Mercê do Bairro, a Brazilian marketplace for mom and pop corner stores, has raised $10 million in Series A funding. Flourish and GFC led the round.
São Paulo, October 2021 – To transform Brazil through entrepreneurs. That is Diego Libanio and Guilherme Bonifácio’s objective, who co-founded Zé Delivery and iFood, respectively, and got together to create Mercê do Bairro in 2019. It is a marketplace for small markets that allows entrepreneurs to shop cheap and receive quickly from countless suppliers. The startup has just raised USD 10 million in a Series A led by Flourish and GFC, with the participation of MAYA Capital, SV Latam, Quartz, Picus, Domo, Alexia Ventures, and Prana, among others.
The Mercê model is known as retail integrated and is already widely used in other countries, such as China, where it was responsible for transforming the sector by connecting the entire chain using technology. In Brazil, Mercê is replacing the traditional clipboard with an app that connects the mom-and-pops corner stores to suppliers and helps with all the purchase and sales management.
Food retail in Brazil is a market of over US$ 100 billion, according to a survey by the Associação Brasileira de Supermercados (Brazilian Association of Supermarkets). The more than 400 thousand grocery stores in the country, which have from one to four registers, represent 35% of this total. “We are talking about a huge public that is currently very underserved. These entrepreneurs don’t have access to management, sales, and credit tools and can’t count on bargaining power to negotiate prices and services. In addition to not having working capital, not every supplier sells to them, because many of them are informal or do not buy the minimum quantities required by distributors”, explains Diego. “We want neighborhood corner stores to enjoy the same benefits as those that are part of large networks, thus making them more competitive”.
“Today we offer a simple and attractive tool, as the entrepreneurs have nothing to lose. We offer to buy in a more practical, cheaper way, as they only pay after they receive”, completes Guilherme. “Our long-term vision is to create a revolution in the proximity market, allowing the market to operate better, with more technology on all its fronts, providing a better experience to the end customer”.
In practice, with Mercê, the corner store owner lists the products that they need in the company app, which works 24/7. The startup is responsible for making the wholesale purchases and delivering them to the establishment in up to one business day. Mercê also plugs in other supply partners, distributors, and manufacturers that have delivery logistics, monitors prices, so that the entrepreneur has access to the best offers, in addition to helping them with access to credit.
Access to credit and expansion
The app is simple to use, does not require training, nor demands a lot of time to adapt. According to the partners, the biggest impact caused so far for entrepreneurs has been the time savings in this process, which reaches 70% using the app.
Credit is offered to owners in two ways. In one of them, a due date that ranges from 7 to 28 days is given for the mom-and-pops to pay for their purchases; in the other, Mercê helps to obtain loans, connecting the corner stores to partners that offer the service. The entrepreneur thus gets access to capital that they would not otherwise have.
“Merce has the potential to transform the informal retail sector in Brazil. Merce’s easy-to-use tech platform and logistics services eliminates the friction of sourcing, management and optimization of inventory, allowing the retail micro-entrepreneurs to focus on serving the needs of their customers. By seamlessly embedding financial products such as credit and payments as part of a holistic, vertical solution, Merce will magnify its impact on the financial success of the retailers it partners with. And for the FMCGs and existing distribution network, Merce provides a valuable channel to reach informal retailers as well as valuable data and insights”, says Arjuna Costa, Managing Partner from Flourish Ventures.
The startup’s revenue comes from a commission charged from partner suppliers, who pay a percentage on top of the sales made. Still, the final value of the transactions is lower than other alternatives, in a way that the cost for both the supplier and the market is reduced. Mercê also receives commissions from FMCGs due to its contribution to increasing market share through trade marketing actions.
Today, Mercê operates in the West, South, and East regions of the city of São Paulo, especially in peripheral neighborhoods. With the contribution, the company will expand its operations, at first, to the metropolitan areas of the Southeast, in particular São Paulo, Rio de Janeiro, and Belo Horizonte. With the value, the partners should invest in the development of the marketplace and strengthen the team, especially in the technology and product areas.
In the future, the startup intends to help scale corner stores across the country, revolutionizing the proximity market with vertical solutions, which allow the small grocery store to become a strong network with B2B2C solutions including the entire store conversion, creating a virtual retail chain with no assets, empowering small entrepreneurs and their customers with technology.
“We are very bullish about Mercê. The market is enormous and I was particularly excited with the impact that Mercê has in the neighborhoods it operates in. I noticed a strong sense of empowerment and ownership in the entrepreneurs that work with Mercê. A renovated Mercê store has the potential to revitalize a whole community, and there are millions of potential Mercê stores out there”, concludes Alex Anton, from GFC.