Last week, Best Buy (NYSE: BBY) announced that was spending $800 million to acquire health services company GreatCall Inc.
Best Buy, traditionally known as a consumer electronics retailer, is beginning to shift its focus from products to services. Most of these services, like GreatCall, cater to aging Americans. GreatCall, a private company, offers personal emergency response services for the elderly, including medical devices capable of detecting slips and falls and a smartphone-compatible urgent response button. It also manufactures Jitterbug, a line of cell phones with large, senior-friendly buttons and text. Each of its devices comes with accompanying services that charge subscription fees, including a personal operator and access to a 24/7 doctor or nurse hotline.
GreatCall has nearly a million subscribers and is expected to bring about $300 million in annual revenue, according to Best Buy. That $300 million may not sound like much now for a company that rakes in $40 billion in annual revenue, but it's expected that number will rise significantly as Best Buy incorporates its devices and services in its stores.
The deal is mutually beneficial for both companies. Best Buy gets the chance to invest in services and technology for senior citizens, a pool of potential customers that is expected to grow 50% over the next 20 years. GreatCall gets the chance to rapidly expand. GreatCall CEO David Inns said, "We are excited to partner with Best Buy to serve the active aging population on a bigger scale. ... 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."
The acquisition of GreatCall is part of a plan to save Best Buy from collapse in the face of stiff competition from online retailers like Amazon (NASDAQ: AMZN). Beginning in 2012, CEO Hubert Joly slashed prices, shored up customer service, expanded its e-retail offerings, and increasingly invested in diverse, service- based holdings as part of its so-called "Renew Blue" turnaround effort. The effort has by and large been successful.
Best Buy isn't the only company expanding into health services that could cater to an aging population. Apple (NASDAQ: AAPL), for example, has built its devices to be compatible with storage and processing of medical data. Amazon, too, is testing the waters: earlier this year it united with Berkshire Hathaway (NYSE: BRK.A) and JPMorgan Chase (NYSE: JPM) to set up a healthcare company for their employees, and it has for a while now been exploring the possibility of selling pharmaceuticals on its site.