As the founder of Piggly Wiggly, Clarence Saunders helped define the modern retail store. In fact, Saunders coined the phrase "self-service" before it later became commonly used. The first Piggly Wiggly store opened in 1916, and the concept was novel. A few years later, Piggly Wiggly patented the self-service grocery store design and price tagging system.

The pre-modern grocery store had a different model, which revolved around clerks. Shoppers presented a shopping list to the clerk, who then assembled the order and exercised pricing discretion. Relationships mattered, as charge accounts were used for trusted customers.

The idea of a self-service grocery store was not at all obvious back then. The food supply chain was still in its infancy, and Wonder Bread, which coined the phrase "the best thing since sliced bread," did not exist until four years later in 1920.

In fact, it was the rise of self-service that helped create the Consumer Packaged Good category.

Saunders made several trade-offs in designing his first store, such as choosing not to sell meat. Due to these feature gaps, other grocery owners reacted with skepticism. How could Saunders' store survive with so few clerks?

At its height, Piggly Wiggly in 1932 had 2,600 stores with $180m in sales (equivalent to ~$4bn today). As in many entrepreneurial stories, Saunders would eventually be kicked out of his own company (and then go bankrupt twice).

Saunders picked a perfect moment to found Piggly Wiggly, the next-gen grocery store. The second wave of industrialization transformed the food industry. Consumers were no longer constrained to a "winter diet" as advancements in refrigeration, canning, and packaging broadened the grocery catalog.

The Census Bureau declared the United States' frontier closed in 1890, and post-industrial America turned towards cities. By 1920, more people lived in the cities than in the countryside, and these conditions created an opportunity to rethink the grocery store.

How Pre-Modern Grocery Stores Worked

Over 100 years later, it's clear that the rise of self-service grocery stores was inevitable. However, if we rewind to the beginning of the 20th century, the pre-modern grocery store operated with several constraints that made the self-service model difficult to envision.

Going back to the 1900s, most food goods were not post-processed into packaged goods. Rather, shopkeepers purchased unprocessed food sold in barrels and large sacks. Store clerks played a central role in assembling raw food goods at the time of order.

Per the book Claurence Saunders & The Founding of Piggly Wiggly:

When customers requested grocery items, the clerks would go to shelves in the rear of the store and find them, usually one at a time… the clerk ground coffee or sliced and weighed cheese. Clerks often short-weighed measured items or mixed spoiled produce with the fresh in a customer's order. If customers tried to pick out the items themselves, the clerks said, ‘Let me help you,’ or ‘Take what is given you.’ When the customer's list was exhausted, the clerk would laboriously add it up, sometimes on the back of a paper sack or perhaps order blanks... He usually asked if the purchase was to be paid now or listed on a charge account… The unscrupulous took advantage by charging higher prices to customers they did not know or like.

Plus, the in-store shopping experience was only half the value equation; delivery also played a large role. Customers needed to make daily food runs because food spoiled quickly. Household refrigeration was almost non-existent, and other food preservation methods were lacking.

So before the grocery store was redesigned to de-emphasize clerks and delivery boys, industrialization would need to reshape food chains.

The "Why Now" of Self-Service

First, the grocery catalog expanded. In the early 1900s, the rise of mechanical cooling systems unlocked more reliable, longer-lasting cold storage options, replacing refrigeration via big ice blocks. Refrigerated shipping containers, trucks, and railcars extended the food supply chain, enabling goods to travel longer distances. Consumers could now eat fruits and vegetables out of season.

Second, food manufacturers developed shelf-ready products, so clerks began spending less time assembling food at time of order. Processed foods came pre-peeled, pre-ground, and pre-cut. Industrial canning of coffee relieved store clerks and households from the task of grinding coffee beans. Soon, trademarked food branding began to emerge. Wonder Bread, the creator of pre-sliced bread, was released in 1920, and Welch's Grape Jelly, a ready-made condiment, was released in 1923. Wheaties, the first cold breakfast cereal, was released in 1924. These companies advertised in newspapers and magazines directly to end consumers.

Third, more people were living in the city than ever before. Higher-density living meant that people were always close to the grocery store, and fewer people maintained their own gardens.

The Minimum Viable Self-Service Grocery Store

Saunders had previously worked as a grocery clerk and believed that the business model of grocery stores was headcount heavy, which translated to excessive payroll costs to retain clerks and delivery personnel.

Eliminating clerks and delivery personnel removed costs, but it also removed premium services that were considered standard at the time.

The Trade-Offs of the V1 Self-Service Grocery Store

Saunders confronted several sharp trade-offs when designing a headcount-lite model in 1916.

The first self-service grocery store was not a "one-stop-shop." Saunders would focus on inexpensive food items that required little salesmanship from the clerks. Meats did not fit a self-service scheme, which was a major feature gap. Piggly Wiggly went without a delivery service, which was also unheard of at the time.

Saunders de-emphasized the role of customer relationships. Piggly Wiggly would have no charge accounts, and instead would require cash transactions. This produced an impersonal buying experience, and some customers were reluctant to switch.

While headcount costs would be lower, inventory shrinkage would be higher. In the pre-modern grocery store, clerks could sneak spoiled items into customers’ bags, but Piggly Wiggly could not offload spoiled goods. Instead, the produce section had to be pruned of any spoiled items. Theft soon became an issue, which also contributed to inventory shrinkage.

The first self-service store was not the feature-complete experience that we’re used to today, but it did have a winning value proposition.

The First Iteration of Self-Service

Before Piggly Wiggly, grocery stores—and indeed all of retail—used the counter layout. Today, this layout is only used when shoplifting is a concern (e.g., in jewelry stores, pharmacies, and the like), or in small stores, such as newsstands, where counters are the only practical layout.

The self-service store design decoupled the Point of Sale (where the transaction occurs) from the Point of Purchase (where the customer selects the item).

The value proposition of the first Piggly Wiggly was threefold:

4x the number of goods with a better discovery mechanism: The first Piggly Wiggly stocked over 1,000 items in the salesroom, approximately four times the variety of groceries available in an ordinary store. By expanding the size of the sales floor, more items suddenly became visible to shoppers rather than hiding behind the counter in a stockroom.

Role of the clerk changed from sales to support: A few clerks were still available on the showroom, although their role was redefined:

They were never to coerce a shopper to take stale goods, nor were they ever to negotiate prices directly with the customer. They were to treat everyone in a polite and courteous manner. Saunders’ clerks were told not to favor their friends before other customers, and that their conversation was to be limited to the business at hand.

From Custom Pricing to Transparent, Low Pricing: Each item had a price tag next to it with a price that was clearly listed. This was a radical step, and Saunders filled a patent entitled "Price Tagging Means" on March 18, 1919. The commitment to transparent, uniform pricing was absolute:

Saunders forbade the use of trading stamps, premiums, manufacturer's coupons. or any tactics that he considered to be misleading shoppers into believing that they were getting "something for nothing." He reasoned that if a company could offer the product at a price with a gimmick, they could offer the same price to everyone, all of the time.

Collectively, the value proposition was a winner, even if the first self-service store was missing key products such as meat, or fewer premium services such as charge accounts and delivery services.

Evangelizing a new way of buying

Like most entrepreneurs who create a new category of service, Saunders had to win people over. Luckily, he was a gifted copy writer.

Here is a selection of quotes from Saunders:

• "Act like the store belongs to you, as it does belong to you."

• "The first commandment of self-service: customers wait upon themselves. Every customer will be her own clerk."

• "Every unnecessary service in connection with the distribution of food must be eliminated… in order that the people may have food at prices within their reach."

• "100 customers can wait on themselves in the Piggly Wiggly, and every 48 seconds a customer leaves Piggly Wiggly with her purchase."

Saunders would admit that the self-service restaurant came first (though it was not called that); Thompson Restaurants in Chicago had made the cafeteria format popular nearly thirty years prior. However, Thompson Restaurants embraced the language of "self-service" after Saunders made it into a commonly used term, which was a sign of its acceptance within the business ecosystem.

Not only did Saunders have to sell customers on a new way of shopping, but he also had to convince other franchisees to embrace the model as well. Saunders published The Turnstile every month, which was a magazine advertising to franchisees.

Saunders' Demise is an Old Story with a Familiar Ending

Piggly Wiggly became an outsized commercial success that outlived Saunders, with several hundred stores still operating today.

However, Saunders would still manage to go bankrupt twice. Like many business founders throughout history, he was eventually removed by his own board in an acrimonious breakup after he lost a public battle with short-sellers.

Saunders later started a new grocery chain called The Sole Owner Stores, which reintroduced the clerk for certain food sections that required salesmanship. The hybrid store format would reach the 150-store mark. Saunders’ timing was less fortunate the second time, however, and he would go bankrupt again during the Great Depression.

When Saunders died in October 1953 at the age of 72, he was experimenting with a chain of automated grocery stores that featured vending machines instead of employees.

The Rise of "Product-led Growth" in the Software Economy

In 2016, 100 years after the first self-service grocery, Openview coined the term "product-led growth." The term refers to software businesses that embrace self-service motions with transparent pricing models.

Like Piggly Wiggly, these businesses rely less on salespeople to service new customers. Consequently, "PLG" companies can sell software at lower price points to small businesses or end-users within organizations that are lower in the organizational chart (and have limited budget authority).

Our next post will trace the roots of modern commerce back to the National Cash Register, the first fintech company.