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Netflix, Peloton and the Post-Pandemic Crash

The COVID pandemic was extremely kind to many such businesses as quarantines and lockdowns occurred. But a return to normalcy in a post-pandemic world has turned the tables. In fact, there are quite a few businesses suffering from a post-pandemic crash as of late. Netflix’s impending losses and Peloton’s rise and fall are excellent examples of today’s post-pandemic crash. But these companies are not alone. Many companies in the tech sector and e-commerce industries are having to readjust forecasts in light of market changes. And most are having to reexplore their market strategies as consumer trends have notably shifted. These developments are important because they highlight just how important it is to be adaptable. By staying abreast of market trends, and by cultivating a culture of change, business can better weather such storms. It will be interesting to see just how well companies like Netflix and Peloton prepared for just such an occasion.

(Who won big during the pandemic? Check out this Bold story to find out.)

“The balance sheet challenge [for Peloton] has been managing inventory. We have too much for the current run rate of the business, and that inventory has consumed an enormous amount of cash, more than we expected, which has caused us to rethink our capital structure.” – Barry McCarthy, CEO of Peloton

Peloton’s Rise and Fall

Perhaps one of the most notable companies to experience a post-pandemic crash has been Peloton. With gym closures and a shift to a streaming exercise craze, the company thrived during the pandemic. It saw billions of dollars in revenues over 2021 as a result of numerous subscriptions and equipment purchases. But unfortunately, Peloton’s cofounder, John Foley, assumed the trajectory would persist. But as fitness centers reopened, Peloton purchased dropped rapidly. The end result was lost earnings of $1.26 billion last year when compared to the prior year. That’s why Peloton’s rise and fall has been well publicized.

The company’s post-pandemic crash led to a change in leadership with Barry McCarthy eventually taking the helm. His challenge has been trying to rid the company of its excessive inventory while renegotiating subscription rates. Thus far, progress has been slow, and the company is looking into a variety of options. One involves using 3rd-party sellers to move its equipment. Others include advancing Peloton’s international presence and moving toward a software platform. In any event, it’s clear that Peloton’s rise and fall was perpetuated not only by the pandemic. A failure to anticipate consumer shifts amidst dynamic change was largely to blame as well.

“Netflix hit a wall. The Street now knows that the low guide last quarter was not an aberration, and we expect it will take a while for investors to believe Netflix can return to growth.” – Nat Schindler, Securities Expert, Bank of America

Is Netflix’s Stream Drying?

As millions turned to at-home exercise equipment with Peloton’s rise and fall, even more consumers turned to streaming. Netflix became a tremendous pandemic winner as a result. The company saw billions of dollars in revenues during 2021. But as the pandemic subsided, people were more than ready to escape the indoors and return to other entertainment options. Increasingly, subscriptions began to not only cease growing but actually decline. And seeing the writing on the wall, share prices for the company fell during the post-pandemic crash. In total, the company has lost over $50 billion in market value over the last year.

(Do you remember the great streaming pivot of 2020? Bold does.)

Of course, Netflix is not the only streaming company to experience such a post-pandemic crash in subscriptions. Warner Brothers has seen a 6% drop in share price, and Paramount Global recently experienced an 11% decline. But by comparison, Netflix has lost roughly 35% in share value during the same time period. Like Peloton’s rise and fall, Netflix’s pandemic glory made its decline that much more painful. And while the company may not have been quite as blindsided as Peloton, it too reacted too slowly to prevent substantial losses. Today, investors realize that a quick solution to a return to growth isn’t likely in the near-term. And ultimately, it may cost Netflix dearly in a highly competitive market.

E-Commerce Going Off-Line

Consumer habits changed drastically during the pandemic, and they have also shifted significantly since. In addition to online fitness and streaming services, e-commerce companies have also experienced the effects. Unable to shop retail stores in person, customers were forced to shop online. And many companies like Shopify, Etsy, and Wayfair benefitted greatly in the process. But like Netflix’s and Peloton’s rise and fall, these companies have had their recent struggles as well. Combined with inflationary pressures and the end of government stimulus packages, a post-pandemic was destined. Now, each of these companies are having to deal with the fallout as a result.

A Peloton shop selling Pelotons
The post-pandemic crash is affecting companies both big and small.

By the numbers, the decline in value for these retail e-commerce businesses are significant. For Shopify, which offers business tools for e-commerce, its shares have dropped 18%. For Etsy, it’s net income has recently dropped 40% with a total loss of 71% in the last 6 months. And for Wayfair, revenues plunged 14% resulting in a loss of $319 million compared to last year. These pose difficulties from human resource and inventory perspectives. Likewise, it also presents problems in terms of cash flow and investments. Their challenges thus mimic Peloton’s rise and fall problems as they try to deal with their own post-pandemic crash.

Foresight and Adaptability as Assets

Being able to predict what to expect during and after a pandemic is understandably impossible. Therefore, faulting any of these companies for some struggles isn’t the point. However, it is important to recognize that businesses today must be extremely dynamic. Technological advances and global shifts demand this. The pandemic simply exacerbated these existing influences making the changes faster and more furious. Hopefully, most of these businesses will navigate their post-pandemic crash well and get back on track. But as a lesson to any company, agility, adaptability, and insight are essential skills businesses must develop in today’s world.

 

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The Remote Work Migration and Its Evolving Impact on the U.S.

Among many things, the pandemic taught us that working from home was not only feasible but actually preferred. Millions of employees now insist on positions that allow remote work, whether it’s hybrid or otherwise. In part, this has contributed to the Great Resignation with workers leaving their positions for greener pastures. But these trends have an even greater potential effect on tech firms as demand far outweighs supply for domestic talent. Because of existing U.S. immigration policies, the nation is missing out on tech migration patterns. Specifically, tech worker migration now favors other countries who could capitalize on these shifts.

(The ability to work remotely has become essential–read more in this Bold deep-dive.)

At the root of the problem is a lack of clarity and insight regarding immigration issues. Political gridlock has caused stagnation in policy changes that might promote more favorable tech migration patterns. As a result, businesses must determine how best to resolve their talent gaps in industries that are globally competitive. Thus far, some policymakers suggest that companies invest more into talent development and training. But the path of least resistance encourages a different approach that aligns with remote work trends. Unless immigration policies are reconsidered, it might just be that others will be the tech leaders of tomorrow.

“Ultimately, this [failure to change immigration policies] could hurt the U.S. economy. There’s no rule that Silicon Valley is always going to have the tech crown.” – U.S. House Representative Zoe Lofgren, Chairwoman of the House Immigration and Citizenship Subcommittee

Basic Supply and Demand Pressures

From one perspective, a deficiency of domestic tech workers has been evolving for some time. While the overall unemployment rate in the U.S. is at historic lows currently, it is even more so for technology positions. Specifically, tech unemployment rates are 1.3%, which highlights the challenges tech firms have in finding talent. Within the U.S., remote work trends have resulted in tech worker migration. For companies willing to embrace remote work, they have been able to fill vacant skilled positions. But for others, tech migration patterns have added insult to injury. This is why some tech firms have pursued new markets like Nashville, Raleigh-Durham, and Tampa. Hoping to tap into new local talent, some are expanding outside of Silicon Valley in their search.

Unfortunately, developing new domestic markets for talent won’t suffice in filling voids in tech talent. While places like Nashville have seen an 8% increase in tech jobs, the state doesn’t have the numbers to keep pace with such growth. Likewise, since 2020, there has been a 420% increase in remote tech jobs. This means that companies must either outsource foreign talent or recruit skilled immigrants into the country. While the former is feasible, the latter is not due to current U.S. immigration policies. That’s why current tech worker migration has been toward other countries instead of the U.S. These are the tech migration patterns that have many tech businesses concerned.

“There’s still a desire for the employer to have their employees in the U.S., but if that’s not possible, they will hire talent and place them where they are able to work productively.” – Stuart Anderson, Executive Director, National Foundation for American Policy

Canada Seizing an Opportunity

U.S. immigration policies related to tech worker migration places a cap on the annual number of H1-B visas. Only 65,000 skilled workers are allowed, which combined with the 20,000 graduating from American universities, is insufficient. Remarkably, these caps have not changed since 2005, and per-country quota limits also exist. Thus, while tech jobs and talent demand have increased, tech migration patterns have been stymied. This isn’t the case in other countries that see the opportunity available. Canada, in particular, is reaping the benefits of the U.S.’s failure to adapt.

a worker working remotely
The explosion of remote work means tech worker migration to countries more favorable to their status. Can the US keep up?

Without question, immigration into Canada is much simpler and easier. They have no limits on the number of technology talent entering the country. This is why Canada has seen a tremendous increase in tech worker migration as of late. Likewise, these tech migration patterns have spawned new businesses. Mobsquad, a Canadian company that helps find tech talent for U.S. firms, relocates remote workers to Canada. MobSquad has enjoyed a four-fold increase in business in the last 2 years and now serves 50 companies. This is also why many tech firms are setting up shop in Toronto, the latest new technology hub.

“There was some hesitation before the pandemic to having workers spread across many offices and cities. Now they’ve proven to themselves that remote work isn’t a problem.” – Arif Khimani, President and COO, Mobsquad

Immigration Reform Essential

Given that the U.S. is already losing tech jobs to places like Canada, it would seem obvious that immigration reforms are needed. But policymakers have failed to appreciate the potential impacts these current tech worker migration effects have. Many want to protect the American worker, assuming that U.S. tech firms will either find or train the talent they need domestically. But this is extremely short-sighted. Companies in the U.S. are progressively adapting to remote work structures and hiring remote IT workers. As a result, despite current immigration policies, American workers are losing jobs to skilled tech talent in India, China and other places. This is why new policies are needed to change existing tech migration patterns.

At present, the U.S. firms continue to lead the world in technology and innovation. But in order to stay on top, these companies must attract and retain the best talent. Having such skilled workers in the U.S. would be ideal, but current labor supply cannot support this. Therefore, changes are needed to allow a tech worker migration into the country. Expanding the number of H1-B visas and relaxing national quotas would be a step in the right direction. If such changes don’t occur, then U.S. tech business will be forced to hire talent remotely from other countries. And this is not the type of tech migration patterns that would benefit the U.S. in the long run.

 

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It’s Time to Bring Back the Automat

When it comes to the fast-food industry, many assume the birth of quick convenience began in the 1950s. Restaurants like McDonalds and others rose to popularity at that time as Americans’ pace of life accelerated. But in actuality, the fast-food concept began decades earlier in select places. Specifically, hustlers and bustlers in Philadelphia and New York were introduced to delicatessen-style automats as early as 1902. These waiter-less restaurants offer variety of hot meals and beverages ranging from sandwiches to coffee. And given today’s climate, many believe automats are coming back in a big way.

(Bold has written about the Automat before–take a stroll down memory lane here.)

The first appearance of automat returns emerged as the COVID pandemic took a hold over the nation. The contactless encounters of these machines were naturally attractive and inspired several new restaurant concepts. But as the pandemic subsides, the question is whether or not these concepts will survive. According to some, the pandemic was just the start of automat returns as other trends also favor their emergence. Specifically, labor shifts as well as sentiments of novelty and nostalgia could explain why automats are coming back. This restaurant concept has many appealing features, and the time looks to be ripe for the automat to again thrive.

“[Going to the automat] absolutely inspired me to think differently through many years of developing Starbucks. The level of theater, romance and surprise that Horn & Hardart delivered at the Automat shaped how we thought about and built the Starbucks Experience.” – Howard Schultz, CEO of Starbucks

Nostalgia Driving Automat Returns

As with many concepts that make a comeback, fond memories of the past can play a role. For many who remember the automats decades ago, there is certainly a longing for the “good ol’ days.” In both Philadelphia and New York City, Joe Horn and Frank Hardart were the original entrepreneurs who embraced these unique restaurants. For a nickel, anyone could get a hot cup of coffee from Horn and Hardart’s machines. Sandwiches, pies, chocolates and even wine were other popular items that encouraged automat returns. Many who grew up in the 1960s immediately get nostalgic upon hearing automats are coming back.

The allure of these machines is not necessarily the culinary delights these individuals received. Of course, some items still provide happy memories for some. For instance, Mel Brooks, who grew up in Brooklyn, believes Horn and Hardart’s ham and cheese sandwiches were the best. But it was also the unique experience of putting in a coin and waiting for your selection to appear. Once the automat returns your item, it’s like receiving a special gift that you couldn’t get anywhere else. For children especially, automats trigger happy memories even today. And some of these children are the reason why automats are coming back in more modern styles.

A Novel Experience for Consumers

Interestingly, older adults with past memories of automats aren’t the only ones intrigued by these new types of restaurants. In recent years, other vending machines serving hot food have appeared. Some offer pizza while others actually prepare, grill, and serve gourmet hamburgers. The convenience of these types of meals is appealing to new generations just as they were to those of the past. But they also offer intrigue and novelty based on the same technologies driving robotics and automation. This too is another reason why automats are coming back in revamped varieties. The same concept that captured consumers decades ago looks to be again doing the same today.

Someone desperate enough to eat out of a vending machine
Automats are coming back. Note: this is a photo of a vending machine, which isn’t as cool as an automat.

To be clear, however, not all meal vending machines are the same. Automats of the past, including those of Horn and Hardart, offered tasty treats and servings. Their marble-like frames and food boxes yielded offerings that were appealing to the senses. That’s not necessarily the case with some meal vending machines today. However, automats are coming back today that do take the high road. For example, Automat Kitchen in Jersey City serves piping hot chicken pot pie, mac-n-cheese, and flatbreads. Brooklyn Dumpling Shop in New York makes steamed dumplings as customers watch before their temperature-controlled automat returns an order. These are the types of automats today that will likely thrive because of the novelty they offer.

“On the psychological level, they offer a moment of excited anticipation, almost magical, when you open up a box and find something you want inside.” – Beth Forrest, Professor, Culinary Institute of America, Hyde Park, N.Y.

Accommodating Labor Market Trends

Without question, quality food and an interesting concept can help pave the way for automat returns. But these are not the only reasons automatics are coming back in all probability. Notably, the pandemic played a role with contactless meal preparation continuing to be desirable by some. But likewise, changes in the labor market is also supporting trends that favor these changes. Fewer and fewer people want to work in the food service industry, especially when it comes to fast-food. Rising costs of living and tough working environments account for much of these trends.

As a result, it’s not surprising that automats are coming back. If consumers like the food and the presentation, then the need to finding hard-to-find staff can be alleviated. With so many people preferring a working-from-home lifestyle, it’s easy to appreciate that staffing regular restaurants have become more difficult. Automats, like vending machines, offer a great solution in this regard. But unlike vending machines, automats tend to focus on higher-quality servings as well as discount pricing. By addressing labor market pressures today, automats can better meet customer preferences that other options cannot.

Coming to a Town Near You

Currently, automat returns have mostly been spotted in some of the more major cities. But that doesn’t mean many of these innovative restaurants won’t be expanding broadly in the years to come. Inflationary pressures combined with the need for convenience will always drive innovations like the automat. And the better quality that modern technologies now offer will make these machines ever more popular in the years to come. Though the pandemic may have triggered their initial reemergence, it’s these other aspects that will give them staying power. As a result, don’t be surprised to see one popping up in your town in the next few years.

 

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