TECHNOLOGY DECEMBER 2018 // DIGITALCOMMERCE360.COM/IR // 33

"VENMO ME." The phrase—synonymous with "pay me"— has become common among young adults WHY MORE when splitting cabs, bar tabs and rent. That's why consumers often think of Venmo only as a mobile peer-to-peer payment service. RETAILERS ARE However, since 2016, Venmo, which is owned by PayPal Inc., has allowed merchants to accept Venmo as a form of payment with its service Pay with Venmo. LETTING SHOPPERS Roughly 2 million merchants accept Venmo as a form of payment, according to a Venmo spokeswoman, including shoe retailer Foot PAYVIAVENMO Locker Retail Inc., athletic apparel retailer Lululemon Athletica Inc., apparel market• The peer-to-peer payment button place Poshmark, apparel retailer Urban Outfitters Inc., wholesale merchant Boxed brings a young, mobile and social Wholesale, flash-sale site Zulily, and apparel following to merchants, and merchant Abercrombie & Fitch Co. may also help boost sales. While that's a sizable number, it's just about 12% of the 17 million businesses that BY APRIL BERTHENE accept PayPal. But the number of merchants TECHNOLOGY DECEMBER 2018 // DIGITALCOMMERCE360.COM/IR // 34

default billing address and shipping address, • New Transaction and a saved credit card. When a shopper hits = 1 ® KZ9 i ; fer the button on an e-commerce checkout page, Name or (iiiusfifname Aubrey C paid Charles L ±6 n&w screen she bypasses these fields and saves time What's il loi ' Llka Commwit making the purchase. Online retailers often A Saveena M paid Dylan P report seeing higher conversion rates after L)-lL-K>J-:t (Jy'L. truni Sîéi' Like Comme*)! adding a button, especially on mobile devices.

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5 Venmo is unique are typically considered millennials, and m that it has a consumers born from 1995 onward are social news feed considered Generation Z.) where shoppers Venmo does not disclose the number showcase their of active users or its users' age, although transactions to accepting Venmo is growing thanks to its research firm eMarketer Inc. estimates that 22.9 their friends. unique advantages—its users can access a million adults have made at least one news feed that allows consumers to showcase peer-to-peer Venmo transaction in the last their purchases to friends and consumers month. Transactions within the Venmo app often keep funds in their accounts that they totaled $16.7 billion in the third quarter ended can use to make purchases. Those elements Sept. 30, which is a 78% increase from the help Venmo stand out, which is why experts previous year, according to company reports. say merchants may want to offer the method Those gains have stemmed from retailers to shoppers as a way to check out. such as Zulily that have recently added a Venmo option. "Venmo could help us continue to build RETAILERS ADD QUICK PAYMENT relationships with more tech-sawy and BUTTONS like Apple Inc.'s Apple Pay and mobile-minded consumers," says Kevin Saliba, PayPal to their e-commerce sites and apps Zulily's senior vice president of marketing. to make it simple for shoppers to check out Quick payment options are important With payment buttons, shoppers have a for Zulily because about 72% of Zulily.com TECHNOLOGY DECEMBER 2018 // DIGITALCOMMERCE360.COM/IR // 35 'We hope Venmo will allow us to reach more prospective customers, while also adding a unique social layer to payments' -KEVIN SALIBA, SENIOR VICE PRESIDENT OF MARKETING, ZULILY

transactions are from mobile devices, he says. That's higher than the average time spent It has offered quick payment button PayPal in a peer-to-peer payment app, which is 3 since 2010 and Apple Pay since 2015. Even minutes and 25 seconds, according to Ogury's though the retailer offers these buttons, it Active Insights platform that analyzes more added Venmo because of its mobile and than 400 million mobile users. social focus as well as to offer more options The social features of Venmo also drew to shoppers. apparel marketplace Poshmark to the payment When a consumer pays a friend via Venmo, platform. "Social commerce is in the fabric she can include a message or emoji about of our companies," says Robbie Fritts, the what it was for, and her contacts can see this online marketplace's director of fraud and in their Venmo news feed. For example, if a payments. The retailer also has a news feed shopper named Allison bought an outfit from for shoppers when they open the app. The Zulily, Allison's contacts in their news feed news feed features products that are tailored might see "Allison paid Zulily" with a dress to a shopper's interests based on her previous icon underneath it. Venmo also allows purchases, sellers she follows, products other a shopper to mark transactions as "private" users share with her and items she has viewed. so they does not appear in her friend's Much like Venmo, Poshmark transactions news feeds. are generally made in an app and are peer-to- "We hope Venmo will allow us to reach peer. Because Poshmark and Venmo's "DNA" more prospective customers, while also is so closely aligned, and have overlapping adding a unique social layer to payments," customer demographics, Venmo is a great fit Saliba says. "Because users can share what with Poshmark shoppers, Fritts says. they're shopping and paying for with friends, "Venmo users are very social in nature we believe the gamified entertainment and frequently share excitement about their factor, which is also core to our customer Poshmark purchases via the Venmo social experience, will potentially drive new feed, which creates a lot of social synergy shoppers to consider discovering something between the two brands," says Fritts, who new at Zulily." declined to reveal any Venmo shopper The social component and hunting for demographics. 2 mi ion emojis makes consumers spend more The number of time with Venmo, says Evan Rutchik, U.S. merchants that managing director at mobile data firm Ogury. ANOTHER UNIQUE ASPECT TO accept Venmo VENMO as a form Ogury data finds that the average Venmo is that often users don't imme• of payment. user spent nearly five minutes per session diately transfer the funds they receive into Source: Venmo in Venmo between January and June 2018. their bank account. Instead, many keep the TECHNOLOGY ECEMBER 2018 // DIGITALCOMMERCE360.COM/IR // 36

2:11 Allison is shopping on Poshmark and sees the ..I 4.UI I I U EVERYDAY Q W "Millions of consumers have funds sitting in their Venmo accounts that are going All-day shopping, one shipping charge, sm-ilnaik unused at the moment," Miller says. "Offering Get 515.00 Off Your Purchase* > Venmo allows customers to easily use those when you open a zulily credit card 'subject to credit approval see details funds and enables retailers to convert more buyers." Poshmark added Venmo in 2016, and shoppers have responded "overwhelmingly Shopping Basket 1 item: $12.99 well" to it, Fritts says. Get $2 OFF this order — turn on zulily In the two years since offering Venmo, the promotional emails, details percentage of shoppers using Venmo has grown and at a slightly higher rate compared proceed to checkout with shoppers who check out with its other quick payment buttons, which include Apple 0 PayPal Pay, Android Pay and PayPal, Fritts says. He declined to reveal specific usage figures. venmo Moreover, the Venmo button has improved Poshmark's conversion rate, Fritts says, save for edit X although he declined to share specific figures. later Sea Blue Rolen Clog - Kids S12.99 Because Poshmark offers several quick QTY: 1 SIZE: payment methods, the marketplace is .» eligible mindful about cluttering the checkout page, _ ii guaranteed which is a common concern for online retail• Zulily recently ers. Poshmark dynamically shows payment added a Venmo buttons to shoppers, such as displaying the payment option funds they receive in their Venmo balance Venmo button first if the shopper has the app because the and use this money to later pay contacts for downloaded, or not showing the Apple Pay service appeals other goods. button if she is on an Android device. to Its tech-savvy, Because the money isn't sitting in a bank "We are thoughtful with the checkout page, mobile-minded account, consumers may forget about it because there is only so much real estate on a customer base. and often don't consider this money when smartphone," Fritts says. budgeting, says Brendan Miller, a Forrester Similarly, Zulily only shows Venmo as a Research Inc. analyst. For example, if Allison's payment option in the Zulily app if the roommate pays via Venmo—or "Venmos"— shopper has the Venmo app installed on Allison for her half of the electric bill, Allison her smartphone. may leave that $30 in her Venmo balance and It took about five weeks for Zulily to not transfer it to her bank account. Then, if integrate with Venmo, including testing, TECHNOLOGY DECEMBER 2018 // DIGITALCOMMERCE360.COM/IR // 37

Saliba says. Only having Venmo for a few season, says Danny Gavin, vice president weeks, Saliba declined to provide any of marketing. The online diamond retailer usage metrics—apart from noting that the currently accepts payments via peer-to-peer retailer is "already seeing organic use of the payment tool Zelle, which is similar to button." The button also makes checkout Venmo in that it transfers funds from bank "significantly faster" compared with other account to bank account without needing a payment options, he says. credit card. Prior to Zelle, Brian Gavin Diamonds accepted bank wire transfers as a payment VENMO CAN ALSO MAKE SENSE for from shoppers, because its jewelry products retailers based on their business model. For are a high-ticket purchase. Shoppers started instance, web-only bulk goods retailer Boxed asking the retailer if they could pay for their has offered Venmo since mid-2017 because purchases via Zelle because it was similar to a the majority of its shoppers purchase items bank transfer, but required less information for more than just themselves, such as with and was less complicated, Gavin says. That roommates and co-workers, says Helen Pan, led Brian Gavin in May to begin accepting Boxed's director of loyalty marketing and Zelle payments. customer experience. Because shoppers are These transactions also don't incur a accustomed to using Venmo for splitting credit card processing fee for the retailer, so payments, it made sense to use the payment Brian Gavin Diamonds offers a 3% discount tool on Boxed.com if shoppers were already to shoppers who buy one of its branded splitting the cost of orders, says Pan, who diamonds and pays via Zelle. Now, about 1-3% declined to give usage data. of transactions each month are paid via Zelle, Sunlight Media LLC, an app development Gavin estimates. vendor, started using Venmo on its digital Peer-to-peer digital payment tools are invoices to clients in 2017. At the start, about becoming a common way consumers pay 5% of businesses elected to pay in this way, one another, and retailers are taking note. and in just three months, about 20% of Merchants are finding that these tools offer Sunlight Media's clients pay their invoices all the benefits of quick payment buttons, but 22.9 with Venmo, says CEO Angelo Frisina. In with more perks, such as a built-in user base addition to the convenience, Frisina says and more brand exposure to shoppers on a million clients like to pay with Venmo because there social news feed. Although it's early for retail• The number is no credit card processing fee. If a client ers to know Venmo's long-term impact on of adults who have made at pays Sunlight Media outside of Venmo, it sales and conversion, there seems to be little least one peer- charges a A% fee, Frisina says. downside to offering the payment button. iR to-peer Venmo And then there's Brian Gavin Diamonds, transaction in which currently does not accept Venmo, but [email protected] | the last month. Source: eMarketer Inc. is considering adding it after the holiday @APRILBERTHENEIR