Apple Pay in China and at Trader Joe’s

There is finally some more news about Apple Pay available. The payment app is finally rolling out in the world’s second largest economy, China.

Apple Pay went live in China on February 18, 2016, Reuters reported. The app is off to a good but slow start in the People’s Republic with one of the country’s largest retail financial institutions, the Industrial and Commercial Bank of China, offering it. Several other Chinese banks are also on board.

As in the United States, Apple’s biggest challenge in China will be to get retailers onboard. This will be difficult because unlike in the U.S., there are already two popular and widely used payment apps in the Middle Kingdom: Tencent Holdings’ (OTC: TCTZF) WeChat and Alibaba’s (NYSE: BABA) Alipay. Both of these already have tens of millions of users.

Yet it is easy to see why Apple (NASDAQ: AAPL) has gone to the trouble of entering the country. Around 358 million Chinese own smartphones; that means there are more smartphone users in China than there are people in the United States. Even if Apple Pay is a niche product it could still get millions of additional users.

China is the fifth country that Apple Pay is available in after the United States, the United Kingdom, Canada and Australia. It is an important market because it is the first non-English-speaking country that the service has been rolled out in and the first developing country.

Apple Pay Now at Trader Joe’s

Back home in the U.S., Apple Pay is now accepted at another major retailer, the discount grocer Trader Joe’s, according to Apple’s website. Since Trader Joe’s is owned by Aldi Nord, the German-based sister company of Aldi Sud, that could mean Apple Pay could soon be at U.S. Aldi stores. The Aldi-brand stores in the U.S. are operated by Aldi Sud.

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Another popular U.S. grocer with a cult following in some parts of the country, Wegman’s, is accepting Apple Pay now too. This means that most of the high-end grocers, including Whole Foods and Sprouts Farmers Market, are taking Apple Pay.

This could put some pressure on the nation’s largest grocer, Kroger, which owns the upscale supermarket chains Harris Teeter and Mariano’s, to start accepting Apple Pay. Kroger has so far resisted Apple Pay like most of America’s retail giants. Another major grocer, Safeway subsidiary Albertsons, is still included in Apple Pay’s “coming soon” section.

There are some interesting new additions to Apple Pay’s lineup of companies; an airline, Jet Blue, is finally accepting it, although no other airline has shown interest in the application. Two hotel chains, Marriott and Renaissance, also appear in the “coming soon” section.

The Retail Apocalypse and Apple Pay

The list of Apple Pay retailers demonstrates that Tim Cook is still having serious problems promoting the solution. The nation’s largest and most profitable retailers are resisting Apple Pay, while many troubled brands are accepting it.

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Four of the five largest retailers in the U.S. by revenue volume—Walmart Stores Inc., CVS Health, Costco Wholesale and Kroger—are conspicuously absent from the list of Apple Pay accepters. Below are the five publicly-traded American retailers that generate the most revenue.

  1. Walmart: $484.03 billion on October 31, 2015
  2. CVS Health: $149.2 billion on September 30, 2015
  3. Costco: $116.55 billion on November 30, 2015
  4. Walgreen: $112.92 billion on November 30, 2015
  5. Kroger: $108.87 billion on October 31, 2015

The only one of the big five that currently accepts Apple Pay is Walgreen (NASDAQ: WBA). The number six retailer, Amazon.com, and the largest privately-owned retailer, Safeway, also refuse to take Apple Pay.

To make matters worse, many of the retail brands that accept Apple Pay are among the most financially troubled, for example, Sports Authority, the sporting goods retailer that is reportedly close to bankruptcy and planning to close 140 stores. Other retail basket cases on the list include McDonald’s, which has suffered major revenue losses; the office supply chains Staples, Office Depot and Office Max; the auto repair chain Pep Boys, which was sold to Bridgestone last year; the clothing retailer Aeropostale, which has closed hundreds of stores in the few years; Toys R Us; and Subway.

The list seems to indicate that the only retailers willing to take a risk on Apple Pay are either those desperate for new customers or forced into it by competition. The only reason Trader Joe’s, Sprouts and Wegman’s are accepting Apple Pay is because Whole Foods is.

It looks as if Apple Pay’s long, hard slog for acceptance is continuing. Even though it is now in China, the app is of questionable value in its home country because Big Retail has refused to sign on.

To make matters worse, some retailers, including Walmart (NYSE: WMT), continue efforts to develop alternatives. Walmart is slowly rolling out its own solution, Walmart Pay, and participating in the Merchant Customer Exchange’s Current C effort.

Current C is a payment application that is being tested in a number of different retailers in Columbus, including some Walmart and Sam’s Club locations. Yet there is no sign that it is being rolled out nationwide.

It looks as if Americans may have to fly to China if they want to pay by phone. The concept is still alien to most U.S. retailers.

Disclosure: The blogger owns shares of Kroger.