Caixin
Jun 08, 2021 04:14 AM
BUSINESS & TECH

Alibaba-Backed Zuoyebang Slashes Tutoring Sales Staff

Zuoyebang advertisement displayed on the street.
Zuoyebang advertisement displayed on the street.

Alibaba-backed tutoring company Zuoyebang is cutting staff as authorities tighten the screws on China’s after-school training industry.

Most of the terminations will be sales staff at the company’s Yaya course section, which provides English, Chinese and early childhood development courses to children ages 3 to 8, a person at Zuoyebang told Caixin.

Zuoyebang, registered as Xiaochuan Chuhai Education Technology (Beijing) Co. Ltd., said the company is making business adjustments, including normal personnel optimization and turnover, and recruitment of key business talent is continuing. It declined to respond to questions about staff reductions at its Yaya business.

Since the beginning of this year, China has been tightening scrutiny of after-school tutoring institutions and punishing illegal training activities. In March, Beijing educational authorities ordered all in-person after-school training classes — which were suspended in early February amid a resurgence of the Covid-19 pandemic — to postpone reopening and conduct inspections and corrections.

According to a newly amended law on the protection of minors, which took effect June 1, kindergartens and out-of-school education providers are prohibited from providing primary school education courses to pre-school children. Regulators are considering working on detailed implementation rules, Caixin learned.

Zuoyebang was fined 2.5 million yuan ($389,000) last month for misleading consumers about tutor qualifications and for faking user reviews. Launched in February 2020, the Yaya unit hasn’t generated any profit, the person at Zuoyebang said. Several persons at other leading online education providers disclosed that rumors about “mass layoffs” at Zuoyebang started to spread last week, and some panicked employees have been contacting other companies.

Under the heightened regulatory scrutiny, the company also halted a planned initial public offering last month, people at the company told Caixin. Zuoyebang completed a funding round of more than $1.6 billion in December. Alibaba Group Holding Ltd., Tiger Global Management, SoftBank’s Vision Fund 1, Sequoia Capital China and FountainVest Partners were among the investors.

In April, state broadcaster CCTV dropped ads from some top online tutoring enterprises. Earlier this month, China’s market regulator fined 13 tutoring companies 31.5 million yuan for false advertising and pricing fraud.

Under the current regulatory environment, early childhood development businesses at leading tutoring companies face relatively high policy risks and unclear profit models, and they may have difficulties surviving this round of business adjustment, a former strategic analyst at Zuoyebang said.

Late last month, New York-listed Gaotu Group, formerly GSX Techedu Inc., halted enrollment in its early childhood courses and reportedly will terminate 30% of its employees as part of a “strategic adjustment” in response the new minor protection law.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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