Old Imperialism is essentially mercantilism. Under this system why did nations have colonies?

As a source of raw materials, and as a locked-in customer.

Consider the American colonies. They produced cotton that was shipped to England to be spun into cloth on English mills, and then were required to buy cotton fabric from England, and could not purchase it from other nations. Since the English controlled the ports, they could see to this with tariffs, or simply prevent cargo ships from other nations landing.

One interesting story from the 1600s is how New Amsterdam, a colony of the Dutch Republic, became New York, a colony of the British. The British demanded the city, and a war was fought over it, and in the end the Dutch traded New Amsterdam/New York for the Island of Run, in what is now Indonesia. Indonesia was, at the time, a Dutch colony, the Dutch Indies, except for Run, which was owned by the British. The Dutch Republic wanted to consolidate their ownership of these islands, because they wanted to corner the majority of the world's sources of nutmeg. At the time, nutmeg was thought to be a treatment for malaria, which would make it very valuable, not only in European equatorial colonies, but in Europe itself.