How Walmart Pay could help the mass merchant compete against Amazon

By Alex Samuely

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February 22, 2016

Walmart Pay may face some challenges in driving adoption

With Walmart experiencing slower growth in online sales, attention has turned to its mobile wallet, Walmart Pay, which brought the retailer up a notch in the mcommerce space but lacks a strong loyalty component, a must-have for any retailer-driven wallet.

Walmart has been engaged in a battle for mobile consumers with Internet conglomerate Amazon, a struggle evidenced in the former’s recent earnings, which revealed a lower quarterly profit. While Walmart certainly placed its brand on the map among retailers excelling in mobile payments, Walmart Pay will likely have difficulty competing with the likes of Apple Pay if it does not integrate an in-app loyalty aspect soon.

“Walmart’s biggest challenge will be the rate of adoption among consumers,” said Danielle Brown, vice president of marketing at Points. “People shop at the world’s largest retailer because of their consistent and convenient shopping experience. By rolling out Walmart Pay, Walmart now has to walk a fine line of engaging mobile customers who’ve come to rely on this convenience while still catering to those less inclined to try out the new payment experience.

“The key to tackling this challenge is highlighting the added benefits that Walmart Pay presents,” she said. “For some, simply the ability to pay on their phone will do the trick. For others, they’ll be looking for an added value proposition. A well-structured loyalty program does that.

“Walmart is a big enough brand to stand on its own two feet. Even as it rolls out this new payment platform, it will continue to serve its customers across all channels. Amazon will be doing the same, however its in-app mobile payment platform Amazon Payments is meant for a different purpose, and thus is different than Walmart’s solution, which is meant to be used in-store.”

Loyalty’s paramount roleIt is not a stretch to say that any consumer who downloads a retailer-specific mobile wallet is a fan of that brand. Someone who shops sporadically at Walmart will likely not download Walmart Pay, and will instead rely on overarching mobile payment services such as Apple Pay or Samsung Pay.

This indicates that retailer-driven wallets have an opportunity to offer components that reach beyond the standard payment capabilities. Loyalty is perhaps the most critical component, as consumers frequently search for mobile coupons and other discounts usable at their favorite stores.

Walmart has made a strong push for mobile loyalty in the past, but its efforts seem to have stagnated slightly.

Walmart Pay was an ambitious move for the national retailer

The nation’s largest retailer first launched the Walmart Pay mobile wallet to meet customers’ demands and address the lack of open solutions usable across devices and payment types (see story).

Further evidence of Walmart angling for the top spot in mobile commerce was its move to integrate MasterPass into its digital offerings following the December rollout of its own mobile payment platform (see story).

While the introduction does fulfill a need for Walmart’s core customers, Walmart Pay could still benefit from implementing additional features, including the ability to earn and save loyalty points, and access available coupons.

The retailer’s latest earnings revealed that its fourth-quarter net income decreased by 7.9 percent. Ecommerce sales spiked by eight percent, continuing a deceleration from the first quarter’s 17 percent growth.

This suggests that major brands will need to ramp up their digital initiatives if they want to compete with Amazon, which has transformed itself into a one-click ordering shop.

Future implicationsAlthough Apple Pay has long been heralded as the prime example of an optimal mobile payment platform, retailers seeking to strike out with their own wallets may want to take a leaf out of CurrentC’s book.

CurrentC enables users to pay, redeem offers and earn loyalty points in one transaction.

By comparison, CurrentC includes a strong loyalty component

Target is also reportedly working on its own mobile wallet, borrowing a page from Walmart as the need to address consumers’ growing demand for smartphone services takes on greater urgency (see story).

If Target does roll out its own payment platform, consumers could potentially see a wallet that combines several must-have mobile commerce features: one-tap payment options, digital coupons and loyalty integration.

“Consumers will absolutely see more retail-driven mobile wallets permeate the payments space this year,” Ms. Brown said. “Thanks to big strides from technology and retail giants like Walmart, mobile transactions have endured many of their growing pains and are closer to reaching their full potential than ever before.

“As for how widely each program will be adopted is yet to be seen,” she said. “While the emergence of new players in the mobile wallet landscape is exciting, modern-day consumers are looking for a streamlined and simple payment experience rather than using several different platforms for slightly different use cases.

“As consumers’ confidence in mobile wallets continues to grow, so will the scope and reach of mobile platforms. The next step is personalizing the user experience to meet customers’ evolving wants and needs. That’s where loyalty comes in. Integration of a user-friendly reward redemption program presents shoppers with a worthwhile next step tailored to their specific preferences.”