Updated: Oct 31, 2021
Started as an ed-tech app in 2012, Yuanfudao became one of the most prominent ed-tech startups in China through homework tutoring for K-12 students. It provides a variety of functions, including live tutoring, test questions bank, and immediate feedback. Users could scan the question, and the system would respond with correct answers and the procedures of solving the problem.
Since it was founded, it has amassed 4 billion users and 30,000 teachers in China. At the same time, it raised 2.2 billion of funding, with VCs including Hillhouse Capital and Boyu Capital. However, as the new “double reduction” policy cracks down on education in China, according to the report from Chinese Education department which regulated some tutoring companies that offer help to the curriculum offered by public schools, Yuanfudao was faced with a critical challenge for the nature of its business.
The “double reduction” policy was meant to reduce students’ pressure: it mandates no homework assigned to first and second graders, cancellation of final exams, an 1-hour time cap for assignments for primary school students, and 90 minutes for middle school students. After the implementation of the policy in early 2021, over 6,000 employees became redundant due to the cutback in services.
Yuanfudao is not the only one under the crisis. New Oriental Education, the biggest after-school tutoring company in China, is going through the same turmoil. According to Last Post, New Oriental Education announced that the programs targeting elementary school and middle school students will be stopped after the fall semester. The revenue from the tutoring service to students in elementary and middle school takes up 80% of the total revenue of new oriental education. To survive in the market, Yuanfudao had to take different measures to transform itself.
In July 2021, Yuanfudao launched a new product “Pumpin Science”, which offers support for well-rounded education in STEAM subjects, which is advocated by the authority. The report from The International Association for the Evaluation of Educational Achievement shows that Chinese kids are in the first place worldwide in terms of mental math abilities, but ranks significantly lower on creative faculties such as imagination. While awareness of well-rounded education starts to grow, the belief that standardized test scores are the sole important metric is still ingrained in a lot of parents and teachers.
Yuanfudao also ventured outside of education. In October 2021, Yuanfudao announced that it is officially entering the clothing industry and will build up its fashion design team.
It plans to focus on material and design, rather than brands, specifically for down coats. In clothing production, down coats are particularly difficult to manufacture due to quality. The R&D for this process is non-trivial and includes considerations such as the type, weight and design of the stuffing. Yet the current market is quite saturated. Local brands in China, such as Bosideng and Nanjiren are well recognized. Foreign brands, such as Canada Goose and Moncler appeal to customers who care about brand recognition, style and fashion.
The decision to expand the scope of the company to include selling clothes might secure the future of Yuanfudao and other tutoring companies. Though it may be difficult to anticipate the next wave of policy changes, the growth of ed-tech companies such as Yuanfudao are already doing a service to students as they prepare to navigate today’s increasing digitalized world.