Why We Invested In Mercê do Bairro: Finally, An Operating System for Brazil's Corner Stores

Just as in every major economy, big box grocery stores and e-commerce are disrupting Brazil’s retail market, creating new retail channels that have the potential to threaten the small mom-and-pop stores that traditionally serve large segments of the consumer base. While these big box stores and supermarkets are consolidating and driving growth with integrated retail systems, many small groceries are stuck navigating a complex and fragmented supply chain.

Shopkeepers do not have access to the same purchasing tools, sales platforms, and credit accounts that large retailers use. They lack the bargaining power to negotiate lower prices. Many wholesale suppliers simply do not sell to them, because they cannot meet the minimum quantities required by distributors. These shopkeepers juggle dozens of suppliers and spend a disproportionate amount of their time and energy simply on buying goods and making sure their stores are adequately stocked. Many struggle with inefficient inventory management and business management systems and have limited access to finance for working capital or store improvements.

And yet, corner stores are vital sources of economic and social good. These mom-and-pop stores are an important source of retail convenience across the emerging markets, often at the center of the community for lower-and-middle income populations. As we have seen during the pandemic, they serve as an essential last-mile outlet for many consumer goods, providing jobs and keeping living costs low in their neighborhoods. In Brazil, there are more than 400,000 grocery stores with four registers or fewer, representing over a third of the total industry. These corner shops are a mainstay for food security for mass market consumers in Brazil, especially for those living outside city centers.

Now, There’s an App for Store Owners
We invested in Mercê do Bairro, a digital marketplace, to help these corner stores cut logistics costs, eliminate bottlenecks, and increase revenue. Led by an experienced team who understand the power of integrated retail as well as Brazil’s fast-moving consumer goods (FMCG) industry, Mercê puts the omnichannel supply chain and the latest business management technology within reach for mom-and-pop stores.

Mercê was founded in 2019 by Diego Libanio and Guilherme Bonifácio, who successfully built Zé Delivery and iFood, respectively. Their vision is to create a revolution in the proximity market, so neighborhood corner stores can become more competitive, and reap the benefits that big box stores have: large networks, access to working capital, and modern technology.

Mercê’s app connects small markets to all kinds of FMCG suppliers and automates the buying process. Shopkeepers login to the app and list the products they need. Mercê does all the wholesale ordering and delivers the goods directly to the store in one business day.

Through the app, shopkeepers also have access to distributors and manufacturers that deliver goods. Mercê monitors prices and alerts shopkeepers to the best offers.

Diego explains,

Merce is an operating system for the corner shop - it takes away the friction of running the business and frees up shop owners’ time so they can give back to their customers

A Platform for Embedded Finance
To pay for purchases, Mercê offers shopkeepers short-term credit up to 28 days. Over time, the fintech startup expects to use its data to help shopkeepers obtain loans from financial partners. Embedding credit and payments into its solution empowers the corner stores and eliminates constraints to access working capital.

With its easy-to-use app and seamless embedded finance offerings, Mercê has the potential to transform the informal retail sector in Brazil. We believe in the founders’ vision and led Mercê’s $10 million Series A alongside GFC, with participation from DOMO Invest, Alexia Ventures, Prana Capital, MAYA Capital, SV Latam, Quartz and Picus Capital.

By eliminating the friction of sourcing and inventory management, Mercê allows retail micro-entrepreneurs to focus on serving the needs of their customers, and continuing to play the vital role as the hub of their local communities.

In their 1:1 Flourish Focus interview with Arjuna, discover how Merce's repeat founders Diego and Guilherme are educating corner shop owners, building their trust and providing financial services so they can grow their businesses and make money.