The pandemic is over, at least according to Netflix.
The streaming service, in case you haven’t read, this week said its subscriber numbers dipped last quarter, by 200,000. That was the first time it ever happened to the company. “COVID created a lot of noise on how to read the situation, boosted us a lot in 2020,” CEO Reed Hastings told analysts Tuesday, according to a transcript on the financial services site Sentieo.
It’s not the only such indication of an economy that is clearly moving into a more normalized direction. On Wednesday, as my colleague Joe Guszkowski reported, the European delivery giant Just Eat Takeaway said it was exploring a sale of its U.S. business Grubhub, just 18 months after making the deal.
The key piece in the story is this: JET’s North American order volumes shrunk 5% year over year in the first quarter.
Both companies have their respective issues. Netflix is facing a torrent of competition from the likes of Disney Plus and Paramount Plus or whatever Plus-named services have come out in recent years. JET’s Grubhub meanwhile, is the smallest of the big three delivery services in the U.S., and its primary competitors have been aggressively finding other things to deliver besides restaurant food. It also has a heavy presence in large cities, per Guszkowski.
Yet their respective demand declines demonstrate a clear shift in consumer behavior. Consumers at the outset of the pandemic were forced to spend most of their time at home, as workplaces closed offices and dine-in service was shut down. With little time, they watched a lot of Netflix. And ordered a lot of delivery, getting food from a variety of restaurants rather than just pizza and Chinese food.
But, as most restaurants can attest, the consumer has been shifting back to normal for some time. According to Restaurant Business sister company Technomic, for instance, full-service restaurants in 2021 recovered 83% of the sales they lost in 2020. While they have a ways to go before they’ve fully recovered, and at least some of that 83% was takeout, it’s still a demonstration of the move back to a more normalized state.
The decline in delivery sales at one of the big three providers, and the decline in Netflix subscribers, suggest perhaps that this shift is accelerating.
It would be natural for consumers to move away from some of the things they moved their spending to during the pandemic. If consumers are eating out at a full-service restaurant, they may well eliminate a delivery order. If they’re simply leaving the house more, they have less time for all the streaming services they were purchasing.
The question for the restaurant industry is how far that shift moves back—and also what impact inflation could have from here on.
Much of the industry is banking on the idea of takeout remaining a larger, permanent fixture of the industry going forward. Operators are building more drive-thrus or they’re putting drive-thrus into businesses that didn’t have them before. They’re creating space for delivery and curbside. If they’re full-service, they’re creating fast-casual versions of their business.
Given that takeout already accounts for the bulk of restaurant visits, this is a safe bet. In addition, inflation could well slow the move back to full-service visits.
Then again, maybe consumers after two years of takeout decide to go into restaurants a lot more. Or maybe independents stage a comeback and regain what they lost the past two years, which is hardly out of the question. And that could mess with the industry’s investment equation.
Officially, the pandemic is not over. People are still getting sick and some of them are dying. Yet, as the airplane celebrations of the end of the mask mandate this week attested, consumers are increasingly moving past their pandemic mindset. That will have implications for any restaurant.