The pandemic has changed the way people shop for their daily needs, including groceries. Online grocery sales in the United States are expected to reach 21.5% of total grocery sales by 2025, after jumping from 3.4% before the pandemic to 10.2% as of 2020. Mercato, an online grocery platform that helps smaller grocers and specialty food stores get online quickly. After helping grow its sales to merchants by 1300% in 2020, Mercato has now closed with $ 26 million in Series A funding, the company told TechCrunch.
The tour was led by Velvet Sea Ventures with participation from Team Europe, the investment arm of Lukasz Gadowski, co-founder of Delivery Hero. Seed investors Greycroft and Loeb.nyc have also returned for the new round; Gadowski and Mike Lazerow from Velvet Sea Ventures have also joined Mercato’s board of directors.
Mercato itself was founded in 2015 by Bobby Brannigan, who had grown up helping out with his family’s grocery store in Brooklyn. But instead of taking over the business, as his father had hoped, Brannigan left for college and eventually started a college textbook market, Valore Books, at $ 100 million in sales. After selling the business, he focused on the family store and found that everything was still working as it was decades ago.
“He had a very basic website, no e-commerce, no social media, and no point of sale system,” says Brannigan. “I said, ‘I’ll build what you need.’ It was an opportunity to help my father in a field that I knew, ”he adds.
Brannigan recruited engineers from his last company to help him build the software systems to modernize his father’s store, including Mercato co-founders Dave Bateman, Michael Mason and Matthew Alarie. But the team soon realized that they could do more than just help Brannigan’s dad – they could also help 40,000 independent grocery stores like him compete better with the Amazons of the world.
The result was Mercato, a platform as a service that allows small grocers and specialty food stores to go online to offer their inventory for pickup or delivery, without having to partner with a grocery delivery service like Instacart, Amazon Fresh or Shipt.
The solution today includes an e-commerce website and data analytics platform that helps stores understand what their customers are looking for, where the customers are, how to price their products, and how to price their products. other information that helps them better manage their store. And Mercato is now working on adding a sourcing platform to help stores buy inventory through their system, Brannigan notes.
“Fundamentally, the vision is to give them the technology, systems and platform they need to be successful in our time,” notes Brannigan.
He compares Mercato as a kind of “Shopify for groceries” because it gives stores their own page on Mercato where they can reach customers. When the customer visits Mercato on the web or through their app, they can enter their zip code to see which local stores are offering online shopping. Some stores simply redirect their existing websites to their Mercato page, as they may continue to offer other basic information, such as address, hours and other details about their stores on the site provided by Mercato, all by having access to more than one million Mercato customers.
However, merchants can also opt for a white label solution that they can integrate with their own website, which uses their own branding.
Stores can further customize the experience they want to offer customers, in terms of pickup and delivery, as well as the time frames they want to commit to. If they want to get into online grocery shopping, for example, they can start with overnight delivery services and then speed things up until the same day when they’re ready. They can also set limits on the number of slots they offer per hour, depending on staffing levels.
Unlike Instacart and others who send buyers to stores to fill orders, Mercato allows the merchants themselves to maintain the customer relationship by handling the orders themselves, which they can receive via email, SMS or even robotic calls.
“They maintain that relationship,” Brannigan says. “Usually it’s much better if it’s someone from the store [doing the shopping] because they may know the client; they know the type of product they are looking for. And if they don’t have it, they know something else that they can recommend – so they’re like a really effective recommendation engine. “
“The big difference between an Instacart buyer and the store worker is that the store worker understands that someone is trying to put a meal on the table and that certain items can be an important ingredient,” he notes. “For Instacart buyers, it’s a clockwork: how quickly can they pick an order to make the most money.”
The company contracts with national and regional couriers to handle the delivery part, once orders are ready.
The Mercato system was put to the test during the pandemic, when demand for online groceries exploded.
This is where Mercato’s ability to quickly onboard merchants came in handy. The company claims it can get stores online in just 24 hours, as it has built a centralized product catalog of over one million items. It then connects to the store’s point of sale system, downloads and associates the store’s products with its own database. This allows Mercato to map around 95% of the products in the store in a matter of minutes, with the last bit added manually – which helps to grow Mercato’s catalog even further. Today, Mercato can integrate with virtually any point of sale (POS) solution in the grocery market – over 30 different systems.
When customers buy, Mercato’s system uses machine learning to help determine if a product is likely in stock by looking at movement data.
“One of the challenges of grocery shopping is that most stores don’t know how many quantities they have in stock for a product,” says Brannigan. “So we are launching a store, we are integrating with the POS. And with the point of sale, we can see how fast a product is moving in-store and online. Based on the movement, we can calculate what is in stock. “
This system, he says, also continues to get smarter over time.
“We’re definitely three to five years ahead, and we’re not going back,” Brannigan says of the impacts of COVID on the online grocery industry. “It’s very abundant now in many places, in terms of e-commerce offerings. And the nature of retail is competitive. So if 1% of people are online, it might not motivate other people. But if you have 15% of the stores online, then the other stores have to go online or they won’t be able to compete, ”he notes.
Mercato generates revenue both through its consumer-oriented membership program, with plans ranging from $ 96 / year to $ 228 / year, depending on distance, and from the merchants themselves, who pay a percentage fee. single-digit transaction on orders – a lower percentage than restaurant delivery companies charge.
The company has now extended its service to more than 1,000 merchants in 45 US states, including major cities like New York, Chicago, Los Angeles, DC, Boston, Philadelphia and others.
With this additional funding, Mercato aims to expand its remote distributed team of 80 employees, as well as its data analytics platform, which will help traders make better decisions that will impact their business. It also plans to update the mainstream subscription to add more perks and perks that make it more compelling.
Mercato declined to share its valuation or revenue, but since the pandemic began last year, the company has said it is reaching $ 1 billion in sales and an execution rate of $ 700 million.