East Buy, the e-commerce unit of China’s one-time private tutoring giant New Oriental, recently reported a significant drop in profit, sparking concerns about its future sustainability. The company posted a net profit of RMB 1.7 billion ($239 million) in the 12-month period to May 2024, with RMB 1.3 billion coming from gains on the shedding of its education business. However, profit from continuing operations plummeted by nearly 70% to RMB 249.1 million for the fiscal year.
The departure of a top influencer, Dong Yuhui, has been attributed to the decline in profits at East Buy. Dong Yuhui, known as China’s top livestreaming influencer, played a crucial role in driving sales and engagement for the e-commerce platform. With his departure, East Buy is now facing challenges in maintaining its growth trajectory.
According to the company’s annual results, a significant portion of East Buy’s total transaction value in the past year came from Douyin, a popular short video platform and sibling of TikTok. Douyin contributed RMB 14.3 billion to East Buy, representing a 43% increase from the previous year. East Buy currently boasts 29.65 million followers on Douyin, with the platform generating over 181 million orders for the company over the last 12 months.
Despite the increase in revenue, East Buy’s revenue growth has not been sufficient to offset the decline in profit from continuing operations. The company’s revenue recorded a 56.8% year-on-year rise to RMB 7.07 billion in the period from June to May. However, the substantial drop in profit raises concerns about East Buy’s ability to sustain its growth without the influence of key personalities like Dong Yuhui.
East Buy has been grappling with challenges since Dong Yuhui’s venture, Time with Yuhui, was sold entirely to the presenter in July. Time with Yuhui, which was previously a wholly-owned subsidiary of East Buy, now has 23 million followers on its Douyin account. The transaction raised eyebrows as East Buy’s CEO, Michael Yu, indicated that the deal would involve arrangements for payment, leading to speculation that Dong would receive the venture at no cost.
In response to the departure of Dong Yuhui, East Buy has cut ties with the influencer and distributed around RMB 129 million to him, comprising unallocated profits from Time with Yuhui. This move underscores the impact of Dong Yuhui’s departure on East Buy’s financials and overall operations.
The controversy surrounding Dong Yuhui’s departure is not the first time East Buy has faced challenges related to its top influencers. In December, the company fired former chief executive Sun Dongxu after he made comments that angered fans of Dong Yuhui. Sun implied in a social media post that Dong’s scripts were written by a team of writers, sparking backlash from the influencer’s supporters.
In response to the controversy, East Buy promoted Dong Yuhui to a senior partner in the company and named him assistant of culture to the chairman, Michael Yu. This move was aimed at appeasing fans and maintaining the influencer’s loyalty to the e-commerce platform. However, with Dong Yuhui’s subsequent departure, East Buy is now facing challenges in retaining its audience and driving sales through livestreaming platforms.
The departure of Dong Yuhui has highlighted the importance of influencers in driving sales and engagement for e-commerce platforms like East Buy. As the company navigates the aftermath of this significant loss, it will need to reassess its marketing strategy and partnerships to ensure sustained growth and profitability in the competitive e-commerce landscape. The future of East Buy remains uncertain as it grapples with the repercussions of losing its top influencer and the impact on its bottom line.