Best Buy Calls for Mobile Safety
With GreatCall, the retail giant takes a decisive step into remote digital health services.
“By joining forces, we can do even more for this population, combining our products, services and expertise with Best Buy’s customer focus and scale to meaningfully expand our reach.” — David Inns, CEO of GreatCall
As of 2019, there are an estimated 50 million Americans over age 65, about 15% of the total population, according to the Census Bureau. This number is expected to increase by more than 50% over the next 20 years. It shouldn’t come as a surprise that more and more companies are investing in products and services targeted to older demographic segments.
Even more remarkable, 12 million Americans over age 65, about one in four, live alone, according to the Pew Research Center. The trend is not just an American one. Low birth rates, increasing life expectancy and older adults living more active, independent lives across much of the developed world, means that the demand for services aimed at seniors is only going to grow for the foreseeable future.
As a result, investors and corporations have poured vast amounts of capital into health, safety and wellbeing technologies and technology-delivered services targeted to older customers, such as remote monitoring devices, emergency response services and remote healthcare.
Some corporations have developed a proactive strategy to tap into this market opportunity. In August of 2018, multinational consumer electronics retailer Best Buy took a clear step in this direction, by purchasing GreatCall, a health technology company which sells products targeted to seniors. In a move that confirms its strategic commitment, Best Buy also bought, in 2019, Critical Signal Technologies, the largest independent provider of personal emergency response systems in the US.
Who is Best Buy?
Today, Best Buy operates almost 1,000 retail locations and employs 125,000 people. Founded in the mid-60s in St. Paul, Minnesota, Best Buy started out at Sound of Music, an hi-fi audio specialty store. By the late 70’s, the company operated nine stores across Minnesota. In the early 80’s, the company name was changed to Best Buy Company, Inc. and it began selling selling VCRs and home appliances reaching $10 million in annual sales.
To finance growth and new, larger store concepts, Best Buy went public in 1987 on the New York Stock Exchange. Two years later, in 1989, Best Buy introduced a novel store format, Concept II. The concept was to create a new shopping and selling experience for consumers, putting all of each store’s stock on the main floor rather than in a stock room, with less salespeople per area, focusing on creating more ways for customers to help themselves.
The new retail concept proved to be successful and allowed for faster growth, enabling Best Buy to reach $1 billion in gross sales by 1992. Through successive evolutions of its retail concepts Best Buy grew to become the largest American retailer of consumer electronics and appliances.
The 2000s saw Best Buy make a succession of investments and acquisitions to expand into new segments and markets.
Between 2000 and 2001, the company expanded in the home entertainment category, acquiring Magnolia Hi-Fi, a West-Coast retailer of audio and video equipment, Musicland Stores Corporation, a Minnesota home entertainment product retailer, and Canadian electronics retailer Future Shop, their first foray in international markets. In 2002 Best Buy bought computer maintenance service Geek Squad. It opened its global sourcing office in Shanghai in 2003, and its first store in China in 2007, after having obtained a majority control in Jiangsu Five Star Appliance, a Chinese appliance retailer. In the late 2000s the company expanded into musical instruments and mobile phones, opened stores in Mexico and the UK and… acquired Napster for $121 million!
But retail is a thin-margin, competitive business. In 2008, consumer electronics retailer Circuit City went into Chapter 11 bankruptcy in part because of Best Buy’s success. In the early 2010s, Best Buy seemed to be doomed to similar destiny, facing increasing competition from online retailers like Amazon, having expanded too aggressively in the previous decade, and being caught up in the fallout from the Great Recession.
Under the leadership of Hubert Joly, Best Buy launched a strategic turnaround initiative, “Renew Blue”. It was in part aggressive pruning of underperforming stores, markets and corporate functions, but it also involved a significant ramp up in its digital, omnichannel capabilities and logistics agility. This required a complete rethinking of the company’s business model and a massive investment in software and training.
Not only Best Buy was able to avoid bankruptcy and get back to top-line and margins growth. In the process, Renew Blue also set the stage for a future of the company where the integration of physical and digital become a core part of its business model and offering.
In 2017, the company launched its renewed strategy Best Buy 2020, with the goal to to “enrich lives through technology by addressing key human needs,” these human needs being health and wellness, as well as smart home services. Best Buy has set this goal in motion with the acquisition of GreatCall.
Who is GreatCall?
Founded by Arlene Harris in San Diego in 2005, GreatCall is a mobile software and technology company, offering phones and medical alert devices and services targeted towards older adults and seniors. It commercializes specialized mobile phone and wearable devices under the Jitterbug and Lively brands, featuring easy-to-use UIs, simple menus, large and emboldened fonts and one-function buttons. To deliver its services, the company operates as a mobile virtual network operator (MVNO) on the Verizon Wireless network.
GreatCall’s offers 5Star, a 24/7 health and safety assistance services to owners of its devices. With the press of a button, seniors are connected to an agent that will assist them in any emergency.
GreatCall’s phones also offer a connection to ride-sharing service Lyft. Rather than navigating the app, GreatCall’s phones connect their users via phone call to operators that then hail a car on behalf of users. GreatCall’s phones also offer a variety of games designed to improve brain activity, focus and memory.
On the alert devices front, GreatCall offers two options. Lively Mobile Plus is a mobile alert device worn around the neck, which features a single button to contact 5Star when they are in need of help. The device also features fall detection and will automatically alert support in case of a fall. Their other option, Lively Wearable, is their smartwatch alternative which works in conjunction with the user’s smartphone, and also provides the user with a connection to 5Star.
With more than 900,000 subscribers, 1,200 employees and annual revenue of $300 million, GreatCall provides the opportunity for independence to seniors and phones and devices that are catered to their needs and those of their caretakers.
“The aging Baby Boomer generation is creating massive new opportunities throughout the healthcare sector to address their needs at a scale not previously required.” — Danny Silverman, CMO, Clavis Insight
The Deal
On August 15th, 2018, Best Buy finalized its deal to acquire GreatCall for $800 million from Chicago-based private equity firm GTCR. GTCR had taken over control of GreatCall in mid 2017 in a deal orchestrated with the company’s CEO David Inns.
At the time, GTCR Managing Director David Donnini said in a statement that “As America’s senior population continues to grow, technology enabling seniors to live independently at home for longer both significantly improves their quality of life and reduces the cost to care for them.”
Best Buy had not been shy in talking about its intentions to make moves in the health space. As late as in the Spring of 2018, Hubert Joly said in a call to analysts in 2018: “We already assort a variety of health-related products and technology products designed for seniors like specially designed phones and medical alert systems. […] this is the time clearly to invest.” The GreatCall acquisition was evidently already in play.
The strategy of investment in the space continued after Mr Joly handed over the reins to newly appointed CEO, Corrie Barry, in early 2019. In June, the company announced the acquisition of senior-focused health services company Critical Signal Technologies (CST), which has 100,000 subscribers to its personal emergency response system.
Why It Matters
The retail landscape is always evolving. Online commerce and omnichannel have brought the retail experience beyond the confines of physical stores and into people’s digital ecosystems. That means that, by leveraging their customer knowledge, widely available digital technologies and the trust that consumer place in their brands, traditional retailers have now license to expand into businesses that are no longer simply defined by the sales of goods.
The convergence of retail and healthcare is a long-term mega-trend, with prominent precedent, such as CVS’s acquisition of PBM Caremark, Amazon’s acquisition of Pillpack and Walgreens’ and Walmart’s investments into health services.
Expectations of an active and independent lifestyle by aging Boomers, reliable remote sensing technologies and blurring boundaries between physical and digital retail create the ideal conditions for growing investments in the digital health services space.
Geek Squad, In-Home Advisors and, now, GreatCall and CST, are part of an overall push by Best Buy into digital-enabled, in-home services. As commerce, with the web, has entered people’s homes, retailers now see also an opportunity to become part of people’s lives beyond shopping, through digital services.
TL;DR
- In August 2018, Best Buy purchased GreatCall, a mobile software company focused on remote assistance to aging adults and seniors, for $800 million.
- GreatCall has 900,000 subscribers and annual revenue of $300 million.
- In 2019 Best Buy also bought Critical Signal Technologies (CST) a provider of personal emergency response services with 100,000 subscribers.
- Best Buy is betting on growing demand for in-home services and in the convergence of healthcare and retail.
- Customer knowledge, digital technologies and trusted brands allow large retailers to expand effectively into health related services.
- Expect continued M&A activity at the intersection of retail, digital applications and healthcare services.
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