From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Sunday, 20 October 2013

The IP Saga of Piggly Wiggly

When is a pioneering business model, anchored in an early 20th century version of a business method patent, taken together with an iconic trade mark, not enough to ensure continued business dominance? The answer—when you are the Piggly Wiggly supermarket chain. From a meteoric rise a century ago, when Piggly Wiggly was the leading grocery store chain in the U.S., a synonym for innovation in the grocery industry with an iconic American trade mark known near and far, it has declined to where it is a second-tier brand largely found in rural and small-towns in the American South and Midwest. Non-Americans rarely frequent these areas and even many Americans from the two coasts may never have set foot in a town where there is a Piggly Wiggly store. No matter—whatever your view about pigs, the tale of Piggly Wiggly is a largely forgotten tale of the limitations of even great IP in ensuring business success.

The Piggly Wiggly story, here, as recounted in Wikipedia, dates back to 1916, where Clarence Saunders set up the first store in Memphis, Tennessee (of Elvis Presley and John Grisham/”The Firm”) fame. A year later, Saunders received a patent for what was captioned “Self-Service Stores” (no. 1,242,872), here. In a word, Saunders created the system by which the retail grocery business is still conducted. As implemented in this store, customers entered through a turnstile. There were four aisles, containing approximately 600 items for sale, organized by product categories. Customers physically selected the items they wished to purchase before proceeding to the cashier.

Piggly Wiggly leveraged this concept of “self-service” to bring about the following changes in the retail grocery business:
Provide checkout stands;
Mark a price on each individual item;
Provide shopping carts;
Feature full lines of nationally advertised brands;
Employing refrigerated cases to preserve produce for a longer period of time;
Provide uniforms for its employees;
Standardize the location of departments across stores;
Design fixtures and equipment for use in the stores;
Use independent grocers as franchisees to operate stores.
It is instructive to consider the first claim (out of four) of the Saunders patent--
“1. An apparatus for the vending of merchandise having a series of merchandising holders or display cabinets arranged parallel with each other and with spaces between them to form aisles and with the ends of alternate cabinets spaced from the wall or partition in the store, whereby a circuitous path is provided through which the customer must pass from the entrance to the exit, substantially as set forth.”
Here was a revolutionary method of doing business in the retail grocery field. Indeed, it has been claimed that Piggly Wiggly served as one of the inspirations for the implementation by Toyota of its just-in-time inventory strategy, the Toyota Production System. Taken from another angle, the self-service system created by Saunders paved the way to placing packaging and brand recognition at the forefront of retail product sales. All of this led to a peak of 2,660 stores in 1932, even in the teeth of the Great Depression. Moreover, the name and mark had already become iconic in large swathes of the country.

Yet the colossus that Saunders built slipped out of his hands. It turns out that Saunders lost a large amount of money by attempting to run up the share price of the company in response to Wall Street speculators, who had bet on a decline in the price of the shares. Saunders fell into bankruptcy and was ultimately forced to turn over his assets to the banks that had funded his leveraged position. As a result, the company was broken down and it sold to a number of local grocery chains, including such continuing household names as Kroger and Safeway.
What remained were the company’s rights in the Piggly Wiggly trade mark. The business model therefore morphed into a licensing/franchise operation, whereby independent grocers with a limited regional reach were licensed to do business under the Piggly Wiggly name and mark. The mark has changed owners several times, most recently in 2003, following the bankruptcy of the previous owner.

Kat readers should not underestimate the iconic nature of the Piggly Wiggly mark. This Kat remembers as a teenager, about the time that the Beatles first hit American shores, taking a 60-hour bus ride from Phoenix, Arizona to New York City. Besides the seedy Greyhound bus stations, which invariably all seemed to be located in the worst neighbourhood in each city, he has only other vivid memory of that trip. As the bus traveled on and on along the legendary U.S. Route 66, here, he passed one, then another and yet another supermarket, all bearing the unforgettable trade mark—Piggly Wiggly, accompanied by the figure of a salubrious smiling swine.

So what do we make of the Piggly Wiggly story from the IP perspective? After all, the company was a true innovator in the way that the retail grocery business is still conducted; moreover, the company took pains to patent some of its key innovation in the area. As Wikipedia reports,‘[t]he success of Piggly Wiggly was phenomenal, so much so that other independent and chain grocery stores changed to self-service in the 1920’s and 1030’s.” And yet, there is no indication that Saunders sought to enforce the patent against his competitors. Indeed, it appears that certain competitors sought to imitate the self-service system by tweaking their operations and obtaining patents of their own, here. The patent system seems to have provided Saunders with little competitive advantage, even before the foolhardy stock market escapade.

As for the trade mark, Piggly Wiggly plus design remains iconic in the regions in which it operates. But even this most
distinctive (and in some places, beloved) trade mark cannot overcome the challenge of competing in larger urban centers against better-financed rivals. Still, the survival of the mark, in the face of bankruptcies, unimpeded imitation and multiple owners, is itself worthy of note. Almost a century after Saunders reinvented the retail grocery business, and 50 years since this Kat was taken by the charm of Piggly Wiggly brand along the back-roads of America, the brand is still of value. That it is so at all is no small accomplishment.

The lyrics of "Route 66", here

1 comment:

Meldrew said...

"And yet, there is no indication that Saunders sought to enforce the patent against his competitors".

The best patent is the one that does not need to be enforced, it is simply respected.

"Indeed, it appears that certain competitors sought to imitate the self-service system by tweaking their operations and obtaining patents of their own..... "

That competitors felt obliged to engineer around and indeed obtain their own patents is perhaps evidence that the patent had an effect on the market.

"The patent system seems to have provided Saunders with little competitive advantage, even before the foolhardy stock market escapade."

Apart that is from providing a good basis to establish a valuable (once) brand. So not much use really.

Question - would a patent to a store arrangement be considered merely a "business method" by the EPO?

It shouldn't be, but I can't help thinking that a way would be found to refuse it by suggesting that the need to channel shoppers through shops like sheep through a sheep dip was a business problem, and that set the business problem the arrangement of technical apparatus used to do this was obvious.

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