In just a few short years, 45 million Americans will be caring for 117 million seniors. Fortunately, these massive demands will arrive at a time when smart home technology is becoming increasingly accessible and intelligent. We are about to enter an era when the convergence of mobile, cloud, IoT and AI will completely redefine our current way of life. These innovations will likely disrupt everything from healthcare to senior housing.
Best Buy believes they can bridge this divide and help millions of families care for older adults. While I was initially skeptical, I actually think they may have a brilliant strategy.
Let me explain.
Best Buy recently launched Assured Living, a new smart home service aimed at helping adult children check in remotely on the health and safety of their aging parents. The idea was organically formed after a number of customers described the challenges they experienced in juggling caregiving duties along with their job and family commitments. After working out an initial pilot with positive results, the executives decided to expand the offering in the Twin Cities with the intention to eventually deploy nationwide.
This service offers an in-home assessment to design the right array of monitors and devices. Once the family finalizes their requirements, the Geek Squad will install a custom-built system. The retailer offers a $29 monthly monitoring service using internet-connected gear. Of course, this is in addition to the upfront hardware costs for equipment.
Smart home gadgets are a fast-growing consumer segment. According to IHS Markit, some 80 million devices were sold globally last year, this is a 64% increase from the previous year.
Options range from basic cameras and motion sensors that cost $200, to various smart products that can learn a person’s typical pattern of activity. These smart products also have the capability to alert caregivers of any unusual changes that may require attention through a smartphone app. Seniors would also be able to use voice commands to turn on lights, lock doors or adjust the thermostat. The doorbell camera that allow them to see who is at the front door, adds a sense of security while saving precious energy for someone recovering from a fall or a knee surgery.
This wave of technology is only expected to increase. Research by AARP and consultants Parks Associates, found that caregivers will spend an average of $509 annually for each person they tend to by 2021, a 69% increase from 2016.
Setting The Stage
Let’s consider just a few market forces that will likely help to turn the tide for smart home technology for older adults.
A Growing Cohort - The US currently has 48 million adults 65+ years. This will increase to 87 million by 2050, this is a growth rate of 82%. If these figures aren’t big enough for you, China’s 65+ population will grow from 131 million to 371 million by 2050. Now, that’s a 183% increase. This trend isn’t limited to the US and China. Other countries like Canada, Spain, Germany, Japan, and the UK expect to see considerable spikes in the 65+ segment over the next 20-30 years. This growing demand will naturally apply pressure to existing paradigms, thus creating entirely new commercial models.
Financial Pressure - We know that most senior housing options are cost prohibitive to the average middle class consumer. For example, a typical assisted living apartment costs $3,500 a month. According to Rand Corporation, nearly $522 billion in income is lost annually because of time spent on elder care. According to a 2016 study sponsored by AARP and others, three out of four caregivers want to use technology to make their duties easier, but only 7 percent have actually done so. Of course, this pent up demand will result in viable solutions that alleviate those existing financial pressures.
Baby Boomer Influence - Currently, 90% of older adults prefer to age in place. We think this number will only increase with the Baby Boomers. They are the quintessential ‘me’ generation that is fiercely independent. This generation yields tremendous power as it has managed to significantly influence virtually every aspect of society throughout their lives. The Boomers can be credited with so many positive cultural changes from the music to civil rights, and I don’t suspect their golden years will be any different. At 76 million strong, they will certainly do everything in their power to remain comfortable in their own homes.
Best Buy’s Strategy
So, how does this translate into a business opportunity? The market is yearning for cost-effective, personalized solutions that allow older adults to remain in their homes longer without forcing any additional burdens on their adult children. The days of having a one-size-fits-all solution in senior living is quickly evaporating. For older adults, it will be about independence and empowerment. The children, on the other hand, will be looking for inexpensive alternatives that with offer peace of mind knowing that AI will take care of the heavy-lifting.
This is where Best Buy enters into the equation. If the company can embrace those market factors mentioned above, Best Buy is extraordinarily well positioned as this new service is simply a logical extension to their their existing business model.
Successful Partnerships - Best Buy is technology agnostic. That is to say they are not wedded to any particular technology platform. As a result, they can choose their partners wisely, thus offering their customers best in breed solutions. This also alleviates the need to become overly distracted or invest their own capital into the ever-changing technology landscape. The most important factor, strong alignment with technology powerhouses like Google and Apple, could strategically stem the tide from the looming threat of Amazon.
Baked In Scalability - Best Buy can leverage their existing Geek Squad that is an army of 20,000. This will immediately position Best Buy to accelerate their go-to-market plans far quicker than virtually any other competitor in the field. More importantly, this model could offer additional pull through business if they can provide ridiculous customer service with natural alignment between the sales and support teams. This must be centered around a sound CRM strategy while leveraging emerging technologies like chatbots to serve their customers in real time.
Community Engagement - Best Buy can tap into their 1,300+ national store locations to show off innovative smart home solutions with their existing technology partnerships. This lends itself to a non-intrusive sale, allowing anyone to easily shuffle into their stores to see real life use cases. The stores also have loads of potential to offer everything from user training to social engagement programs with local seniors. This could usher in an entirely new realm of brand loyalty that would be extremely difficult to replicate.
Best Buy has an opportunity to revolutionize the smart home market. While doubters remain, it’s hard to deny the possibility when you consider what Best Buy has accomplished since Hubert Joly took over as CEO in 2012. Joly and his team have completely transformed the company to not only survive, but thrive in the post-apocalyptic world of Amazon when so many other big box retailers had to close their doors. This is evident in Best Buy’s stock price, but it is also seeping into the cultural fabric of the organization. Employees are happier, customer service ratings are up and revenues have consistently outperformed Wall Street’s expectations in six of the last seven quarters.
It almost feels like the tail of David & Goliath. Can Best Buy repurpose all of that brick and mortar (that was once considered the bane of their existence) to beat Amazon? Jeff Bezos famously said, “When you invent something new, if customers come to the party, it's disruptive to the old way.” Perhaps that’s exactly what Best Buy is creating in their stores. A friendly atmosphere that remain supportive and connected to the local communities. It looks like Mr. Joly is about to throw a big party at a store near you! Stay tuned. This could lead to an interesting case study.