Just another failed startup

This was once Facebook.There have been a zillion start-ups and dot-coms and new-economy companies, so I don’t blame you if you only remember the ones that succeeded. Facebook, Instagram, and Twitter you know, of course, and you might even remember some near-misses like Friendster and MySpace. But you probably never heard of Orkut or QQ or Fubar or CherryTap or Cyworld or Daum or the thousands of others of social-networking sites. You’ve heard of Amazon.com, but probably not its less successful competitors Pet.com and Tiger and CD-Now and WebVan. Only fans of business disaster remember them.

There was even a website called Fucked Company, which maintained a gleefully mean-spirited list of start-ups that were dying or dead, for the entertainment of gleefully mean-spirited people like me. In 2007, the website itself went bankrupt, dying in an abrupt and memorable burst of irony.

But only the true connoisseurs of failure remember Keedoozle.

Keedoozle’s business plan was to run supermarkets almost entirely without staff. All the merchandise would be stored in huge vending-machine-like dispensers, customers would order goods off a screen, and the food would slide down a chute on to a conveyor belt, and then into the customers’ baskets.

Keedoozle actually opened three stores before collapsing under the weight of the absurdity of the idea. The machinery was mindbogglingly complex, the process was error-prone and expensive, and ultimately, the concept didn’t serve any need the customer actually had.

In many ways, Keedoozle was a typical failed start-up: a cool idea, a great deal of optimism, a great deal of money, a ridiculous name… and a terrible business plan. The whole thing disappeared in two years.

There were some differences between Keedoozle and most other start-ups, failed and otherwise. For one thing, Keedoozle never had a website. It never had a website, its management never even considered building a website, and its customer never expected one. For that matter, it was never featured in Wired or on TechCrunch.

Why? Because Keedoozle, for all its sophisticated technology, for all its URL-friendly name, for all its dot-com, drink-the-Koolaid insanity, opened and closed in the 1930s. This high-tech start-up lived and died at the depth of the Depression. Its grand opening was held the same month that the first Batman comic hit the newsstands.

Keedoozle was the brainchild, if you can call it that, of the grocery genius Clarence Saunders, and it is Saunders I really want to talk about. Keedoozle was not his first contribution to shopping technology. Saunders was most famous for inventing… the supermarket.

I was surprised to learn that the supermarket was invented at all. I thought it was one of those things that went back to antiquity, like fire or the bathtub.

But no. Before Saunders came along there was the “general store”. You didn’t shop at a general store, you gave your shopping list to a clerk, he went in the back and returned with your stuff and rang it up. It was labor-intensive and inflexible.

Saunders had been in the grocery business since 1895. His first big idea, launched in 1915, was Saunders-Blackburn Co, a grocery store whose unique innovation was entirely negative: it didn’t extend credit. Prior to that, most groceries would let customers pay at the end of the week or the end of the month, and as you would expect, a lot of customers never paid at all. Saunders-Blackburn was strictly cash-and-carry, and as a result, was very successful.

The next year, though, Saunders launched what was to be his major contribution to retail, the world’s first supermarket, with an irresistibly puckish name: Piggly Wiggly.

As with Saunders-Blackburn, Piggly Wiggly was based on getting rid of an expensive luxury, in this case, the clerk who did all the actual shopping for the customer. Instead, the customer would go up and down aisles, picking out the items she wanted. To support this innovation, Saunders had to invent a lot of other details. Every product had to have a price tag, that was new. The stores were standardized, so once a shopper knew where everything was in her own store, she could visit any other Piggly Wiggly and feel at home. Saunders built refrigerated cases for perishables, put his employees in uniforms, and franchised out the idea. At the peak, there were more than 2500 Piggly Wigglies across the country.

The crowning achievement for the store, obvious in retrospect, but taking decades to first think of: the shopping cart. If you’re going to buy a lot of stuff, you need something to carry it in. Genius.

Piggly Wiggly is still around, of course, although greatly overshadowed by Safeway and Kroger’s and CostCo and Walmart and dozens of other chains. They all of course use the Saunders model: self-service aisles, uniformed staff, refrigerated cases, standardized stores selling standardized goods at standardized prices. When it comes to food retailing, we are living in Saunders’s world.

But this is an story about failure, not success. Saunders got greedy. By 1922, Piggly Wiggly’s stock was flying high, and a lot of Wall Street sharpies thought it was due for a fall. They “went short”: they borrowed stock and then sold it, planning to buy it back once the price dropped. Saunders got in there and bought up all the stock he could afford, artificially driving the price further up. The sharpies, panicked, had to scramble to buy stock, making the price climb still further, a hilariously vicious cycle called a “short squeeze”. The stock went from 40 to 120 in a matter of months – until the New York Stock Exchange stepped in and declared the party over. They even made Saunders give all the money back. Saunders lost every dime, was thrown off Piggly Wiggly’s board, and almost went to jail.

Embittered by his experience with the corporate world, he opened up a new chain of groceries in 1928, and he expressed his bitterness by naming the chain the “Clarence Saunders Sole Owner of My Name Stores”. By 1929, there were 675 “Sole Owner” stores – and a professional football team, called the “Clarence Saunders Sole Owner of My Name Tigers” of course – but by 1930, the chain was out of business.

The rest of his life was like that. With the Sole Owner stores gone, Saunders disbanded the Sole Owner Tigers. He tried the Keedoozle thing and after that an even less successful automated retailing concept called Foodelectric that never opened a single store. The remarkable man died in 1953.

I would like there to be a moral here. I would like to be able to sum it all up in a lesson for everybody. Saunders’s life shows such a strong pattern, such a powerful dramatic arc – one small success, one huge success, and then a lifetime of failures, great and small – I would like it to all mean something, anything, but I just don’t see it.

Maybe that is the final failure of Clarence Saunders: he didn’t even make it as a cautionary tale.

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One thought on “Just another failed startup

  1. Maybe the moral is that no matter how good you are at something or several things, other members of society outnumber you, they, on net, can outwork you, and when push comes to shove, they can take from you, whether more so by your own failures and shortsightedness, or (more likely) by their diligence, effort, and the greater weight of their combined existence when measured against your own. Stay humble, stay wary, make and keep many friends. You will need them, more so than all the cleverness and diligence possible from any single human being. Now if I can only succeed in remembering my own advice… What was I saying?

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