Clarence Saunders — the Piggly Wiggly Founder Wall Street Wiped Out

Summary

Clarence Saunders was the Memphis grocer who reinvented how the world buys food. On September 6, 1916, he opened the first Piggly Wiggly store at 79 Jefferson Avenue in Memphis, where shoppers — for the first time — passed through turnstiles, pulled their own goods from open shelves, and paid at a single checkout. The self-service layout he patented in 1917 became the template for the modern supermarket, and within a few years Piggly Wiggly franchises spread across the country; the company was listed on the New York Stock Exchange in February 1922.

Saunders was a flamboyant, self-made man who believed his own legend. When bear raiders on Wall Street began selling Piggly Wiggly stock short in late 1922 and early 1923 — wagering the company would fall after several independently owned Eastern franchises failed — Saunders took it personally. Rather than ignore the speculators, he resolved to beat them at their own game by quietly buying up nearly every available share of his own company, attempting one of the last great stock corners in American history.

He nearly pulled it off. Borrowing roughly $10 million, Saunders bought so heavily that within weeks he controlled almost all of Piggly Wiggly's freely traded shares, squeezing the short sellers who now had to buy from him to cover their positions. The price climbed from about $39 to roughly $124 by March 20, 1923. But with the shorts trapped, the New York Stock Exchange declared that a corner existed, suspended trading in Piggly Wiggly the next day, halted it permanently on March 26, and granted the short sellers extra time to deliver their shares — breaking the squeeze Saunders had built.

The reprieve was fatal. Saunders was left holding millions in stock he could not sell at the prices he had paid, crushed by the loans he had taken to buy it. In August 1923 he resigned as president and surrendered his property — his stock, his cars, even his unfinished Memphis mansion, the "Pink Palace" — to his creditors, and personal bankruptcy followed. He spent the rest of his life chasing comeback ventures, including a second grocery chain and an automated store called the Keedoozle, but never recovered the fortune the corner had cost him.

The Fortune

Born August 9, 1881, in Amherst County, Virginia, Clarence Saunders started life poor and clerked in country stores as a teenager, absorbing every inefficiency of the old over-the-counter grocery trade. In that system a customer handed a clerk a list, the clerk fetched and weighed each item, and labor costs were enormous. Saunders saw waste where others saw tradition, and he conceived a radical alternative: let customers serve themselves.

On September 6, 1916, he opened the first Piggly Wiggly in Memphis, a store designed as a one-way path of open shelving that funneled shoppers past every product and out through a checkout. He was granted a patent on the self-service concept in 1917, branded it with the deliberately memorable, nonsensical name, and franchised aggressively. The format slashed labor and let prices fall while volume soared, and Piggly Wiggly multiplied into more than a thousand stores across the United States.

By the early 1920s Saunders was a wealthy man and a national figure. Piggly Wiggly Corporation was listed on the New York Stock Exchange in February 1922, the chain was still growing rapidly, and Saunders had begun building a colossal pink Georgian-marble mansion in Memphis to broadcast his arrival. He was, by his own estimation, an industrial visionary who had outsmarted an entire trade — a confidence that would soon meet Wall Street.

The Cracks

Trouble started not in Memphis but in the East, where several independently owned Piggly Wiggly franchises in New York and nearby states ran into difficulty and closed. Wall Street speculators read the failures as a sign of weakness in the parent company and began selling Piggly Wiggly stock short, betting the price would collapse. To Saunders, a proud outsider, the bear raid was not an ordinary market event but a personal insult by Eastern financiers against a Southern self-made man.

Instead of waiting out the speculators, Saunders decided to destroy them. In a classic corner, he set out to buy up nearly all of the company's freely traded shares so that the short sellers — who had sold stock they did not own — would be forced to buy it back from him at any price he named. To finance the campaign he borrowed enormous sums, roughly $10 million in total, pledging his holdings and his reputation against the loans, and within about a week he had scooped up more than half of the 200,000 outstanding shares.

The maneuver worked spectacularly at first. As Saunders mopped up the available float — eventually controlling nearly all of the stock — the price of Piggly Wiggly shares climbed from around $39 toward $124, and the cornered shorts faced ruin. But a corner is only as strong as the rules of the exchange, and Saunders had antagonized the very institution that governed the game. On March 20, 1923, he called for delivery of shares he had lent to the short sellers; the next day the New York Stock Exchange suspended trading in Piggly Wiggly and extended the shorts' delivery deadline, defusing the squeeze just as Saunders thought he had won.

The Collapse

With trading suspended on March 21 and permanently halted on March 26, and the shorts given extra time to find stock elsewhere, the artificial scarcity that powered the corner evaporated. Saunders was suddenly the owner of a mountain of Piggly Wiggly shares for which there was no longer a panic-driven market, and he still owed the millions he had borrowed to buy them. He tried to sell shares directly to the public in Memphis to raise cash, but it was not nearly enough to cover his debts.

The collapse came quickly. In August 1923, with payments coming due on his loans, Saunders resigned as president of Piggly Wiggly and relinquished his property — his stock, his cars, and his real estate — to his creditors; personal bankruptcy followed. The corner that was meant to humiliate Wall Street instead wiped out his fortune in a matter of months, a textbook demonstration that even a winning squeeze can be undone when the exchange changes the rules midgame.

Among the casualties was the great pink mansion he had been building in Memphis. Still unfinished when ruin struck, the Pink Palace was surrendered before the Saunders family ever lived in it; the city of Memphis eventually acquired the building, which opened as a museum in 1930. Saunders, once one of the most celebrated retailers in America, walked away from the Piggly Wiggly fiasco effectively broke at the age of forty-one.

What Went Wrong

After

Saunders was barred from using the Piggly Wiggly name he had created, but he was incapable of staying down. In 1928 he launched a new grocery chain under the defiant banner "Clarence Saunders, Sole Owner of My Name, Stores, Inc." The chain grew quickly and even lent its name to a professional football team, but it was swept away by the Great Depression and collapsed by 1930.

Undeterred, Saunders devoted his later years to a new obsession: a fully automated grocery store he called the Keedoozle — "Key Does All" — in which customers used a key to make selections from glass display cases while conveyor systems delivered the goods to a checkout. He chartered the concept in 1935 and opened a Memphis store, then revived it again in 1948, but the machinery was ahead of its time and chronically unreliable, with circuits scrambling orders, and the Keedoozle never became a viable business. He was working on yet another automated concept, the Foodelectric, when he died in Memphis on October 14, 1953.

Clarence Saunders never rebuilt the wealth the corner had cost him, but his original idea reshaped the world. Self-service retailing — the format he patented in 1917 — became the foundation of the modern supermarket and, by extension, much of modern shopping. His unfinished Pink Palace still stands in Memphis as a museum, a monument both to the grocer's vision and to the spectacular gamble that bankrupted him.

Lessons

References

• Clarence Saunders (grocer) Wikipedia
• Saunders, Clarence Tennessee Encyclopedia
• Piggly Wiggly Wikipedia
• Keedoozle Wikipedia