Best Buy’s (NYSE: BBY) push into the commercial health care space is poised to make the electronics retailer an even bigger disruptor than many may have anticipated, thanks largely to its focus on seniors.
That’s the premise of a report released earlier this week by analysts at investment bank and financial services firm Morgan Stanley (NYSE: MS). It’s an idea that could have implications for senior living providers, some of which already utilize Best Buy’s GreatCall products.
Medicare Advantage appears to be another area of potential crossover. Senior living is moving into the MA space, with some providers also becoming payers, as new rules allow for benefits that cover some services typically offered in assisted living. Meanwhile, Best Buy could begin to work more closely with Medicare Advantage plans, potentially gaining financial upside as insurers realize cost savings by making the company’s health products available to their beneficiaries, Morgan Stanley analyst Simeon Gutman wrote.
“We don’t think the market fully grasps Best Buy’s commitment to health,” the report reads. “We believe Best Buy has a durable competitive advantage in senior care, its niche in the healthcare services market.”
Best Buy stands to generate between $11 billion and $46 billion in total revenue over the next two decades with its commercial health care business, according to the report. By comparison, Best Buy’s 2018 sales totaled $42.9 billion.
Best Buy has spent the past two years investing in its consumer health electronics business with a litany of product launches, strategic hires and acquisitions. It launched Assured Living, an entry-level line of remote-monitoring equipment geared toward seniors aging at home and their families who want to keep an eye on them, in 2017.
That was followed by the retailer’s August 2018 $800 million, all-cash acquisition of GreatCall, a developer of smartphones, smartwatches, medical alert devices and other senior-focused tech devices. The GreatCall acquisition was a major contributor to Best Buy’s strong Q4 2018 earnings.
In April, Best Buy partnered with TytoCare, a maker of a medical examination device that records pain points and relays them to a physician for a fast diagnosis. That was followed a month later by the acquisition of remote patient monitoring company Critical Signals Technologies.
Corie Barry, who spearheaded Best Buy’s push into health care as the company’s chief financial officer, was promoted to CEO in June. That same month, Best Buy announced it would add high-tech fitness spaces in over 100 stores. In its latest move, Best Buy acquired wearable sensor manufacturer BioSensics last month, in a $21 million deal.
Competitors such as Amazon (NYSE: AMZN), Apple (NYSE: AAPL) and Walmart (NYSE: WMT) are also looking to gain a share of the home health market, but the pace of Best Buy’s expansion will give it a competitive advantage, according to Morgan Stanley.
If Best Buy becomes a giant in the senior care space as its recent activity suggests, it would have a major advantage over its competition, via its brick and mortar stores and its Geek Squad team of tech support specialists.
As of February, Best Buy had 997 standalone stores, while the “Geek Squad” totaled over 20,000 employees. These assets, and its status as the last consumer electronics retailer, as Barry told CNBC Wednesday, give it a leg up in terms of store focus and expertise. Comparatively, Apple only has 272 Apple Stores across the United States.
Best Buy’s all-electronics focus holds the potential to open the retailer to the growing senior market, allowing the company to become an even bigger vendor of wearable health devices for senior housing providers, with Geek Squad employees acting essentially as consultants for residents.
Best Buy’s moves also have the potential to target providers with Medicare Advantage plans. The Morgan Stanley report revealed that 30 million beneficiaries are enrolled in Medicare Advantage programs — three times the number of dual beneficiaries. By building closer relationships with national and regional managed care groups, as well as medical professionals, Best Buy could build scale and possibly share savings with these groups.
“Taken together, these points lead us to believe that Best Buy is at the edge of a significant, untapped white space opportunity in healthcare,” the report reads.
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