Reporter | Cha Qinjun
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As early as 2007, Ruisi Discipline English (NASDAQ:REDU), an English quality education institution that entered the Chinese market, ushered in the "elephant turn" in 2020, when the epidemic was raging.
At the beginning of 2020, Ruisi changed coaches. Wang Lihong, who worked at Bain Capital for 13 years, became the CEO of Ruisi and proposed "digital transformation". On March 18, Wang Lihong said in an exclusive interview with Interface Education: "OMO (online and offline integration) is a very firm long-term strategy of Ruisi. ”
OMO also saved Ruisi from losses in the first half of 2020.
According to Ruisi's semi-annual report and the fourth quarter and annual financial report released on March 17, Ruisi's loss in the first half of 2020 was as high as 162 million; from the third quarter to a profit, the fourth quarter net profit was 1.4 million yuan, but compared with 51.1 million yuan in the same period last year, it still fell by 97%.
Ruisi's revenue in 2020 was 959 million yuan, a decrease of nearly 40% over the previous year. Net loss was $132 million.
Although the fourth quarter and full year data of Ruisi is not eye-catching, it has released an industry signal - for education and training institutions, whether it is to achieve business expansion or to cope with unexpected situations, the OMO model can ensure that the institutions are well-founded.
<h3>"OMO's biggest challenge is not technology, nor funding, but Mindset."</h3>
In the past year, online education has become the consensus of the industry to burn money and obtain customers. The high cost of online education customer acquisition has seriously weakened the profitability of enterprises and become a headache for all online education institutions. Data provided to Securities Daily by a brokerage analyst shows that the cost of a single student to obtain customers has exceeded 3,000 yuan.
"The accuracy of online enrollment is very poor, which is equivalent to fishing for shrimp in the sea, so it requires a lot of stocking." Wang Lihong said to interface education.
Due to the complete closure of offline institutions, the cost of customer acquisition in the first quarter of 2020 was as high as 11734 yuan / person, and the cost of customer acquisition in the fourth quarter was 3225 yuan / person, down 24% from the previous quarter. Selling and operating expenses were RMB72.1 million, down 17.8% year-on-year.
Ruisi adopted the customer acquisition strategy of "Skynet + Ground Network" dual network linkage, which contributed to the reduction of customer acquisition costs. Online customer acquisition channels are mainly low-cost e-commerce operations, live streaming with goods and other means.
"We've noticed that online traffic is actually becoming more expensive, like information flow ads in the circle of friends. And we are because of the offline network, the proportion of ground push, word of mouth increased to reduce the cost of customer acquisition. Wang Lihong told Interface Education.
In Wang Lihong's view, the advantage of offline networks is that "each campus is a demonstration of advertising and learning effectiveness." The accuracy of the target customer will be higher. Since offline contact and communication is also stronger, the conversion rate is also correspondingly increased. ”
Online + offline promotion brings new users. In the first and second quarters of 2020, the number of new regular course users in Ruisi Direct School was 1507 and 3749 respectively, and this data increased to 8328 and 8023 in the third and fourth quarters, respectively.
However, due to the impact of the epidemic, the number of students in Ruisi throughout the year has still decreased. As of December 31, the number of students in the regular curriculum of Ruisi was 47,724, a decrease of 6,659 compared with 54,383 in the same period last year.
The dual-network linkage strategy also has its limitations.
"Ground pushing requires a place and more manpower to do these jobs, and the most important thing is that it is not efficient. There are also many people needed for online marketing, and there are also many content and operation personnel that need to be invested in group transfer and private domain traffic. Wang Lihong said, "Online needs input, but there is a degree of investment and where the input is the most important." ”
Since Ruisi laid out OMO for more than a year, Wang Lihong believes that the biggest challenge is not technology, nor funds, but Mind (mind), in layman's terms, that is, the extent to which the public's understanding of OMO has reached.
According to the "Sinking Market K12 Education and Training Industry Research Report" released by Love Learning Education on March 22, 95.6% of institutions currently agree with the view that "the future education model must be OMO"; in 2021, the proportion of parents choosing "online classes as the mainstay, offline classes as a supplement" and "only want to attend classes online" was 68%, compared with 17% last year.
At present, the exploration of the OMO model by education companies is both offline to online and online to offline, such as chalk education of public examination training institutions.
"The head institution does OMO, more localized online courses, offline channel diversion, which is the best way to sink to lower-tier cities." Liu Yaokun, Associate Director of UBS Securities, said at the media exchange at the 21st UBS Greater China Symposium on January 12.
In his view, the core competitiveness of OMO lies in both the content side and the customer acquisition side.
"On the content side, the competitiveness of the more popular online large class courses in lower-tier cities is declining, and the teaching progress of primary and junior high schools in lower-tier cities is different from that in first-tier cities, and parents' localized teaching is in demand." OMO, on the other hand, is basically based on the local needs of a city. ”
On the customer acquisition side, offline stores and ground push lead to a low cost ratio of offline customer acquisition, the effect is better, and there is a threshold for entry. "So OMO solves the limitations of online classes in terms of content and customer acquisition, and it is more consistent with the huge market in lower-tier cities."
Wang Lihong believes, "In another year, most of the courses may be OMO, so you will not be particularly entangled in the difference between online and offline, but through the design of the course, with the highest efficiency to do online or offline targeted learning." ”
<h3>"The English track for young children has been relatively concentrated, and it is difficult to make a big breakthrough in the competition pattern</h3>."
In January this year, a number of financing news came out of the online youth English track. At the same time that funds are pouring into the head enterprises, the Matthew effect of the industry is becoming more and more significant.
Among them, the online young children's English institutions announced the completion of nearly 100 million US dollars of C round financing and 120 million yuan B+ round of financing after the priority of whale foreign education and training, the former invested by Tencent, the latter led by New Oriental; Acadsoc also released the news that the C5 round of financing is about to be completed, with a total of nearly 1 billion yuan in C round financing.
In Wang Lihong's view, "a good education target must first have a good curriculum, a good brand and a good product; secondly, with the changes in the demand market and supervision, it can continue to grow; and finally, it must have a sustainable business model." ”
Catalyzed by the epidemic, the penetration rate of the industry has also been further improved. According to Ai Media Consulting, the current scale of China's online children's English market has reached 26 billion yuan, the user scale is about 5.8 million, and the market penetration rate has reached 22%. It is expected that by the end of 2021, the penetration rate of China's online children's English market will reach 37%, and in 2022, it will reach 51%.
"Although the process of users moving from offline to online is accelerating, more leading companies with high visibility and large scale will be selected." Wu Hao told Interface Education that this has formed a certain squeeze on the startups in the middle waist, and the cost of traffic and employment has also risen.
In the early years, some online children's English institutions built barriers with financial advantages, and then established a head position, and then gradually sought profit opportunities. But at the moment, many startup owners and investors said that the health of enterprises and internal operations are more concerned.
"The Young Children's English Track is actually relatively concentrated, and it is difficult for the industry pattern to have a big breakthrough, and it is difficult for new institutions to squeeze in." Wang Lihong said.
After the era of racing, the young children's English industry has come to an inflection point: reducing customer acquisition costs, refined operation, healthy business model, and becoming a more important industry indicator for online children's English players.
In her view, it is necessary to look more at different business models and learn advanced concepts, including the Internet of Things, artificial intelligence, etc. "It may not be available immediately, but it can inspire us to do online products, do private domain traffic, and expand digital thinking."
Talking about Ruisi's planning for the next three to five years, Wang Lihong said to Interface Education, "I think the scale must continue to expand, and the digital capabilities must be improved, otherwise it will be abandoned by this era." ”
In the face of the fierce external competitive environment and the increasingly stringent policy supervision, Ruisi obviously cannot relax.
<h3>Ruisi will expand the offline mathematical thinking small class</h3>
From the perspective of revenue composition, Ruisi's revenue is mainly divided into three parts, course income, cooperation income and others. Income from small English classes is the backbone of Ruisi's income. This part contributed revenue of 326 million yuan in the fourth quarter of 2020, an increase of 10.88% from the previous quarter.
Ruisi is still focusing on small English classes, including the online English small class that was launched last year. We also have one-on-one, but only a small percentage. Wang Lihong told Interface Education.
Wu Hao, CEO of Whale Foreign Education Peiyou, previously mentioned in an interview with Interface Education: "Small class classes are the best class type to balance the personalized learning needs of users and the economic model of enterprises. One-to-one can meet individual needs, but the scale is not economical; although the economic model of the large class is relatively healthy, the individual needs cannot be met. ”
However, the entry threshold of small class classes is high, and the elimination rate is also high. The unique placement, tiering mechanism, large-scale teacher training mechanism, and sustainable reduction of operating costs of small class classes are all difficult problems facing each player.
Wang Lihong said, "The challenge of small class sizes comes from operation. When small class sizes grow, they need to expand the number of teachers in equal proportions, and it is actually difficult to train, teach, and manage teachers. ”
According to the statistics of the Chinese Academy of Sciences, there are more than 200 enterprises that have opened or have opened small class classes, of which only about 10% of the enterprises can really operate normally and are understood and recognized by users, and only a few enterprises have achieved D round financing and above.
In addition, Wang Lihong revealed to Interface Education that Ruisi will also expand offline mathematical thinking small class classes this year, which was launched online last year. "In this area, we have to look at what the demand of second-, third- and fourth-tier cities looks like." With Beijing as a pilot, the franchised campus will also be opened soon. ”
There is already a clear convergence trend in the online education industry: the top players in each vertical track will choose Toco, Toko age group, and even Toban.
In this regard, Wang Lihong believes that a demand side is diverse, "children cannot learn a single discipline or a single skill." Second, from the perspective of supply-side operations, it can broaden the life cycle of users, "improve the repurchase rate, stay in my system for a longer time, and learn more things." ”
Wang Lihong used the analogy of the e-commerce industry, "Now there are very few real vertical e-commerce, and it is not necessarily a good life. Or a comprehensive platform can build a larger IT team, teaching and teaching service team, resulting in synergy. ”
For the shortcomings of Ruisi, Wang Lihong admitted that the ability of digitalization needs to be further improved. "Ruisi is a strongly operating company, it can be rolled out across the country, and now there are more than 500 learning centers. But it is too focused on its own education and operations, and has a little less thinking to borrow from the outside. ”