Wal-Mart Stores, Inc. WMT has again created a buzz in the e-commerce industry with the launch of its own mobile payment system called Walmart Pay that will allow shoppers to pay through its existing smartphone app. The retailer has started testing the new payment system in selected stores. It plans to launch it in all 4,500-plus U.S. stores by the first half of 2017.
Wal-Mart's latest announcement is another step to accelerate its online business, to make shopping easier and faster and to compete with online leader Amazon.com, Inc. AMZN. Further, the move comes at a time when Wal-Mart is already testing multiple strategies, including wage hikes, online grocery shopping, and subscription shipping. For the holiday season, the retail giant has already added new features to its app like allowing online shoppers to check in once they get to the parking lot so they could have their online orders ready for pickup.
As per Wal-Mart, around 22 million customers use its app each month, and more than half of its online orders come from mobile devices. Therefore, the retailer chose to build its own system, which can work on iOS and Android smartphones its mobile app. Users will just have to scan a QR code displayed at the register during checkout.
In fact, Wal-Mart will become the only retailer to offer its own payment solution that works with any iOS or Android device and with any major credit, debit, pre-paid or Walmart gift card – all through the Walmart mobile app. This is different in comparison to other payment options which work only on certain devices. Apple Pay from Apple, Inc. AAPL requires iPhones whereas Google's own tap-and-pay service, Android Pay and Samsung Pay require Android phones.
Wal-Mart’s mobile payment system is expected to pose tough competition to these big names, as they all are trying to gain share in this lucrative and growing business.
Wal-Mart's move could be a blow to the Merchant Customer Exchange, or MCX, set up a few years ago by a consortium of retailers including Wal-Mart and restaurants to create an industry wide mobile payment system called "CurrentC."
We note that Wal-Mart has been posting disappointing results due to sluggish U.S. sales. It is also facing intense competition on all fronts, ranging from dollar stores to the traditional grocery store chains and online business. Its international operations are also under pressure with a stronger dollar eating into sales.
At the same time, Wal-Mart projects slower growth in new stores. Price competition is one of the reasons for the deceleration. Wal-Mart is finding it difficult to compete with local grocers in some markets, which compelled it to scale back expansion plans for smaller stores. Wal-Mart also expects to incur huge e-commerce expenses over the near term.
Higher labor costs along with the company’s efforts to overhaul its stores and invest in its online operations are weighing on its earnings.
Amid such a scenario, the company’s effort to make shopping easier and better using technology is commendable
Wal-Mart has a Zacks Rank #3 (Hold).
A better ranked retailer is The Kroger Co. KR, which holds a Zacks Rank #2 (Buy).
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