Why Is the Indian Edtech Market Under Heavy Loss in 2022?

One of India’s Edtech giants BYJU’s recently laid off its 500 employees. Similarly, other well-recognized Edtech companies like Unacademy, Vedantu, Whitehat jr., etc. have also handed pink slips to hundreds of their employees in the latest Edtech crisis.

So, is the Indian Edtech market actually coming to its end? When did it start to crash and what are the causes? Which of the brands will survive the situation?

In this blog, we will find the answer to all these questions.

The Inception of the Indian Edtech Market
Growth of the Edtech Industry in India
Effect of the Pandemic on the Edtech Market
The Post-pandemic Struggle of Edtech Companies
Who Will Survive the Edtech Race?

The Inception of the Indian Edtech Market

The coaching centers have been a part of our education system for a long time. Beginning with the small tuition classes with 5-10 students to the big coaching institutes with hundreds of students, this business has travelled a long way.

Mostly, the inability of the school curriculum to prepare students for competitive examinations and the lack of well-trained teaching staff are considered to be the reason for the advent and proliferation of these coachings.

Well, whatever the reason be, the truth is that today coaching centers have become an indispensable part of the Indian education system.

These coaching centers charge high fees, sometimes even higher than the school fees for an entire year, to prepare the students for different exams. They offer classes, study material, question banks, test series, and even hostel facilities for the students.

Several cities have emerged as coaching hubs for different examinations, such as Kota for IIT-JEE coaching, or Delhi’s Rajendra Nagar for UPSC coaching.

In continuation of this, with the arrival of new technology, online coaching centers came into the picture. The major advantage of these Edtech companies over offline coaching centers was their cost-efficiency.

They offered the same course to the students as the offline coaching center but at a very low price, comparatively. It was owing to the lower expenditure needed to run these businesses.

Actually, to run an offline coaching center one has to spend a humongous amount of money on infrastructure, teaching staff, admin, support staff, housekeeping, electricity & water bill, etc.

Other than this these coaching centers also have to take care of marketing through billboards, seminars, etc. which further escalates their running cost. In the end, students are the ones who have to pay for these expenses in terms of the high fees charged by these institutes.

On the other hand, the online coaching centers do not have to spend money on infrastructure, extra staff, or other facilities. All they need are a few experienced teachers who would record the subject-wise lectures for them.

So, even for the teachers instead of regular monthly payments they only had to pay them once. These companies also hire the teachers on a profit basis to organize doubt-clearing sessions for the students.

This made their functioning expense go really low. Moreover, back when these companies actually started, the digital modes of marketing, such as YouTube or Instagram, were cheaper. Due to this, they were also saving on their advertisements and marketing costs.

However, owing to the soaring internet costs this market did not grow much until 2017 when “Jio” entered the Indian telecommunication industry. With its extremely low-cost internet connection, Jio revolutionized the way the coaching industry of India functioned.

Growth of the Edtech Industry in India

Owing to the availability of cost-effective internet connections, this led to the rise of digital coaching institutes in India. The market of these institutes was not restricted to a particular city or zone. They could actually approach any student across the country.

Moreover, with the pre-recorded lectures they could even sell customized courses or subject-specific courses to students. If a student only wanted to study Physics, he/she was not compelled to pay for other subjects as well. Therefore, initially, the Edtech market required ultra-low working capital and was a high-profit margin business with boundless potential to scale.

Due to all these advantages, a large number of investors with billion-dollar funds approached these companies even turning many of them into unicorns.

But, here is the twist, as the entry barrier to starting an Edtech company was quite low the competition started to increase. The cost for course making was low and the selling was easy. This invited countless individuals to enter the field.

This sudden increase in competition led to a number of other changes in the digital market. Owing to the increased number of advertisements for similar products, the cost per conversion escalated multiple times.

This drastically increased the cost of investment in the Edtech business as the margin between investment and profit shrank to become thinner. This led to incurring losses in most of these companies.

Effect of the Pandemic on the Edtech Market

Although COVID-19 brought the entire world into turmoil, bringing several challenges for the entire human community, this pandemic was bliss for the Indian Edtech companies.

With the shutting down of schools and offline coaching centers, the Edtech industry saw its boom in 2020. The edtech companies utilized this as an opportunity to habituate customers to online learning.

Resultantly, while they offered more discounts, more free sessions, and other free services to the customers, they also hired more staff and gathered more funding for themselves.

This was the time these companies invested all their energy and resources to bring the Edtech market to its hype as almost all the students were using online classes.

The Edtech companies at this point exploded like no one could have imagined inviting more players to join the field.

The Post-pandemic Struggle of Edtech Companies

Later in 2021 or the beginning of 2022, the pandemic started to fade away leading to the re-opening of schools, coaching centers, and other institutions. As the students rejoined their respective institutes the resources gathered by the Edtech companies were no longer required.

The students got involved in their offline activities as earlier, preferring a physical classroom over the virtual one. This led to the major collapse of the Edtech industry in India.

Finally, the companies began to suffer heavy losses and had to fire the surplus staff including both the teachers as well as the sales team. But, is this Edtech crash occurring for real?

Unfortunately, the answer is yes. So, the next question appears, who will survive it? To get the answer we have to know who all are the participants in this struggle.

Who Will Survive the Edtech Race?

There are three types of players in the Edtech market. First are the super-brands like BYJU’s, Unacademy, etc. These companies have made a name and reputation in the market which is exceptional and considered quite reliable by the customers.

Second, are the companies with huge funding with which they are able to promote and advertise their products much more efficiently and effectively.

Third are the personal brands such as Study IQ, Physics Wallah, etc. These are the brands that have grown organically on the basis of their content instead of marketing. These are the most powerful and most profitable players in the field.

Amongst the three categories, the first ones to get out of the race are the high-funding companies. Even when these companies are able to attract customers with their advertisements, the lack of content and inability to produce results causes trust issues with customers. This causes an early detachment of customers ensuing huge losses for these companies.

The super brands have no doubt made an irreplaceable image in the market and have earned trust with their services. So, it is expected that they will remain a part of the industry maybe but will have to incur some losses. However, the top players in the game will always be the personal brands. They will always remain profitable and if they stay on the right path they could even become bigger than the super brands one day.

The reason for this is that they have a brand value like nobody else. It separates them from the commoditized Edtech market. As they have gained this place due to their quality content and customer trust there is the least possibility of collapse.

Moreover, they have incredible distribution channels with their customers being the source of their publicity. They are able to connect students without even running any ads so their acquisition costs are very low. Therefore, they have an edge over their competitors and run their businesses without even funding.

Conclusion

Presently, the Edtech market in India is under heavy loss. The industry is at its worst and facing a huge crisis. The reason for this is the re-opening of schools, universities, and offline coaching centers.

However, like any other market, the best players in the field who have gained the trust of the customers and built a reputation for themselves will always stand strong with a profitable business, surviving the highs and lows.

FAQs

What is the future of EdTech in India?

Edtech is growing rapidly in India and is estimated to reach around $30 billion in the next 10 years

How many EdTech companies are there in India?

There are nearly 9,043 EdTech startups in India.

How big is the EdTech market in India?

The market valuation of the Indian Edtech industry is $2.8 billion and is expected to reach $10.4 billion by 2025.