GET 2020 | From Pyramid to Dumbbell — Future Pattern of China's Education Industry?
2020-08-14 17:11:24

Introduction: since last week, JMDedu has been launching a two-month national tour across China as a part of events to promote the upcoming GET2020 Summit(Global Education Technology). We aim to network local education companies through seminars with various themes and investigate several key cities' market environment. For the first piece, we will talk about how education reimagined in Taiyuan, one of the main manufacturing bases of China.


Since the COVID-19 outbreak in early 2020, offline training institutions suspended across China and schools' closure at all levels have been prolonged. As a result, the private education industry entered the "darkest period". 

In February, staff from an offline children's English training institution in Shanghai told JMDedu that "in the first-tier cities like Shanghai, the rent is more than RMB100,000 per month and the employee's salary and social security cost is over RMB300,000 per month. We predict zero revenue, but the necessary expenditure cost will be around RMB500,000. "

The first-tier cities face such difficulties, let alone the educational enterprises in the second- and third-tier cities who encounter more issues due to their smaller population base and the scattered layout. However, it does not draw enough attention. 

On August 7, JMDedu held the first educational industry seminar in Taiyuan, Shanxi Province, with the theme "Rebuilding the Education Industry's Road in the Post-epidemic Era". Topics such as OMO, the development of post epidemic education and training industry, and education and training environment in Taiyuan were discussed.

Status Quo of Education Companies in Most Second-tier Cities

Taiyuan, the capital and largest city of Shanxi Province, is an ancient city with more than 2500 years of urban history. The city currently has a small population base, 3 million, far less than most provincial capitals. It has many educational training institutions, but they are scattered and small in scale, introduced by Wu Jing, the founder of Haifan parent-child swimming. 

As a second-tier city, we learned in the seminar that compared with first-tier cities such as Beijing and Shanghai, notwithstanding that Taiyuan has lower average income, as parents pay more attention to education, their spending on kids' training is rising. 

Wei Hu, the director of the academic operations of Koala Know that provides online Chinese courses, indicated that noting the labor cost in Taiyuan is relatively low, the company set up its teacher team in Taiyuan. 

Due to parents' high willingness to spend on kids' learning and the low labor cost, together with the low housing price, Taiyuan now is attracting the attention of leading institutions that need more market shares as the markets of first-tier cities have been crowded. On the other hand, many second-tier cities, such as Taiyuan with university towns, are also more suitable for expanding institutions with sufficient talents. 

OMO is just the Beginning of Edtech Transformation


JMDedu surveyed 1726 education institutions across the country at the beginning of this year. We find that compared with the pure offline education companies, the enterprises with an online business have significantly better employment expectations in 2020. Among them, 39.4% of the pure online companies and 28.6% of hybrid mode education companies said they would increase their staff in 2020, while 45.6% of the offline education companies would downsize staff in 2020.

Negatively affected by the pandemic, traditional offline training institutions are seeking ways out. OMO(Offline-Merged-Online) is considered the best option. "OMO is just the beginning of Edtech transformation," claimed Wenyan Li, the head of the teaching and training division of EEO whose core product is ClassIn, an interactive online classroom offering educational solutions.

"Students and parents will continue to try out various online courses after the pandemic," believed by Wenyan. EEO visited many offline training centers and found that the majority would not abandon online education after the pandemic. Still, lack of time and professionals impeded their building of online education.

What should offline institutions know about merging into online business?"Online and offline are not divided, but most of those who choose online will become purely online," indicated Chujiu Mei, the founder of JMDedu. She believes that "online does not mean that all steps should be transferred to online. We should consider which part is suitable for online and which needs to stay offline according to our situation. That means institutions need to determine which part of "Teaching, Learning, Exercise, Assessment, Evaluation, Management, Accompany(after-class services)" is worthy of going online and which should maintain the offline status. 

Meanwhile, Chujiu put forward that OMO and online education should avoid the pitfalls of blindly burning money on running commercial advertisements because the conversion rate is low. Poaching talents with a fat paycheck is not suggested either. 

“In the future, if education training institutions do not switch to online education or do OMO, they will be attacked jointly by online education institutions and companies whose layout is nationwide," Chujiu said.

What Will the Battlefield Look Like in the Post-pandemic?

In the last six months and forward, unchanged in the education industry is demand and clients. What is transforming? "The way of product delivery and the approach to provide educational services," stated Chujiu. "From face-to-face to live streaming and recording broadcast and from the physical classroom to the third-party live broadcast platform, more choices are available. " 

Chujiu suggested that teachers and trainers should prepare to deal with the recurrence of the epidemic. She thinks that chaos and uncertainty will bring more opportunities. "The epidemic has not changed the nature of education. It has only challenged our business operation. "

Besides, she said that the long-term persistence of the epidemic had created a new normal—the penetration rate of online education has been boosting, and the services provided by educational institutions have also been developing.  

What will be the future pattern for the education industry in China? Chujiu introduced that the education industry was initially in a pyramid shape, with two giants (TAL and New Oriental) at the top, local institutions taking up 100 million to 2 billion market size in the middle, and numerous institutions ranging from 30 million to 100 million at the bottom. "In recent years, due to the epidemic, science and technology, capital intervention and user maturity, the pyramid has begun to deform to the dumbbell.

She deemed that there will be nearly 20 education companies in the dumbbell structure whose market size is around 10 billion or even 100 billion and tens of thousands under 30 million at both ends, and oligarchy will not exist. Offline institutions possessing 100 million to 1 billion will be squeezed and disappear in the end. In her view, the transformation will take place whether or not there is an outbreak. The epidemic only plays a catalytic role in it. 

Related Articles