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Why Mercato's Business Model is so successful?

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Mercato’s Company Overview


Mercato is an innovative online grocery platform that connects consumers with local grocers, specialty food stores, and artisan food producers across the United States. Founded in 2015 by Bobby Brannigan, Mercato aims to empower independent grocers by providing them with a robust digital presence and a broad customer base. The platform offers a wide range of products, from fresh produce and premium meats to rare and unique specialty foods. Mercato is committed to preserving the authenticity of local food culture and values the unique offerings of each local store. With a focus on sustainability, it also strives to reduce food waste and support local economies.

Business Model:

Mercato operates on a hybrid business model, combining elements of e-commerce and marketplace models. It partners with local grocery stores and food vendors, providing them with a platform to sell their products online. Mercato handles the online ordering process, customer service, and delivery logistics, allowing vendors to focus on their core business. For consumers, Mercato offers the convenience of online shopping and home delivery, with the added benefit of supporting local businesses. The platform uses AI technology to personalize product recommendations, enhancing the shopping experience for each user.

Revenue Model:

Mercato generates revenue through various streams. Firstly, it charges a commission fee from its partner vendors on each transaction made through the platform. The commission rates vary depending on the size and type of the vendor. Secondly, it offers a subscription service called Mercato Green, which provides members with unlimited free deliveries for a monthly or annual fee. Additionally, Mercato earns revenue from advertising fees from vendors who wish to promote their products on the platform. This multi-faceted revenue model allows Mercato to maintain a stable and diverse income stream.

https://www.mercato.com/

Headquater: San Francisco, Ethiopia, Africa

Foundations date: 2015

Company Type: Private

Sector: Consumer Services

Category: eCommerce

Digital Maturity: Digirati


Mercato’s Related Competitors



Mercato’s Business Model Canvas


Mercato’s Key Partners
  • 7-Eleven
  • The market's 40 individual vendors
  • Payment gateways (Visa, Mastercard and American Express)
  • Crowdfunding Investor
Mercato’s Key Activities
  • Content development
  • Software engineering
  • User interface design
  • Product management
  • Digital marketing
  • Operations
  • Product delivery
Mercato’s Key Resources
  • Platform
  • Product Catalog
  • Network
  • Software
  • Brand
  • Cash
  • Mercato brings together the best independent grocers across the country
  • The first software-as-a-service for a $670B industry that’s been overlooked by software companies as well as investors
  • Mercato operates a network of independent local grocery stores that allows people to order groceries online from stores in their neighborhood and have them delivered the same day
Mercato’s Value Propositions
  • Healthy groceries and food made by local artisans
  • It gives shoppers access to locally made food and products from hundreds of independent grocers
  • Specialty food stores and markets across the United States
  • Support independent grocers & mongers
  • All your local groceries delivered
Mercato’s Customer Relationships
  • Convenience
  • Digitally and Locally
  • On the spot
  • Cheap
  • Face-to-face
  • Reputation
  • Trust
  • Quality
  • Safety
Mercato’s Customer Segments
  • Consumers
  • Merchants
  • Food Lovers
  • Local Farmers
  • Chefs
Mercato’s Channels
  • Mercato.com
  • Merchants Page
  • Social networks
  • Telephone
  • Email
  • Website
  • Blog
Mercato’s Cost Structure
  • Platform development and maintenance
  • Payment ecosystem
  • Courier services
  • Cost of goods sold
  • Marketing
  • Operations
  • Community
  • IT maintenance and upgrade
Mercato’s Revenue Streams
  • It takes a 10% commission on all sales made through its platform
  • A monthly subscription fee

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Mercato’s Revenue Model


Mercato makes money by combining different business models. Below, you will find the list of the different monetization strategies identified for this company:

  • Transaction facilitator
  • Two-sided market
  • Subscription
  • Online marketplace
  • Collaborative consumption
  • Curated retail
  • Customer data
  • Customer relationship
  • Digital transformation
  • eCommerce
  • Experience selling
  • On-demand economy
  • Network builders
Analytics


Market Overview
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Mercato’s Case Study


Mercato's CASE STUDY

Introduction

In our journey of exploring and analyzing innovative businesses, we have come across various companies that have redefined the norms in their respective industries. One such company is Mercato, an online grocery platform that has not only revolutionized the way people shop for daily essentials but has also contributed immensely to local economies and sustainable practices. This blog post delves into Mercato's unique business model, its approach to empowering local grocers, and the intricate strategies that make it a notable case study in the realm of e-commerce and digital transformation.

The Genesis of Mercato

Founded in 2015 by Bobby Brannigan, Mercato was born from a simple yet impactful idea: to bridge the gap between consumers and local grocery stores by leveraging technology. Brannigan’s background as the son of a Brooklyn grocer gave him insider insights into the challenges faced by small-scale grocery stores, such as limited digital presence and fierce competition from retail giants. Mercato's mission to empower independent grocers and preserve local food culture resonates deeply in a world increasingly dominated by big-box retailers.

A Unique Hybrid Business Model

Mercato operates on a hybrid business model combining elements of e-commerce and marketplace models. This model is distinct because it allows Mercato to partner with local grocery stores and food vendors, providing them a platform to list and sell their products online. While the vendors focus on their core business—ensuring quality and specialty products—Mercato manages the online ordering process, customer service, and delivery logistics. According to Harvard Business Review, hybrid business models are increasingly vital in today's digital economy because they offer multiple touchpoints and value addition for both partners and customers (HBR, 2021). In its operations, Mercato has also utilized AI technology to personalize product recommendations, enhancing each user's shopping experience. This combination of technology and a commitment to local grocers has created a robust, adaptable ecosystem that intimately connects customers and vendors.

Revenue Streams: A Multi-Faceted Approach

Mercato's revenue model is indeed a diverse one, creating a stable and multi-faceted income stream. Primarily, the company charges a commission fee from partner vendors for each transaction made through its platform. This commission varies depending on the vendor's size and type, allowing flexibility and scalability. Secondly, Mercato offers a subscription service known as Mercato Green. Customers who subscribe to this service enjoy unlimited free deliveries for a monthly or annual fee, fostering customer loyalty and stable recurring revenue for the company. As reported by experts, subscription models are increasingly becoming popular in the e-commerce sector due to their ability to ensure steady revenue streams (Statista, 2023). Lastly, Mercato earns from advertising fees paid by vendors who wish to promote their products more prominently on the platform. This creates a win-win situation: vendors get more visibility, while Mercato boosts its income. The multi-faceted nature of Mercato's revenue streams epitomizes strategic financial planning and smart business acumen.

Addressing Customer Needs

Mercato’s success isn’t solely based on its business model but also on its ability to deeply understand and address customer needs. In fulfilling these needs, Mercato tackles diverse aspects: - Social Impact: By supporting local economies, Mercato builds a sense of community affiliation and belonging among users. - Emotional: The platform’s design aesthetics and access to rare, high-quality foods meet emotional needs of customers who seek uniqueness in their shopping experience. - Functional: From saving time to simplifying shopping and connecting users with high-quality, local products, Mercato ticks all the functional boxes. According to a recent survey, 88% of consumers value companies that support local businesses (Nielsen, 2022).

Business Patterns and Strategic Alignment

Mercato operates an array of business patterns ensuring comprehensive market penetration and engagement. These include: 1. Transaction Facilitator: By managing end-to-end transactions, Mercato ensures smooth and efficient operations. 2. Two-Sided Market: It connects two distinct user groups—customers and local vendors—in an efficient and mutually beneficial manner. 3. Subscription: The subscription-based Mercato Green fosters customer loyalty. 4. Collaborative Consumption: Mercato encourages collective support for local stores and reducing environmental footprints. 5. Curated Retail: The platform offers a curated list of high-quality products, differentiating itself from generic retailers. These patterns align seamlessly with Mercato's strategic objectives, contributing significantly to its positioning and differentiation in the market.

Mercato's Unique Value Proposition

Mercato’s unique value proposition lies in its commitment to support and uplift local grocers and artisans while providing premium quality products to consumers. According to Harvard Business Review, companies that focus on creating value both for their partners and customers tend to perform better in the long term (HBR, 2020). By offering healthy groceries crafted by local artisans and ensuring that consumers have access to rare and unique specialty foods, Mercato stays true to its mission of preserving local food culture. Moreover, the emphasis on sustainability by reducing food waste aligns with increasingly eco-conscious consumer preferences.

Case in Point: Operational Success and Community Impact

A noteworthy example of Mercato's operational success is its partnership with 40 individual vendors across the market. These partnerships have enabled local grocers to expand their reach beyond physical limitations. As of 2023, Mercato has expanded its network to over 1,000 local grocery stores across the United States, providing a direct channel for local vendors to tap into the burgeoning online grocery market (Mercato, 2023). According to the Food Marketing Institute, the online grocery market in the U.S. is expected to reach $250 billion by 2025, up from $100 billion in 2021. This growth trajectory presents a significant opportunity for Mercato and its partners for sustained growth and recognition (FMI, 2021).

Conclusion

Mercato stands out as a powerful case study on how innovation, technology, and a strong sense of community support can redefine a traditional industry. By merging e-commerce with localized shopping experiences, Mercato not only meets consumer needs but also supports and uplifts local businesses. Its hybrid business model, multi-faceted revenue streams, and strategic partnerships illustrate a comprehensive approach to conducting business that other entities can emulate. As we look at Mercato's journey from a fledgling startup to a formidable player in the online grocery market, we recognize the power of strategic vision and community-centric business models in shaping a sustainable and prosperous future. Mercato's success is not just in numbers but in its meaningful impact on local economies and the grocery shopping experience.


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