Finally gave up with AW and Apple Pay. I used it in Whole Foods tonight and no go. At best it works about 50% of the time for me, which is hopeless. I'm sure it works 100% in ideal and perfect conditions but the World we live is simply not like that. In future I'll just pull out my phone and use that, it's just a much better experience.
Did you hold your watch with display face almost touch checkout terminal, less than 0.5cm, and right above NFC sign, maybe hold on 3-5 second and wait for a beep/vibration before remove it?
For Whole food, I always have to hold a little longer, more close to 5second, but it works every time. I also always wait for the payment screen when NFC sign shown on screen.
Whole food is 5min from my house, so I go there almost daily.
If you expect AW will have same NFC range and sensitivity as iPhone 6/6s, it will probably be couple generations, and it will probably never be the same power as same generation of iPhone. The reason is iPhone use discrete NFC chip, which Apple could change design more easily when new improved/cheaper NFC is available and quickly release to iPhone, but S1 chip is SiP (System in Package) in a tiny tiny tiny platform, specially compared with the iPhone PCB side. It will take time for Apple to miniaturized it and incorporate into next gen of S chip, at the same time, they have to do it with lower cost than iPhone design, since AW Sports (majority of AW sold) cost significantly less than iPhone.
Added: Miniaturization actually cost more $$ on both design and manufacture, so it is likely Apple will pick the cheapest material/chips to be incorporated into SiP S chip, so they could keep the cost down. There is probably better performance NFC chip, or other function 3rd party chip, Apple could use in S SiP chip, but they will likely never pick a higher performance chip other than one "just good enough", as long as Apple want to keep the AW sports cost same.