Article | Mantis Observer

Author | Li Jing

The total number of applicants for the 2024 National Civil Servant Exam reached 2.91 million, competing for 39,600 job opportunities. The average competition ratio was 66:1, an increase from the previous year. According to data released by the Ministry of Education, the number of university graduates this year reached 11.79 million, an increase of 210,000 from last year.

These figures indicate that under downward pressure, taking civil servant and public institution exams has become a prominent trend. Job growth cannot keep up with the increase in applicants, leading to increasing examination pressure.

Against this backdrop, the demand for civil servant exam training is bound to increase, and training institutions seem poised to ride the "wave." However, examining the stock prices of major listed companies, Offcn has seen four consecutive years of negative trends, and Fenbi has also continued to decline since its listing, with their share prices shrinking by 97% and 75% from their peaks, respectively.

On one hand, there are continuously strong demands, while on the other hand, training institutions are not recognized by the capital market. Why is there such a contrast?

Accelerated Internal Competition and Effect-driven Demand

The increase in the number of applicants is bound to bring about an increase in training demand, which is undeniable. However, this growth in demand does not equate to a smooth path for the industry.

As a selection-based exam, the civil servant and public institution exams are a never-ending internal competition. Unlike pass/fail exams, selection-based exams do not guarantee "success" by reaching a certain score line but require defeating competitors, determined by exam preparation. This leads to changes in demand and potential challenges for civil servant exam training.

From the perspective of exam selection, the current internal competition may not continue indefinitely. Therefore, reforms or adjustments to the civil servant exam system are highly likely. Once reforms are implemented, they will have a significant impact on training.

Even if reforms do not occur in the short term, the increase in demand will lead to more institutions entering the market. After the "double reduction" policy, vocational training has become an important direction for education and training institutions to transform, making market competition more intense and posing greater challenges.

At the same time, market demand is increasingly effect-driven, placing stricter requirements on teachers and operations. As the difficulty of exams continues to increase, the pressure to improve scores also grows. This poses greater challenges for teaching and research teams and teacher teams. There will also be a corresponding increase in demand for special classes, such as agreement classes. How to allocate teachers is crucial, requiring a balance between effectiveness and efficiency. Additionally, the higher the selection difficulty, the higher the refund rate, putting greater pressure on cash flow management.

The dual effects of a downward cycle and increased exam difficulty have reduced many candidates' willingness to spend, and with the increase in free online resources, the demand for various classes will also face pressure.

A research report from TF Securities indicates that recruitment training institutions in recent years may place more emphasis on the quality of collections, optimize the proportion of agreement class courses, and indirectly screen students; or focus more on improving pass rates and collection/revenue conversion efficiency; or increase the proportion of base classes and long-term training classes.

It can be seen that although overall training demand has increased and industry sentiment has risen, potential risk management, increasingly fierce competition, and subtle changes in consumer demand have all brought new challenges to training institutions.

Each Has Its Own Difficulties

Based on various research reports, the current training market still exhibits a three-way standoff among Offcn, Huatu, and Fenbi.

Among them, Offcn has a first-mover advantage, while Fenbi started as an online recruitment exam training provider. Huatu is also one of the earliest institutions with a deep foundation in offline teaching. Each of these three institutions is making adjustments in response to new changes.

Offcn: Resolving Historical Issues

Over the past years, Offcn became the leader in civil servant exam training through its innovative agreement class model. After successfully going public, Offcn reached its peak. However, in subsequent years, Offcn Education frequently purchased land, made large dividends, and Li Yongxin even donated 1 billion yuan to Peking University, ignoring the potential risks of agreement classes and plunging the company into difficulties.

In recent years, Offcn has been mired in controversies such as difficulty in refunds and violations of information disclosure regulations. This month, Offcn Education Chairman Li Yongxin appeared for the first time in the Offcn Yanxuan Douyin livestream room, responding to controversial topics such as refunds and share prices. He apologized in the livestream and repeatedly stated, "We will definitely repay the money."

At this stage, Offcn, facing strong demand, cannot adopt aggressive strategies and is more focused on strategic retraction. Most notably, Offcn has been reducing the number of high-fee, high-refund agreement classes and shifting to actual collections to reduce refund pressure. At the same time, Offcn is tightening its belt. In 2023, research and development and teaching staff were reduced by 48% and 49%, respectively, and the number of directly operated branches fell from a peak of 1,500 to 783.

It can be seen that Offcn is currently more focused on resolving survival issues and lacks the ability to consider expanding its market share, suggesting that its share is likely to be eroded.

Fenbi: Embarking on the Monetization Path

The appeal of agreement classes is immense, making it difficult for online-born Fenbi to resist such temptation.

In 2020, Fenbi launched agreement classes. After one year of development, the number of paid attendees in Fenbi's agreement classes in the first nine months of 2021 was 1.7 times that of the entire year in 2020. Fenbi is undoubtedly continuing to increase its investment in high-priced small-class courses. In its 2023 annual report, Fenbi's training service revenue was 2.51 billion yuan, a significant year-on-year increase of 83.2%. This growth in training service revenue is attributed not only to strong training demand but also to the higher average revenue per paid student brought about by small-class teaching. The revenue contributed by small-class training courses reached 1.665 billion yuan, accounting for 66% of total revenue.

It can be said that small-class courses have become the core of Fenbi.

Online courses were once Fenbi's core, attracting a large number of users through low-cost courses. Clearly, Fenbi's breakthrough was largely due to prices far lower than those of offline training. However, low prices are not a long-term solution, as they can affect profit levels and overall scale growth.

In recent years, Fenbi has been trying to address the issue of good reputation but low attendance, and increasing the average customer price is the most direct and effective way. Moving from low prices to high prices is always difficult, and Fenbi's approach is to attempt to convert its past online accumulation into revenue.

This is essentially a consumption of past scale accumulation. Small-class courses are high-priced and demand high training effectiveness, but given the extreme difficulty of passing civil servant exams, Fenbi may find it difficult to avoid reputational damage. At the same time, while Fenbi has not splashed money as extravagantly as Offcn, the significant refund pressure of agreement classes will also be a Damocles' sword hanging over its head.

Huatu: Leveraging Trends to Boost Online Efforts

For the past 20 years, offline courses were Huatu's stronghold, but the pandemic shook its strategy.

Since 2020, Huatu has gradually converted all offline courses from its more than 1,100 branches nationwide to online teaching. The passive adjustments during the pandemic eventually became the crucial foundation for the current integration of online and offline. Currently, Huatu exhibits an overall trend of being primarily offline while extending to online. Online, lecturers upload teaching videos through multimedia platforms and supplement them with proprietary textbooks, assignments, practice tests, mock exams, and other methods. Through applications, students can access online courses and materials in real-time, help plan and track study progress, and follow up on offline training course status.

At the same time, to address potential adjustments to civil servant exams, Huatu is also strengthening its intelligent and other business segments. According to public reports, Huatu has established a dedicated AI team to continuously develop and integrate teaching scenario applications into Huatu Education's products. In addition, Huatu plans to gradually expand its academic training and vocational skills training businesses, such as medical and postgraduate entrance exams, and further realize industry-education integration.

Huatu's approach actually aligns with the current developmental trends. In the current stage of polarized demand for civil servant exam training courses, online layout can better meet the reality of declining paying capacity, giving Huatu a price advantage and further promoting scale expansion. Of course, online layout is not easy and requires continuous investment, and revenue may not increase with scale expansion in the short term, requiring sustained strategic resolve.

In summary, Offcn is currently focused on resolving historical issues, unable to attend to scale and market share, striving for a smooth transition. Fenbi has entered the monetization stage, attempting to stratify users, increase average customer prices, and strengthen profit levels. Huatu is leveraging trends to expand, relying on its previous solid operational accumulation to further increase its share and seize market opportunities. In this process, Offcn is destined to lose some market share, Fenbi may face reputation decline, and Huatu will be tested in its strategic resolve. The three giants will all face their own troubles.

Civil servant exam training has developed for over 20 years, and this market has always been turbulent. Facing a new stage with both opportunities and challenges, every detail of institutions now is like the flutter of a butterfly's wings, which may stir up a hurricane in the future landscape.