Targeted by Beijing, China firm reinvents itself with live streams groceries

Its online English classes are gone. Instead, former tutors have gained online fame in recent weeks by selling fresh produce, fish and mutton on ByteDance Ltd.’s popular short-video platform Douyin.

Under the brand Dongfangzhenxuan, translated loosely as Oriental Select, the company applies its teaching and marketing background to pitching groceries. With brief promotions of the items for sale, the teachers-turned-influencers deliver philosophical lectures, perform music and teach some English. Throughout each live stream, they drop jokes and share personal experiences, just as they did in classrooms.

Executives at New Oriental declined to comment for this article, but the company’s reinvention is an example of how companies have refashioned their businesses as political priorities change in China. Other private-education companies have shifted to making educational hardware or exploring life-science ventures. Videogame makers, another sector authorities have tried to rein in, are increasingly turning to overseas markets.

For New Oriental, which rode a boom in the private-tutoring industry after going public in 2006, the music stopped last July, when Chinese regulators banned for-profit after-school tutoring for K-9 students. The ban aimed to rein in rising education costs, which are seen as deterring couples from having more children, worsening China’s gloomy demographic outlook.

The new rules sparked massive selloffs in tutoring companies’ shares. Tutoring made up the majority of New Oriental’s $4.3 billion revenue before Beijing’s curbs. In the quarter ended Feb. 28, the company swung to a net loss, and its revenue plunged 48% from a year earlier. New Oriental laid off more than 60,000 staff members and closed more than 1,000 learning centers. It has since shifted its focus to its remaining businesses, including test prep, as well as new initiatives like live-stream marketing.

The remaining workers had to fit new corporate strategies. In November, New Oriental’s founder, Yu Minhong, announced the company’s pivot to agriculture e-commerce.

The new direction didn’t take off until early June, when clips of one of the company’s former tutors, Dong Yuhui, teaching English expressions on a white board while promoting steaks and cod fish went viral on Chinese social media.

Over two weeks in June, Oriental Select’s followers on Douyin jumped from 1 million to 18.5 million, and the channel booked more than $76.7 million in product sales, according to Chinese social-media data tracker New Rank. Commissions on those product sales are a primary source of revenue for Oriental Select. The company said Oriental Select doesn’t get paid to advertise products.

Hundreds of thousands of viewers now tune into Oriental Select’s free live streams daily, buying groceries and learning English, and it has been the top-ranking live-streaming account by popularity on Douyin since early June, according to New Rank.

For those who have taken classes with New Oriental, known for its multitalented teachers and a relaxed teaching style, the storytelling and memes that wrap around each product promotion ring a bell.

“It’s just the same as when my teachers would sandwich some knowledge points between jokes, and we’d be like, ‘Wow, I just learned something,’" said Chen Qi, a Shanghai-based social-media influencer who took English classes with New Oriental in college.

In a June 21 live stream, as Mr. Dong was peddling mutton sourced from northwestern China, he taught the audience English words for “mutton," “pork," “fish," “rooster," “hen" and the expression “hen night" for bachelorette party.

As he went on to explain that the minerals in Ningxia’s water and soil contribute to just a slight gamy taste in the mutton, an appreciative stream of comments rolled across the screen. “I’m learning while buying stuff," one viewer commented.

Mr. Dong’s followers have gradually learned through his live streams about his humble background in northwestern China’s Shaanxi province and how he worked his way up to lead high-school English education.

Beijing’s crackdown put an end to his eight-year teaching career. Mr. Dong didn’t respond to requests for comment.

In pivoting to a new business area, New Oriental picked one that has policy support: Agriculture e-commerce aligns with Beijing’s objectives of stimulating the rural economy.

“They are responding to national policies," said Xiaofei Han, a doctoral candidate at Ottawa's Carleton University who researches China’s live-streaming e-commerce ecosystem. She said that choice will make it easier for the company to build its rural supply chain and establish local partners.

The company’s comeback is also blessed by good timing. Mr. Dong became famous days after China’s top live-streaming influencer Li Jiaqi disappeared from public view. In early June, Mr. Li abruptly went off the air as he promoted a tank-shaped ice-cream cake on the eve of the anniversary of the 1989 Tiananmen Square crackdown, a taboo topic in China. Mr. Li hasn’t posted anything online since then.

New Oriental’s online learning arm is Hong Kong-listed Koolearn Technology Holding Ltd., which operates the live-streaming business. Following New Oriental’s sales numbers, shares of Koolearn surged more than six times. Shares have since given back some of those gains but are still higher than their pre-crackdown levels.

Amid the stock surge, China’s social and gaming giant Tencent Holdings Ltd. cut its stake significantly in Koolearn in mid-June.

Some skeptics wonder whether Oriental Select’s selling point—a live-stream channel that spreads knowledge—can continue to attract attention and traffic. “I doubt anyone serious about learning English will do so through watching live streams," Ms. Han said.

Mr. Yu, New Oriental’s founder, said during a live-streaming chat last month that he wants to build the brand’s own supply chain and start a fund to invest in agricultural companies.