For the past several weeks, the Tech press has been in a frenzy about ConnectC – you know that merchant payment system that no one had ever heard of before the launch of Apple Pay. And, while many of the articles may be accurate (they seem like they are) as to why merchants are prefer CurrentC, I’ve found that the Disruptor (Apple Pay) vs. Entrenched Interest (Merchants) narrative in articles like this one Forbes http://www.pewinternet.org/2013/06/05/smartphone-ownership-2013/. or this one Slate ignore a critical question. Does supporting Apple Pay benefit enough of a retailer’s customers to warrant the investment required to be able to support it. Or, stated more bluntly, if you’re a retailer, do you need Apple Pay?
To illustrate my point, I thought I would view Apple Pay through the lens of the retailer so many people love to hate – Walmart. It has been well documented that Walmart doesn’t invest money into its operations unless it will enable the retailer to drive lower pricing without sacrificing margins. So, forgetting all the innovation hype, does Apple Pay drive enough value to Walmart to warrant an investment in new terminals? Clearly, it doesn’t… yet. And it may not have anything to do with stubbornness or intransigence or fear - it may really just come down to money. As in, right now, it’s not worth it.
Walmart serves 250 million customers per week
This is per the Walmart website. And for the purposes of this post, I’m going to use 250 million as the number of individual shoppers that visit Walmart in a given year. (I’m sure it’s higher, but having the number be higher makes the math more complicated…) If every one of those shoppers has a cell phone (they don’t, but let’s keep the math simple), we’re talking about a total of 250 million mobile phones that visit a Walmart each year. As of today, Apple is approaching worldwide sales of 25 million iPhone 6 & iPhone 6 Pluses sold – including in countries where there are no Walmart stores. So you can see, even if every iPhone 6 owner shopped at a Walmart, best case scenario, they would account for about 10% of Walmart’s total customer traffic.
Except Walmart customers are probably not iPhone 6 owners
Why is it a best case scenario that Apple Pay would account for 10% of Walmart customers? Well, consider Walmart’s customer demographic.
First, look at this great visualization done by Time – it represents iPhone vs. Android ownership in terms of US geography . It’s important to note that iPhones are concentrated on the coasts, while Android is big in the Midwest and south. Why is it important? Well, if you take a look at this study released on Adage , you’ll see that nearly 65% of Walmart customers happen to be located in the Midwest and South – where Android is the dominant operating system. Android has the most owners where Walmart has the most customers.
Second, take a look at another critical statistic on this chart – income. More than 50% of Walmart customers earn less than $50,000 per year . This isn’t news. But, look at this great study done by Pew on the demographics of mobile phone ownership. Towards the end of the study, there is a great statistic that shows OS preference by income – and more than 55% of cell phone owners making less than $50,000 per year are in the Android ecosystem.
So, let’s recap. The majority of Walmart customers reside in communities where Android is dominant. And the majority of Walmart customers are in an income demographic that preferences Android. If I were a statistician, I would do the math, but I’m not. So I’ll just say what’s plainly obvious, iPhone 6 & iPhone 6 Plus owners make up nowhere near 10% of Walmart customers because Walmart customers are statistically less likely to be iPhone owners in the first place. They are likely to be Android phone owners. Meaning they couldn’t use Apple Pay even if they wanted to.
And that’s the point. Apple Pay (and/or Google Wallet) may be the future of mobile payments. And there is a possible future where it makes business sense for WalMart to support them. But at least today, supporting Apple Pay costs Walmart money. And spending money to support a mobile phone payment system that its customers likely don’t have – just wouldn’t make business sense.