Mercato Inc., an online marketplace that offers same-day delivery of groceries and specialty foods from more than 600 independent stores in eight U.S. markets, will expand to three additional markets by the end of the first quarter and plans to be in a total of 15 markets by the end of 2019.
Mercato recently launched its service in Los Angeles and will soon open up in Seattle, Washington; San Diego, California; and Austin, Texas, says Mercato CEO Bobby Brannigan.
Mercato launched its Los Angeles operation via an affiliation with that city’s Original Farmer’s Market—a kind of arrangement that has worked out well for Mercato in the past.
“In working with the farmers markets, we consolidate all vendors under one umbrella for consumers,” Brannigan says. “Customers can order on Mercato online and receive the same high quality as if they picked items at the market. The delivery is consolidated with all items going out to the customer together in a single order.”
In addition to Los Angeles and the soon-to-be-launched new markets, Mercato operates in New York City (Brooklyn, Manhattan and Queens); Chicago; San Francisco; Alameda, California; Washington, D.C.; Boston; and Philadelphia.
Unlike bigger players like Instacart, Brannigan says Mercato works exclusively with independent stores. Mercato also leaves it to the stores to do their own picking and packing of orders. Retailers on the Mercato platform can opt to handle their own deliveries or delegate that service to Mercato, which in turn works with third-party services like DoorDash, Postmates and Deliv.
Another thing that has set Mercato apart so far is that it sells only from its website, Mercato.com. The company does not yet have a mobile app, although it plans to launch a mobile app in 2019, Brannigan says.
“We purposely decided to lead with the website first before creating an app,” Brannigan says. He says Mercato wanted to offer independent retailers—many of which are not yet online—a chance to create their online stores with large hero images and other features that illustrate their brands in a manner similar to their stores.
“We also wanted them to be able reach both mobile and desktop customers. Our merchants and grocers are also more likely to use the web via a tablet or computer,” Brannigan says.
Currently, only about 4% of shoppers buy groceries online, Brannigan says. He attributes that to a reluctance by consumers to buy fresh food packed by others. Grocery stores on the Mercato platform are vetted for quality and service, which should put customers at ease, he says.
“Our goal is to address that [other] 96% because we believe an independent grocer can provide the quality the customer needs,” he says.
Mercato’s retailers prepare orders themselves because that kind of personalized service matches the business models of the grocery stores, butcher shops and specialty food markets Mercato works with, Brannigan says.
Mercato, founded in 2015, has so far not tried to raise money from venture capital firms, but has not ruled that out, Brannigan says. So far, the company has raised capital from strategic investors, including Michael Loeb, co-founder of Priceline.com; Richard Braddock, former CEO of online grocer Fresh Direct LLC (No. 81 in the Internet Retailer 2018 Top 1000); and Monica Woo, former President of 1-800-Flowers.com Inc. (No. 66).
A recent study by Kantar Worldpanel found that, as a percentage of sales, consumer packaged goods sold online—excluding fresh food—now represents just less than 2% of the U.S. market in 2017. The researchers say e-commerce has been and will remain the fastest-growing sales channel for CPG sales but will grow to just 2.8% of the market this year and 5.4% by 2021.
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