Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Grocery Wars

Whole Foods, Walgreens subsidiary biggest beneficiaries from Apple Pay

Upscale grocer Whole Foods Market (NASDAQ: WFM) and Walgreen Boots Alliance (NASDAQ: WBA) subsidiary Duane Reade, are the two brick and mortar retailers with the highest use of Apple Pay.

The two brands processed the most credit-card transactions through Apple Pay according to the consumer spending analytics specialists over at TXN. TXN crunched the numbers and discovered that Apple (NASDAQ: AAPL) still has a long way to go before its payment app becomes mainstream.

TXN surveyed Apple Pay’s share of credit card transactions in 2016, and found quite a bit of bad news for Apple and Payment Apps. The data indicates that mass market adoption of payment apps is still a long way, away.

Where Apple Pay is used

Some of the most important insights from TXN’s survey of Apple Pay use include:

  • The number of people using Apple Pay is tiny. At the retailer with the highest rate of usage; New York City drugstore chain Duane Reade, only 1.8% of customers paid with Apple Pay.

  • Apple Pay is popular in vending machines the third biggest physical recipient of transactions was Canteen Vending. A little under 1% of the transactions at Canteen’s machines involved Apple Pay.


  • Apple Pay is a tough sell even online. The website with the highest rate of Apple-Pay use was Hotel Tonight; where around 3.4% of transactions involved Apple Pay.


  • The affluent are slightly more likely to use Apple Pay. Most of the brands accepting it such as Whole Foods (affectionately nicknamed Whole Paycheck); Trader Joe’s and the New York based Duane Reade cater to upper class clientele.

  • Apple Pay has failed to penetrate the online retail market. The e-tailer with the highest rate of Apple Pay usage was the online discounter – where just 2% of transactions involved the app.


  • Apple Pay has not penetrated the app economy. Less than .20% of the transactions on Airbnb involved the app. Only a little under 1.5% of Lyft users used Apple Pay.


  • Apple Pay is not a significant source of revenue for retailers. It attributed for just .70% of the purchases at Trader Joe’s and .60% of those at Sprouts Farmer’s Market (NASDAQ: SFM).

  • Apple Pay is even a tough sell at the Apple Store. Around 1.25% of purchases at Apple’s own retail outlet involved the app.


  • TXN’s numbers are a little suspect, it lists Starbucks (NASDAQ: SBUX) as an Apple Pay taker. Starbucks is not on Apple’s official list of merchants. Nor is Duane Reade differentiated from its parent Walgreens. One has to wonder if TXN is reporting Walgreen transactions as Duane Reade purchases. As far as I know Duane Reade operates in just one city; New York, while Walgreen operates nationwide.


Why Walmart and Kroger are Saying No to Apple Pay

These numbers explain why major retailers such as Walmart (NYSE: WMT) and Kroger (NYSE: KR) are saying no to Apple Pay. It simply it is not worth their while because it cannot add significant amounts of revenue or new customers.

Why should Walmart or Kroger bother with Apple Pay and risk potential security breaches for such tiny amounts of business? Will they even pay attention to Apple Pay with its current rate of usage?

Note: Walmart is certainly interested in payment apps, it has rolled out its own solution Walmart Pay at all of its U.S. locations.  It just does not appear that Walmart is willing to make any special efforts for Apple.

Kroger; America’s largest standalone grocer, is even more cautious. At this point it is not taking any payment apps and has shown no interest in the technology. Kroger is far from alone, many other retail giants including Target (NYSE: TGT), TJX (NYSE: TJX), Lowe’s (NYSE: LOW), Amazon (NASDAQ: AMZN) and CVS Health (NYSE: CVS) are ignoring Apple Pay.

My take is that Apple Pay’s percentage of transactions would have to hit 5% before Walmart, Kroger or CVS would pay attention to it. Until that happens Apple Pay and Alphabet’s (NASDAQ: GOOG), Android Pay will remain niche products appealing only to early adopters.

How Long will take Apple Pay to go Mainstream?

That does not mean payment apps are not the future. It just takes a real long time for the public to warm to new payment technologies. The first modern credit cards appeared around 1950; yet they were not widely adopted by the middle class until the 1980s.

Paper money took far longer to catch on; it was first experimented with in China over 1,000 years ago. Yet it was not widely adopted in Europe and the United States until the 19th century.

This means it will probably well over a decade for solutions like Apple Pay to become widely adopted. Although some sort of outside Black Swan event; such as demonetization or hyperinflation might speed up the process, particularly if large segments of the population lose faith in government fiat money and turn to cryptocurrencies as a hedging mechanism. That process has already begun in countries like China and Venezuela with the growing popularity of bitcoin.

The numbers show us that Apple Pay is far from the mainstream. Unless some sort of radical paradigm shift occurs; it will be well over a decade before average Americans even consider this solution.