "Oriental selection 5 cents a stick to buy corn and then sell it for 6 yuan" is just a smear statement by competitors, because the packaging, preservation, and logistics costs of agricultural products often far exceed the acquisition costs.
Li Jiaqi's strength lies not only in his ability to make hundreds of billions of GMV per annum, but also in the fact that his selection is mainly supported by beauty products with high commission rates. Even Weiya cannot match it in this regard, and its selection includes a large number of low-commission food, 3C products, etc. Simba is even worse in this regard, but Kuaishou's huge traffic and "family system" allow him to win with volume. The total profit generated by Oriental Selection in 2022 is likely to be lower than the profit generated by Li Jiaqi during the half-month period of the Double 11 event.
Most of Li Jiaqi's live broadcast room are beauty and personal care products with high gross profit margin and high commission rate
If Oriental Selection really wants to expand the scope of product selection and cultivate real commodity barriers, then it needs to seize a valuable window of time: it is always easier to transform during the period of rising traffic. The improvement of product selection capacity will also bring a virtuous circle and maximize the duration of the traffic dividend. However, I suspect that Eastern Selection will neither expand into the field of industrial consumer goods, nor will it fully shift to advertising. After all, judging from the 2022 financial report, Oriental Selection's further embrace of the self-operated model has just begun.
Looking back at history, we often find that in the process of vigorous development, a new thing often gives birth to the seeds of its own decline. It's unrealistic to expect it to change halfway, because if it does, maybe it won't exist in the first place. Or the old saying in "Zuo Chuan": "If a king prospers, he will die with this." ”
From an emotional point of view, New Oriental Online is the MCN concept stock that is most in line with the taste of domestic fund managers and can be best understood by domestic institutional investors. As mentioned earlier, Oriental Selection is a live broadcast institution that meets the tastes of intellectuals, and fund managers almost all meet the definition of intellectuals; Moreover, most of them are middle-aged male intellectuals living in first-tier cities. This means that they are less likely to empathize with Li Jiaqi (for young women) or Simba (for the sinking market). Dong Yuhui's "poetry and distance" may be too difficult and slightly niche for ordinary people, but it is just right for most fund managers who graduated from 985 colleges or overseas famous schools, and can provide a very high "sense of gain".
In short: if fund managers are willing to give (or at least have given) higher valuations to A-share companies that they can't empathize with on Saturday, Tianxia Xiu and Shengxunda, then there is no reason not to give higher valuations to New Oriental Online that they can fully empathize with. However, this does not mean that this valuation is correct, because there is no "right" or "wrong" market in the first place.
There are also many investors who sincerely believe that Oriental Selection can completely transform the production and circulation of China's agricultural products and complete the great mission of "empowering agriculture". A few years ago, this mission should have been fulfilled by e-commerce giants such as Ali, JD.com, and Pinduoduo. But this year, not many people have seriously studied the fundamentals of Internet giants, and their voices are getting weaker and weaker in the market. Oriental Selection has ushered in an excellent environment for such a company.
This is the nature of capital markets: the desire to create gods at all times. Sometimes it is a true God, and sometimes it is a false God. After the god-making movement of the Internet platform passed, it was the turn of the god-making movement for new energy vehicles; The god-making movement of the Eastern Selection is just a small footnote to this strange era.
Benjamin Graham once said, "In the short term, the market is a voting machine; In the long run, the market is a weigher. "I would also add: in the short term, the market belongs to a small group of voters, so it is very easy to manipulate and run away from fundamentals; In the long run, the market is a weigher for everyone, no matter what kind of company or what kind of concept, it is impossible to fly alone without gravity. If you see some wingless creature soaring high above the blue sky and white clouds, wait for a moment, because it will most likely land on its face later.