Why Apple Is Checking Out Wal-Mart

NEW YORK ( TheStreet) -- Imagine having to pay $12 million per second. This is what Wal-Mart Stores ( WMT), the world's largest retailer, pays on a daily basis at its U.S. stores on cashier expenses.

But now it's looking for ways to trim down on those expenses while improving arguably one of its chief weaknesses - the checkout process. To that end, it has called upon Apple ( AAPL) to help revolutionize the way its customers shop and pay.

My recent article discussing how Apple could kill off Visa ( V) generated a "mixed" reception. In the article, I said the following:

"But I'm starting to get the sense that these card companies, many of which have introduced convenience to the payment process, could be in trouble. Although they were successful at convincing consumers that it is best to leave their cash and checkbooks at home, it is not out of the realm of possibility that they could soon become the dinosaurs of the payment process, if they don't adapt.

"The one thing consumers can't ever be without is their cellphones. That's why vendors like Starbucks (SBUX), which recently formed a partnership with Square, are becoming more open to the idea of mobile payments, a new craze that has the potential to eventually become the world's currency. If this happens, it would mean that in addition to seeing Visa and MasterCard logos on the doors of your favorite store, you will see logos of Apple and Google (GOOG)".

Well, it now looks as if this very idea has started. The premise was simple -- if stores are able to cut down some time during on the checkout process, not only will it benefit the consumer but it is certain to minimize loss revenue while improving margins.

In Walmart's case, it understands that even though its stores have self-pay kiosks where customers are able execute their own transactions, $12 million per second on cashier expenses remains glaring enough that it needed to do something about it. Its competitive future depends on it.

A story by Reuters last week revealed Walmart has embarked on a pilot program aimed at speeding up the payment process. The company asked employees that owned iPhones to participate in an exercise and simulate a shopping experience that allowed them to scan and pay for their own items. If this works it has the potential to save Walmart millions of dollars annually.

Although details of the experiment remain unconfirmed, sources say customers might soon be able to scan and bag items as they walk through the aisles with their shopping carts. Using the iPhone app, a detailed list of each item within the cart would then be issued at the self-checkout area. This, too, will minimize additional time needed to rescan each item as has been conventional method.

Walmart has been looking for ways to trim costs and preserve its competitive advantage, which is offering shoppers the lowest costs among all of the retailers.

That's all well and good if we are discussing Target ( TGT) or Office Depot ( ODP). However, when Amazon ( AMZN) is brought into it the conversation changes. Amazon has been more successful at chipping away at Walmart in terms of cost from the standpoint of tax savings as well as improved shipping times.

Walmart will now be able to overcome this somewhat. First, it understands that paying $12 million per second in the checkout process needs to be improved. One of the ways it sought to do this was to add self-checkout lanes.

However, the savings would pale in comparison to fully changing the entire transaction process. With the help of Apple, it seems prepared to take it a step further. The only question is, where will it lead?

It seems plausible that customers will be able to complete the entire transaction with the iPhone using the credit card attached to the account in the same manner that consumers pay for apps, music games etc. In addition to Starbucks, companies including McDonald's ( MCD), which has just partnered with eBay's ( EBAY) PayPal unit, have also started looking at the advantages of mobile payments.

It seems these companies have no choice but to embrace the idea if they wish to stay competitive and minimize loss revenue due to excessively long lines.

What's more, I think eventually shoppers will be able to use their iPhones to shop and pay for items and then get them at the local store, taking away some of the advantage Amazon currently enjoys.

Regardless of how you feel about Walmart, the company deserves quite a bit of credit for considering this idea. As embattled as it has been over the years for a myriad of reasons, the company remains firm on moving forward and executing its mission.

This time it has looked upon Apple and technology to help it maintain its reputation for saving customers more money as well as now save them time.

Well, I suppose at a cost of $12 million per second, I would want customers out of the store as fast as possible, too.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.