Interview with the CEO of Mercantile Systems Inc.

Mercantile Systems Inc. (MSI) is a privately owned company, headquartered in Brentwood, CA. It was founded, in 1954, by Robert Cosgrove and focused totally on mystery shopping. Today, MSI also offers its clients a multitude of other services, such as compliance audits, sales improvement programs, training seminars, employee theft monitoring and management and much more.

Mercantile Systems is accredited with the Better Business Bureau and enjoys an A+ rating. New shoppers can register at

My experience with MSI has been limited to a couple of new home sales shops, which I found to require a typical amount of narrative with a reasonable fee attached. Overall, shoppers on the Mystery Shop Forum speak highly of the company and the few complaints focused on extensive narrative requirements. Shoppers apply for open shops and, if approved, have 24 hours in which to confirm their acceptance. Payment is via paper check, 45 days following report approval.

MSM talks with Dan Cosgrove, CEO:

MSM: It appears that your first mystery shopping-type experience occurred around the age of 22, when you worked for a year as a private investigator for Mercantile Systems, Inc, which was then owned by your father, Robert Cosgrove. You eventually left MSI and founded Hospitality Specialty Group. Why?

Dan: I actually worked at Mercantile for 4 years. I wanted to grow the company but my father was content, so I worked a deal with him, agreeing that I would still run his operations and, at the same time, start my own company, Hospitality Specialty Group. I rented two small offices out of my father-in-law’s machine shop. It was so loud that I could only make sales calls when he was not running his machines. I did this for two years, growing HSG to over 100 clients. I then merged back with Mercantile Systems, with the intent of purchasing the business at the end of the year, however my father got sick with cancer in September of that year and passed away two months later, in November. I ended up buying the business from my mother.

When I was juggling the two businesses, a funny thing would happen, in that, I would be making sales calls at HSG, and then on my days working in the MSI offices, we would get a call from a prospective customer, who would happen to be the same darn customer that I was calling from HSG. It seemed that I sparked interest and, rather than start with an unknown company like HSG, they would ask their competitors which company they used and they would refer them to MSI. I often would end up talking to them and closing the sale, while at MSI for MSI.

MSM: Hospitality Specialty Group offered private investigations and mystery shopping services, which, in some ways, made you a direct competitor of your father. What lessons did you learn as a young, start-up, stars-in-your-eyes, new business owner?

Dan: I learned that I had a LOT to learn. I thought that I ran MSI, but when I opened HSG and had to do all the billing, collections, sales, reports, client relations, etc, I quickly realized that I did not do as much as I had originally thought. That same realization came back when I bought MSI. The first two years I knocked it out of the park; I landed everything I touched and more; we grew from 3 employees to 14 employees. This was in the middle of the days and I figured I was living the dream; I was going to be a millionaire at 30 and retire at 35. The world was a piano and I was a straight Elton John! Then, some of our biggest clients left, and I knew nothing about cash management, staffing, etc. That is the moment when I began a 10+ year learning experience.

MSM: At some point, you rejoined Mercantile Systems, merging both companies into one. What was the impetus?

Dan: I merged the two companies because Mercantile Systems was not growing and I knew that my parents were not motivated to keep it going. I figured the best thing to do would be to combine the two organizations and eventually buy them out. Granted, I had no formal plan, other than the idea, “Let’s merge and I will buy you out!”

MSM: After researching a year’s worth of posts about Mercantile Systems on the Mystery Shop Forum, the only creditable negative comments concerned the excruciatingly long narratives. Just recently, I completed my first couple of shops for MSI. They were new homes sales shops and, in my opinion, the required narrative was typical for those types of shops. Did you revise your requirements within the past year and how much weight do shoppers’ comments have on the way you do business?

Dan: Shopper feedback is important, as we want to make sure that we can guarantee a solid base of quality shoppers. We bring their feedback into staff meetings and talk about how we can change reports to make them more user-friendly. I would suspect that much of the long narrative feedback comes from our integrity reports, and often this is necessary, due to the stringent requirements we have for these types of reports.

MSM: Mercantile Systems is one of the very few mystery shopping companies which publicly recognizes shoppers on its website and, perhaps, the only one, which does so every month. What or who inspired this brilliant no-cost idea?

Dan: This came, as most of our great ideas, from our staff and our head of operations Valerie Casares. We have required readings and nearly all of the books done by Ken Blanchard, including “One-Minute Manager” and “Who Moved the Cheese”, are on the list. Our corporate culture is one of recognizing a job well done and we feel that “a pat on the back” goes a lot further than “a slap in the face”. A simple and genuine “thank you” for a job well done goes a long way.

MSM: Please describe how you see mystery shopping evolving in the future.

Dan: I think mystery shopping is just a tool and probably won’t change much in the future as it is really just using “feet on the street” to capture and report on interactions. I think that companies that only sell mystery shopping will struggle and when they can find a client, they will find themselves stuck in a price war with their competitors. I believe companies that evolve and partner with their clients will be the ones which will prosper.

In the business world, they use the term “big data.” In our industry, we really don’t deal with “big data”, but we do deal with data that is extremely actionable, since it either directly reflects what is going on in a client’s location (e.g. mystery shopping a food sever at a restaurant) or it is coming from the mouths of the customers.

The real value is the ability to interpret this data for our clients, being able to explain the overall picture and then being able to break it down to identify their strengths and their weaknesses, how they compare to their competitors, how they compare to other industries and, also making a determination about if the customer is always right.

Clients are not interested in “collect me some data and dump it on my desk”. They want to hire experts and will pay for the expert advice. They want to understand what the data means and they also want professional guidance about where to go next.

MSM: MSI appears to be positioned to do just that!

Dan, on behalf of the staff at Mystery Shopper Magazine, thank you so very much for taking the time to answer these questions.

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