In the upscale Fashion Island shopping mall in northeastern Bangkok, a dedicated education zone on the first floor is bustling with activity. Here, over 30 institutions offer a range of educational services, from English and K12 to Chinese, mathematics, and art. This area caters to Bangkok’s middle and upper classes, who place a high value on their children’s education.
In August 2024, PalFish opened its first offline store in Thailand at Fashion Island. At that time, Zhixiang Chu Hai was in the region, exploring the Southeast Asia market and attending the store’s opening ceremony.
Five months later, the store has seen impressive revenue. PalFish’s overseas director revealed to Zhixiang Chu Hai that the initial investment of approximately 500,000 yuan has already yielded nearly 2 million yuan in revenue, essentially breaking even within three months and operating well. In December 2024 alone, the store received over 100,000 yuan in renewals from users.
Chinese education institutions began venturing overseas in 2019, and their presence expanded rapidly after the “double reduction” policy in 2021. PalFish was among those that expanded during this period. Today, PalFish has a global user base of 60 million across Latin America, the Middle East, Russia, and Southeast Asia.
Facing the increasing cost of online traffic, PalFish began shifting its focus to offline operations last year. “Previously, we relied heavily on paid advertising, but this approach is unsustainable in the long run as traffic costs rise annually. We need to explore new models and find new traffic scenarios offline,” said PalFish’s overseas director.
Offline Channels Offer Greater Opportunities
Southeast Asia, deeply influenced by Chinese culture, places a strong emphasis on education, as evidenced by the dedicated education zones in many Thai malls. This highlights a universal truth among global middle classes: when wealth increases, investment in the next generation becomes a priority, regardless of nationality.
PalFish’s overseas director, Li Xiao, noted at a recent conference that the role of education remains consistent globally: to develop interests, build capabilities, maintain a competitive edge, and alleviate parental anxiety.
Many Chinese companies choose Southeast Asia as their first overseas destination due to its geographical proximity and cultural similarities. However, this has led to intense competition, driving up online traffic costs and reducing return on investment.
“Take online customer acquisition costs in Vietnam, for example. The cost per customer is nearing that of China, with a single phone number costing $20 to $30. The cost of online traffic is only increasing,” shared a guest at a panel discussion.
As online growth slows, expanding into offline channels becomes a natural next step. Offline operations have higher barriers to entry, and many overseas companies have yet to make this move, presenting significant opportunities. For education institutions, offline channels are crucial. Education is a long-term, high-investment field where customer switching costs are high. Offline stores can provide better experiences and higher conversion rates while building brand barriers for long-term development.
Contrary to expectations, the cost of opening an offline education store in some Southeast Asian countries is not high. PalFish’s director explained, “In Thailand and Malaysia, rent is not expensive. For example, in Thailand, there are dedicated education zones with rent discounts. While a restaurant might pay 400 yuan per square meter, an education store pays only 100 yuan.”
“In Malaysia’s highest-spec mall, a store of 120 to 150 square meters has a monthly rent of around 20,000 to 25,000 yuan. With an initial investment of 500,000 yuan for decoration, the total annual investment is about 800,000 yuan. Given a monthly turnover of 300,000 yuan, the payback period is three to six months,” he added.
PalFish shared data from a newly opened store: an initial investment of 260,000 yuan, with 280 orders completed in three days, generating approximately 180,000 yuan in revenue. The store has a total of 547 customers, with 266 having taken free trial lessons, making them potential high-quality clients.
PalFish has a sophisticated methodology for selecting store locations. They divide a city into different zones, centering on malls and assessing the surrounding schools and residential areas to ensure sufficient market potential.
Thailand, Malaysia, and Vietnam: Key Markets
Unlike China, Southeast Asia’s long daylight hours and year-round heat mean that people tend to congregate in malls, creating a unique commercial ecosystem. While internet development may lag, offline malls are highly developed and prosperous.
Thailand, with a population of over 70 million, sees malls as central hubs for weekend family activities. The malls are luxurious, with large parking lots, and can attract 150,000 to 200,000 visitors over a weekend.
However, Thailand’s urban agglomeration effect is significant, with Bangkok being the only highly developed city. As the political, economic, and cultural center, Bangkok has a population of 11.2 million, ranking 30th in the world. In 2024, Bangkok accounted for 25% of the country’s population but received 75% of the government’s overall planning investment.
This concentration means that Bangkok is the best market for expanding offline education businesses. PalFish currently has all its stores in Bangkok, planning to cover all 30 major malls in the city.
Malaysia, similar to Thailand, is another market with great potential. With a population of around 32 million, 70% of whom are young, Malaysia’s western region, near the capital Kuala Lumpur, is the most prosperous area.
E-commerce in Malaysia is underdeveloped, with 91% of shopping activities occurring offline, compared to 62% in China. Even on weekdays, Kuala Lumpur’s malls are packed, primarily with students.
This is due to differences in education systems. In Malaysia, schools end at 3 to 4 p.m., and many students choose to spend their free time in malls, contributing to a thriving offline education ecosystem.
Vietnam, compared to Thailand and Malaysia, has a better-developed economy and internet infrastructure. However, Vietnamese people still have a strong preference for offline markets.
One company shared that even on weekdays, malls in Ho Chi Minh City are bustling with people, especially students who have nowhere else to go after school at 4 p.m. The top 30% of malls in Ho Chi Minh City are comparable to Beijing’s Sanlitun shopping centers, and in some aspects, they are even more advanced.
Challenges of Offline Expansion
Opening offline stores overseas is not as straightforward as in China. From site selection and team building to operations, marketing, legal compliance, and cultural adaptation, there are many challenges, especially in the education sector.
Understanding the local city is the first challenge. For example, in Vietnam, unlike Thailand, there are no dedicated education zones in malls, meaning no rent discounts and higher entry barriers.
Securing a store location is another significant challenge. Southeast Asia is a relationship-driven society, and without connections, it is difficult to enter the market. Even with dedicated education zones, securing a spot can be challenging.
Hiring locally is also a complex issue. While hiring in China is relatively easy, with high offer acceptance rates, this is not the case in Southeast Asia. One company reported that out of 87 offers sent, only eight people accepted, a mere 10% acceptance rate.
Employee turnover is also much higher than in China. In Vietnam, retaining sales staff for over a year is extremely rare, making it difficult to build a high-quality and effective sales team.
Once everything is in place, the final challenge is selling the product. This requires a deep understanding of local culture and the ability to meet customer needs effectively.
One guest, who has lived in Thailand for 15 years, shared her experience. Initially, she used sales pitches from China, focusing on creating parental anxiety about their children’s future. However, a Thai mother running a fruit stall was not convinced, stating that she was happy with her current life and had no desire for her child to become a lawyer or doctor.
This experience taught her the importance of respecting and integrating into local culture. She adjusted her pitch to suggest that better education could help the mother sell more fruit, which resonated with the mother and led to a successful sale.
Offline Expansion as the New Frontier
Education institutions’ move into offline markets is just one example of Chinese companies’ overseas ventures. Last year, Zhixiang Chu Hai observed that many other industries, such as Chinese tea drink brands and new energy vehicles like BYD, NIO, and XPeng, have also penetrated the offline market in Southeast Asia.
Many companies previously relied on familiar online strategies for overseas expansion. However, more and more brands are realizing that the core battleground in Southeast Asia is still offline. Today’s overseas expansion is, to some extent, entering a ground-war phase.
