Best Buy CEO eyes health care

The Morning Call - - NATION & WORLD -

com­pa­nies look­ing to cap­i­tal­ize.

“I am not say­ing we will own the whole health care ex­pe­ri­ence — we don’t want to,” Barry said. “But we are uniquely well­suited to be in peo­ple’s homes with tech­nol­ogy. We can help with the tech side of health.”

Best Buy shares closed Thurs­day at $66.96, down $0.50 in New York. The stock had gained 27% this year through Mon­day’s close, out­pac­ing the in­crease of the S&P 500 In­dex.

Best Buy’s move into this space comes as Wal­mart Inc. has also stepped up its health care am­bi­tions, in­tro­duc­ing low-cost med­i­cal clin­ics that of­fer pri­mary-care ser­vices and also men­tal-health coun­sel­ing. Another ri­val, Ama­zon.com Inc., paid $753 mil­lion for mailorder startup Pil­lPack to get into the phar­macy busi­ness.

Best Buy’s fo­cus, mean­while, is less on flu shots and more on the tech­nol­ogy that un­der­pins health care ser­vices. There it faces chal­lenges from tech gi­ants in­clud­ing Google, Mi­crosoft Corp. and Sam­sung Elec­tron­ics Co., which are typ­i­cally Best Buy’s part­ners.

The re­tailer has even hired a chief med­i­cal of­fi­cer to spear­head it ef­forts, ac­cord­ing to an in­ter­nal memo ob­tained by Bloomberg. Daniel Gross­man, a physi­cian and vet­eran of med­i­cal-prod­uct maker Medtronic Plc who also prac­tices at the Mayo Clinic, will join the com­pany Oct. 1 and re­port to Asheesh Sak­sena, the pres­i­dent of Best Buy Health.

In the past year or so, Best Buy has spent up­ward of $1 bil­lion on ac­qui­si­tions in the health space, most notably the $800 mil­lion pur­chase of GreatCall Inc., which sells mo­bile phones and emer­gency-re­sponse sys­tems for older Amer­i­cans. At the time, Joly called the se­nior mar­ket “white space wait­ing to be cap­tured.” The num­ber of Amer­i­cans ages 65 and older is pro­jected to nearly dou­ble to 95 mil­lion by 2060 from 52 mil­lion in 2018.

Best Buy fol­lowed up this year with two more tuck-in deals, buy­ing se­nior-fo­cused health-ser­vices com­pany Crit­i­cal Sig­nal Tech­nolo­gies as well as a small en­gi­neer­ing group in Water­town, Mas­sachusetts, that de­signs wear­able sen­sor sys­tems that can help se­niors live longer in their homes by pre­dict­ing when they’ve fallen and need med­i­cal as­sis­tance.

“It’s all about Grandma,” Michael Pachter, an an­a­lyst with Wed­bush Se­cu­ri­ties Inc., said in an in­ter­view. Be­cause the com­pany al­ready is known as a seller of tech­nol­ogy to con­sumers who need help fig­ur­ing it all out, “it makes sense for Best Buy to of­fer this.”

The ser­vice part of the equa­tion dove­tails with Best Buy’s broader de­sire to ex­pand its ser­vices rev­enue and lessen its de­pen­dence on prod­ucts like video game con­soles, where de­mand can fluc­tu­ate and much-hyped gad­gets can flop. The com­pany now of­fers an an­nual ser­vice plan that prom­ises to fix any prod­uct you own, no mat­ter where it was pur­chased.

Ser­vices made up 6% of Best Buy’s U.S. rev­enue in its most re­cent quar­ter, up from 5% at the end of its last fis­cal year. But it’s still a small slice of the over­all busi­ness.

“Peo­ple are spend­ing less money on stuff,” Brian Owens, an an­a­lyst at Kan­tar Con­sult­ing, said. “Re­tail­ers need to in­vest in al­ter­na­tive rev­enue streams that pro­vide ser­vices and ex­pe­ri­ences. As you evolve into health care, the big op­por­tu­nity is sim­plic­ity. And peo­ple trust Best Buy.”

Prod­ucts will also play into the strat­egy: Best Buy will put in­ter­net-con­nected fit­ness de­vices from brands like NordicTrac­k and ProForm into just un­der 100 stores in time for the hol­i­day shop­ping sea­son. Like other re­tail­ers, it also sells fit­ness track­ers and prod­ucts like the Owlet Smart Sock, which wraps around in­fants’ feet and tracks their sleep pat­terns and heart rates.

Not ev­ery­thing has worked so far, how­ever. A Best Buy pi­lot pro­gram called As­sured Liv­ing, which aimed to out­fit se­niors’ homes with a com­plex net­work of smart-home gad­gets and sen­sors that care­givers could mon­i­tor, was deemed too dif­fi­cult to sell in re­tail stores and has been re­con­fig­ured. Best Buy will also need to find more part­ners, like health-in­sur­ance com­pa­nies, that can help pro­mote the re­tailer’s of­fer­ings to their ex­ist­ing cus­tomers.

JUSTIN SUL­LI­VAN/GETTY

Get­ting in on the $3.5 tril­lion health care mar­ket could off­set the slug­gish­ness in Best Buy’s main busi­ness of sell­ing lap­tops, TVs and phones.

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