Q&A with Merchant Candy

Startup CPG: WHAT IS MERCHANT CANDY?

Boris de Souza: Merchant Candy is the best-in-class AR platform for modern Shopify merchants. We started building Merchant Candy because we realized that there was a huge gap in the market: Shopify-integrated invoicing. Nearly every founder in the CPG space has set up Shopify and added a tool like Klaviyo to automate aspects of the business. But when it comes to invoicing, the process is extremely clunky and expensive to set up. Merchant Candy is a way of solving and automating that part of the company's pipeline.

QuickBooks is generally the chosen tool for accountants. We're aiming to be the chosen tool for founders. Typically, AR is messy. We focus on taking that off the founders’ plates. We receive payments on your behalf as a merchant, and we process those payments and remit those funds to you electronically. As we receive payments, we associate them with the invoices that they were intended for. This part of reconciliation is usually very time-consuming; for B2B payments, payments are predominantly in paper checks. You need to receive them, deposit them, and then

SCPG: HOW DID YOU REALIZE THIS PROBLEM?

BDS: Prior to starting Merchant Candy, I was the Head of Treasury at Braintree. My job was to work with banks to move money online, and then work with the merchants to figure out how to reconcile and create reporting. When I left Braintree, I quickly learned that similar services were being provided to larger corporations, yet no one was focusing on the emerging brands. I began chatting with these eCom brands to figure out what was broken in the space. More specifically, I reached out to Ori Zohar, co-founder at Burlap & Barrel, a rapidly growing CPG spice company.

He expressed to me that AR was a major problem for his small business, which took me aback. Burlap & Barrel was an eCom business, so I’d assumed all customers simply paid with cards. In reality, while they started off as a DTC brand, their product took off and was quickly picked up by restaurants and grocery stores. Unlike a traditional eCom customer, these wholesale vendors wanted to pay by paper check and occasionally ACH. To put it bluntly, Shopify isn’t programmed to handle these payment methods. You have to copy an order from Shopify into Quick- Books to mimic an integration and it can get incredibly messy. On top of the clunky manual input, Ori also faced the challenge of sending reminders and managing checks sent to the wrong addresses.

We started talking to other brands and found that the story was very much parallel: growth started out easy, then wholesale opportunities arose and they realized Shopify was no longer cutting it. Put simply, no app currently solves invoicing for you on Shopify.

While novel invoicing software may have beautiful user interfaces, very few actually solve the urgent problem of handling non-card transactions. The fact that this problem still continues to plague emerging brands is exactly why Merchant Candy exists, and why we’re excited to build out our platform.

We believe that Shopify is optimal for a brand’s ops hub and Merchant Candy is the optimal platform for your financial ops. In addition, Faire can be great for lead gen, but it lacks the functionality to act as a brand’s core financial ops platform. As we chat with more and more brands, we’ve seen nearly every approach to integration. Ultimately, we want to see brands running their entire business ops on Shopify, while using us to expand into omnichannel.

SCPG: WHAT DOES MERCHANT CANDY LOOK LIKE IN PRACTICE?

BDS: Last January, we had Burlap & Barrel jump on board as our first client. After moving their entire QuickBooks volume to Merchant Candy, the team was able to completely automate their invoicing across 3 separate revenue channels. These three channels required manual invoicing, often paid using paper checks. To make matters worse, antiquated invoicing platforms lacked the Shopify integration needed to make invoicing a seamless extension of their online store.

Because the team was spending an increasing amount of time and cash flow on invoicing demands, it quickly became apparent that an automated solution was needed.

We worked closely with Burlap & Barrel to integrate with their Shopify and simplify workflows between invoice creation and payments. Through this integration, the brand’s data was now always in sync and its invoices were up to date. Notably, the Burlap & Barrel team found automated credit tracking to be extremely useful - it immediately eliminated issues around underpayment or overpayment by vendors. In the process of onboarding with Merchant Candy, Burlap & Barrel was able to quickly streamline its core invoicing process which yielded faster payments and decreased overhead, all while completely removing bill payment cost centers. On top of that, the brand directly saved money through lower payment processing fees.

When it comes to working with new partners, Merchant Candy is particularly adept at handling nuanced issues like applying a discount on a final invoice. For example, if a product was damaged during shipping, typically the merchant can’t apply a discount on the final invoice once it’s already processed. Merchant Candy tracks the surplus or the credit available, and when a new invoice has been created, it applies that credit automatically. This feature removes the need to have someone who retains the knowledge of which merchant is owed what credit when a new invoice is created. This allows founders to truly decentralize their AR and have more people work on it, without having to spend time maintaining this knowledge base.

SCPG: HOW DOES MERCHANT CANDY HELP FOUNDERS BEYOND AUTOMATING PAYMENTS?

BDS: At a certain point, you need the data from your AR to make smart financial decisions. Using Merchant Candy means that you can keep track of your accounts receivable and understand what your invoices look like. This data is really helpful for these merchants because they can use that to make a smart, educated decision on whether they should go out and take a line of credit from a bank, or whether they should factor invoice for 8 to 10%. It's comparable to arming yourself with the data before you go out and sell a car -- you look up the KBB value. That's really where we're helping these emerging brands. They can tell what their DSOs look like and what they're ending balance will look like. If someone is willing to back their invoices, they know exactly where to challenge them on the risk and ask for a better rate.

SCPG: WHAT’S THE FUTURE OF MERCHANT CANDY?

BDS: Our mission is to be the financial OS for rapidly growing eCom brands. But, we're starting by tackling the hardest problem for merchants: accounts receivable. Today our focus has been very much on brands that use Shopify as a platform. We spend a lot of time thinking about how to automate workflows. We’re asking questions like: how do you operationalize everything so you don’t have to rely on two different teams to handle your business's sales channels? We're constantly enriching Shopify as we uncover the answers to these critical problems.

While eComm growth has risen dramatically over the past two decades, wholesale remains the critical unlock in scaling digital brands to a point of financial and operational maturity. The first wave of digitally native brands sought to upend traditional distribution channels, initially ignoring wholesale to focus on the online consumer. Yet this wave of brands is hitting a tipping point. To fully reach their potential, brands have had to shift their focus back towards traditional wholesale avenues.The second and third wave of digital brands know this, integrating wholesale into their growth strategy from day one. They launch online, iterate product offerings based on direct lines of communication with their customers, and then move quickly to expand into retail.

To distill our long-term vision, we want to make expanding into wholesale or omnichannel as smooth as possible. Critically, we can grow alongside brands of any size, ranging from upstarts like Elavi to established brands like Blendjet. As teams start looking for solutions to scale their Shopify stores without the headaches, that’s where Merchant Candy comes in.

Merchant Candy is a proud sponsor of Startup CPG.