In Le Robert "Dictionnaire historique de la langue française" they give "mercerot" as a word from the 13th century meaning haberdasher and the word connoted commiseration so far the 18th century. Then it fell into disuse.

In French "petit" may mean "short" "small" "little" "young" "mean"…
I don't know how to translate "roulant sa merchandise" but it means that he would take his goods wherever he went.
In his bag /suitcase, he has scissors "ciseaux", not birds "oiseaux" (must have been a typo somewhere!)
Last word " mie" is not related to "mie" = "crumb", it's an archaic short for "amie" = literally "female friend", but "ma mie" would mean "my beloved"

There's another verse after the last one above
"L'aurai ce soir à mon coucher.
Bonsoir la compagnie."

Literal translation:

There was a young haberdasher
Lon lon la, what do people say about love?
There was a young haberdasher
Rolling (?) his goods.

Went into a borough
Where there were 3 girls

Here is one, here are two
Here is the prettiest.

He folded her, folded her up,
Put her in his bag (suitcase)

The (her) mother, as soon as he left,
Ran after him.

What do you have there, young haberdasher?
What do you have in your bag?

I have knives, I have scissors,
(And) many other goods.

You lied, young haberdasher,
It's one of my daughters

You'll give her back, young haberdasher
Or you will loose your life.

As long as I'll have my saber in hand
I will defend my beloved!

I'll have her when I go to bed
Good evening everybody.

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"Le Petit Mercelot" (Click to play)