Now that Best Buy Co. has pulled off what once seemed like an unlikely turnaround, it is looking somewhere quite different for fresh growth: the health industry. Despite some advantages, it may find breaking into this market something of a stretch.
Best Buy has been signaling ambitions in health care for some time, notably with its 2018 acquisition of GreatCall, which specializes in connected health devices for the elderly. Executives underscored this emphasis on health in a presentation last week for investors, announcing a goal of serving 5 million seniors within five years.
The logic behind the new focus is sound. Best Buy faces headwinds in its traditional business of selling consumer electronics: The smartphone market is saturated, for example, and some consumers are hanging on to those devices longer before replacing them. Meanwhile, it's easy to see how Best Buy can apply the same blueprint it has been using to sell 4K televisions to market such wellness-centric gadgets as connected baby gear and fitness equipment.
Much of Best Buy's improvement in recent years was based on the strength of its customer service. The company made sure that store workers had deep expertise so people had a reason to come their stores instead of going to Amazon.com. It's a model that will surely help Best Buy with, say, a new mom trying to figure out what exactly a newfangled $300 "smart sock" does for her baby.
And for selling emerging fitness products such as Wi-Fi-connected exercise bikes or rowing machines, an inviting brick-and-mortar store experience should be an asset. Plenty of shoppers will want to try these things out before shelling out $1,700 and dedicating a corner of their family room to a bulky machine.
Health-oriented services, though, are going to be much trickier. The market is already big, and Best Buy correctly identified trends it can take advantage of, such as the emergence of cheaper, tech-enabled home care for seniors and the rise of value-based payment for services. Best Buy has made interesting acquisitions and has some potential advantages here - namely, its fleet of about 1,000 stores and army of tech-savvy support staff.
Health care is slow to change, however, and the company has limited experience and expertise. In this case, Best Buy isn't trying to grab market share as a retailer. The company's initial focus on remote monitoring technology for seniors will require it to grow a still-nascent market as a much more active participant in a complicated ecosystem.
When it comes to health-care services, the most important customer isn't necessarily the consumer. It's the insurer or the government. These payers and providers will have to cooperate to intervene when Best Buy's monitoring technology or follow-up calls indicate they're needed. In order to get broad adoption and reimbursement at the sort of scale it hopes for, Best Buy will have to prove that its services both improve quality of care and save money.
That's something that more established and experienced health-care-technology companies constantly struggle with. There are also barriers to consumer adoption; Best Buy will have to overcome privacy and security concerns from seniors and their families.
The complexity of the health-care industry is daunting even to health-care companies, never mind a big-box consumer electronics chain. Beating back Amazon is a real testament to Best Buy's retail and marketing savvy. But it will need more than that to succeed in health care.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post. Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.