WEBVTT

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Welcome to the Jason and Scott Show. This is episode 340 being recorded on Friday, June 19th.

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I’m your host, Jason, Retail Geek Goldberg.

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And unfortunately, Scott had an unexpected emergency and isn’t able to join us.

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But we have a very special guest in his place.

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Regular listeners of the podcast will know we are unapologetic fanboys of Apple

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and awesome retail experiences on the show, and this year marks the 50th anniversary of Apple.

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So who better to help us celebrate than the actual creator of the modern Apple

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store concept, Ron Johnson.

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Welcome to the Jason Scott Show, Ron Johnson.

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Hey, it’s great to be here, Jason. Thanks for having me, and it’s a big year for Apple.

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You know, the 50th year for the start of the company, but it’s also the 25th

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anniversary of the year we opened the first store. Yeah.

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Yeah, that’s amazing. That was Tyson’s Corner, right? Was that?

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Tyson’s Corner. Yeah, Tyson’s Corner and Glendale opened the same day, May 19th, 2001.

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That is amazing. It kind of dates me because I do remember a world without Apple stores.

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It’s sad to think I’ve been doing this so long. You, of course,

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were a very young man when you started that first store.

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And Ron, I’m super excited because I understand that you have written a book

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called Shop Different that’s going to release this September,

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which is coming fast, September 22nd.

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Why did you decide to write a book? What’s the thesis of the book?

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Yeah, well, I wasn’t going to write a book, but it turns out there’s this case

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study that was written at Harvard Business School that’s used by almost every business school.

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And to this date, it’s Harvard’s, according to the school’s,

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most popular first year case.

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And I’ve gone back to the school a couple of times and talked.

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And it’s just packed with lessons. And that case looks at my career from Target,

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Apple, and JCPenney and asks the questions, what worked at Target,

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what worked at Apple, and what happened at JCPenney?

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And as I thought about it, I said, you know, the way to give back is to really

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share the inside story of all of those.

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And after a lot of time, I decided, you know, I’m going to write a book.

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And I found a great person to help me write it and we’ve been working on it

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for three years and HarperCollins is publishing it and it comes out September 22nd, this September,

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And I think it’s a really beautiful book.

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Well, we are all really excited. Obviously, everyone that is generous enough

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to listen to this podcast is someone that loves retail.

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And this is unquestionably going to be one of the must-reads for us this fall.

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So thank you very much for writing it.

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We’ll double-click on it a little bit more. But one of the ways we always start

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the show, and it’s kind of a perfect segue, is kind of understanding the background,

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of our guests. And so we alluded a little bit to Target. Is that where you started your retail career?

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Yeah, I did. I grew up in the Twin Cities and went to Stanford Harvard Business

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School and then decided coming out of business school, I didn’t want to go into

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investment banking like everyone else. And I had offers to do that.

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So I want to go into retail. But you got to remember, your listeners will know this.

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The 80s were the greatest period of retail innovation of any decade in the history of retail.

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And just like venture capital today is funding ai venture capital is funding

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retail growth you know 84 is when mickey you know repositioned the gap and that’s

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when the limited started to open all their stores and that’s when all these big off,

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mall big box stores started to come out and when the outlet center was invented

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and on and on and so the 80s were a big time for retail so i said,

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I’m going to join that parade.

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And I started at a division of Target called Mervyn’s, which was their most

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successful strategy at the time.

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And I started unloading trucks down in Glendale, California.

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Yeah, I do feel like that was a golden age of retail, although it’s always a

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golden age. There’s always cool stuff happening.

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But I’m going to say the vast majority of great people we get into retail,

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especially back then, were not coming from Stanford and Harvard.

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So, you were probably a little bit of an outlier with the super fancy degree.

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So, we’re grateful that you did that. It’s maybe a little more common path today.

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And I’ve spent a lot of time walking the halls of Target.

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And one of the things I hear a lot about your tenure there is you were intimately

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involved in the Michael Graves deal, which I would argue is seminal at Target.

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Can you tell our listeners a little bit about that?

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Just a quick, this would be interesting.

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Yeah.

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You know, when I started my career, there were 13 regional discounters.

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You know, Walmart started in Veneville, was doing rural stores,

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and Target was in the Midwest. And wherever you’re from, there is a regional

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discounter. Just like there were department stores that were local.

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And by the 90s, it was pretty clear that only three were going to survive.

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And that was Walmart and Target. And then Kmart still had some life left at the time.

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But Target had the fundamental challenge of how do we beat Walmart?

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Because in the 90s is when Walmart started to open up in suburban areas.

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And Walmart had a significantly lower cost structure.

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So Target was known for hip fashion. But the problem is, you know,

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fashion is you get a good markup.

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But by the time you mark it down, you don’t make much more than you do on basics.

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And so I had this idea that Target should come up with a third category, which was design.

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Design would let you get the markup of fashion.

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It’s unique product. But design products should be in the assortment for a decade,

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not a season, like apparel can be.

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And so we launched a partnership. It was the first retail collaboration,

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believe it or not, ever. And these are commonplace today.

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But we went on, got Michael Graves to design home products for Target.

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That was my idea, my initiative I led with the team.

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And it just turned out to be fabulous. You know, the 90s had gone through a period of design.

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It was a decade of design. And it was happening, the Volkswagen Beetle.

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You know, Johnny and Steve did the iMac in 98 when that launched.

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You know, on and on and on. It was a decade of design and we caught the wave at Target.

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And during my time at Target from 90 to 2000, the stock went up 12 times.

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Yeah. Yeah. Yeah. Yeah. Hopefully you, you got to hang on to some of that equity,

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but that to me, that, that Michael Graves collab started this,

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obviously it started collabs across all of retail, but particularly Target, it started this whole

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surprise and delight thing that, that, uh, Target was.

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Well, that’s what, you know, Target, you know, they had to get people to,

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And part of it was, you know, there was a lot of status in the 90s about where you shot.

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And people would whisper to the friends, oh, I got this at Target.

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Yeah.

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But when we did design, it was legitimate. And people started to shout, look what I found.

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And people would go on these Target runs to see what was new. Because we were really,

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really exciting merchandise. Some was designed by us. Some was from Europe.

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You know all these things we were doing and then you know of late unfortunately

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target lost its way a little bit you know hopefully target target finds its

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way back um and the stock price has gone up yeah yeah and i think they will,

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But that was a great period for Target.

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Yeah.

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And I love being a part of it.

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Yeah. They did have a good quarter last quarter. So we’re hoping that’s the

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beginning of a turnaround for them.

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I think that’s funny. It used to be that you were kind of quiet about your patronage at Target.

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But during that era, it became Target. And I think of you and Michael Francis

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as really kind of making it cool and hip to shop at Target.

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Michael did. Target had great marketing.

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You know, there’s a guy, John Pellegrin, who did an amazing job and Michael

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was at the department stores and he came to Target and did a fabulous job building

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out the Target bullseye, that it became one of the most recognized symbols, you know,

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in business, not just in retail.

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Yeah, it’s this whole story is going to come full circle because he’s at the gap now.

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Um so so what what i’m curious and i honestly don’t know the answer to this

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is how how did you go from target to apple were you recruited were you looking

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for your next challenge interesting.

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I got a call one day from a recruiter and he said ron remember in 1991 he said you were 20 How old was I?

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I was in my late 20s. And he said, you know, there’s a guy named Mickey Drexler

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who wants to open up a new concept called Old Navy.

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Would you like to talk to him about running it?

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And I said no, because I was early on in my career at Target and wasn’t ready to move.

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And he said, you know, you turn that down. Look at how Old Navy’s done.

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I’ve got another one for you.

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And he said, Steve Jobs wants to open stores at Apple. Yeah.

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He asked me to look for who’s that guy doing all the design work at Target because Steve loved design.

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And so I decided to go out and meet Steve and I met him. We interviewed for

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three hours the first night and I walked away saying, I have to work for this guy.

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You know, it was one of those moments and Apple was struggling.

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You know, it wasn’t doing well. Target was on fire. People couldn’t understand why I would do that.

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And then a lot of my friends said this was 2000. I said, Ron,

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the dot-com boom is what’s happening in retail. Don’t go to Apple.

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Go to one of the dot-coms. Start a dot-com company. I said, no,

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no, I want to go to Apple. I believe in physical retail, and I believe it’s

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a great brand, and if we do the stores right, it can really make a difference.

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Yeah.

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So I joined Apple.

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That’s amazing. And I do think, in fairness, in hindsight, that seems like a

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no-brainer decision, but people have to remember that at that point,

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It was not clear that Apple was going to be the runaway success that they’d become.

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And it for sure was not clear that manufacturers should own their own retail stores. Like there was.

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Well, no one thought that was a good idea. Well, remember back in 2000,

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the PC had 95% share. And who was the big PC one? Dell.

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Yeah. Direct to consumer online.

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They had built out online shopping starting in 94 or so. And they were just killing it.

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Yeah.

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But the reality is, was selling mainly to business, not to consumers.

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Yeah.

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But then Gateway had gotten up to 300 plus stores. And when we’re going to open

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the Apple stores, they were folding.

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Yeah.

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You know, they closed down the year we opened our stores. So people are going,

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what’s Apple doing? They can’t make money in stores.

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Dell’s winning. Apple’s got 5% market share.

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And they’re going to put stores in malls, expensive real estate in those big

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stores. These guys are crazy.

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Yeah. Yeah. So I can imagine some people were questioning your career choices at the moment.

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And then your choices and my business strategy. Yeah, mostly it wasn’t.

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It wasn’t just that Apple was going to open stores.

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It was that we weren’t going to test it.

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We were going to open them and we’re going to do everything different.

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Yeah. And.

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The I I’m trying to put myself in your shoes and I literally can’t do it.

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But like you’d both to work with someone like Steve would be like so exciting and such a privilege.

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But it also would be, quite frankly, terrifying because he’s he’s famously fast,

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sharp and not not very tolerant of people that that can’t keep up.

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That’s true. But, you know, that’s one of the reasons I wrote the book.

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And one of the things I’m delighted with is I was able to portray the Steve

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I knew and the Steve I knew would be the same kind of person Johnny Ive knew

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and Tim Cook worked with.

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You know, Steve was actually a great person to work with. No one inspired you

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more, taught you more, helped you more.

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And if you were one of his close, you know, I was on the executive team.

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He was a great leader. He delegated better than anybody I’d ever worked with.

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High standards you know and you know he it could be tough sometimes yeah but

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that’s what you want you want to work with people who are smarter than you who

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stretch you who challenge you if you don’t you know i think that’s a big issue.

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No for sure i i’m curious how like how did that work like did was he super involved

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did you have to build the concept store and did he get did he get involved in

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approving it like did you.

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Have to he was very involved he he was involved in the things he loved,

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so he cared about design so he got involved with the development of the initial store,

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and from then on he kind of helped with some of the big like the fifth avenue

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store the all glass cube yeah you know but after that he just delegated he didn’t

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get involved with the culture the people who i hired,

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it was really his input was in the design of the store And, you know,

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we had a lot of great conversations early on about conceptually how we are going to compete.

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And those were really good conversations. Like, he hated the idea of putting stores in malls.

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You know, but I said, Steve, your goal is to reach the 95% who don’t use a Mac.

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They’re not going to get in a car and drive 10 miles to a store.

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You might get them to go 10 feet out of their way. You know,

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and Steve, once he understood that, he said, okay, we’ll be in malls.

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Awesome.

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So, you know, and.

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Yeah. So you were able to convince him. He was open-minded. Yeah.

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Steve is extremely open-minded. You know, his strength is his ability to innovate through conversation.

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You know, some people call it, David White would call it conversational commerce.

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You know, but it’s really a great conversation is when no one has an agenda,

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they want the best idea to win.

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And you’re both absolutely present. You’re debating an issue.

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You’re bringing your own personal geography to it and the best idea wins and

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steve never never never did something because it was his idea,

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it was only if he thought it was best but he was very open to input and there

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are many examples of that throughout the book you know.

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That’s that’s gratifying to hear i i am curious by the time you left apple stores

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were were universally regarded it as a wild success.

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And there are all these crazy stats about the revenue per square foot being,

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higher than Tiffany’s. And it was at the top of the ecosystem.

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And they say imitation is the most sincere form of flattery.

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Everybody, of course, was inspiring their new work based on the success of that store.

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I’m kind of curious, though, from you, from the horse’s mouth,

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what do you think about and what are you most proud about in that Apple concept?

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What do you think were…

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There was a lot of innovation in there, but what was the secret sauce that really

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caused consumers to resonate.

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The secret sauce is we created a place that people wanted to belong.

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You know, the store, it was, and it was interesting because it was the time

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of the internet, when the internet was all about a transaction.

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And if a store was going to survive the internet, you had to build an experience.

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And so part of the benefit of the Apple store coming out at the time when the

00:15:51.245 –> 00:15:54.120
internet was just taking off is they were our competitor.

00:15:54.707 –> 00:15:58.165
And we had to do something that they could never do. you know and so ultimately

00:15:58.165 –> 00:16:02.653
what i’m most proud of i think is you know i was in the apple store in milan

00:16:03.088 –> 00:16:07.627
two days ago a beautiful store and the experience was fantastic,

00:16:08.237 –> 00:16:13.135
and the store was essentially the same layout same vision that we established

00:16:13.135 –> 00:16:19.312
25 years ago yeah with all the changes and that that’s hard to do in retail to keep something,

00:16:19.963 –> 00:16:24.850
vibrant and working but i think the strength of the apple store has always been its people,

00:16:25.546 –> 00:16:30.635
you know they’re not on commission they love people they love serving people,

00:16:31.231 –> 00:16:35.495
they’re not in a hurry you know they take time to welcome you to the store to

00:16:35.495 –> 00:16:39.145
get to know you to find out what you’re trying to do and then they present a

00:16:39.145 –> 00:16:41.725
solution that’s exactly what you need not more than you need that.

00:16:42.735 –> 00:16:47.429
You can take home today you know and then the store’s got great support,

00:16:48.047 –> 00:16:52.585
after you buy whether you want to learn more through classes and theaters or

00:16:52.585 –> 00:16:56.655
you want to get help like in a genius bar yeah but it just it turned out it

00:16:56.655 –> 00:16:58.244
was just a well-conceived store,

00:16:58.819 –> 00:17:05.500
that has stood the test of time and when i left you know i think there were 370 stores open,

00:17:06.206 –> 00:17:13.025
we had another 50 in works today apple has 530 stores so in our first 12 years

00:17:13.325 –> 00:17:19.475
we got about 80 of the footprint done globally and you know in the u.s you know

00:17:19.475 –> 00:17:20.851
there’s Apple stores within,

00:17:21.496 –> 00:17:25.454
you know, seven, a 10 minute drive today of 90% of the population.

00:17:26.059 –> 00:17:30.835
Yeah. So it’s, it’s, but I have to digress for one second. When you walk into

00:17:30.835 –> 00:17:33.546
Milan, do, does anyone know who you are? Do people recognize you?

00:17:34.355 –> 00:17:35.256
They didn’t this time.

00:17:35.256 –> 00:17:35.506
Okay.

00:17:35.926 –> 00:17:41.931
But it’s interesting. Most of the stores I visit, especially in Europe, people recognize me.

00:17:42.372 –> 00:17:42.696
Yeah.

00:17:42.696 –> 00:17:46.706
Because, you know, they stay around a long time. You know, like I was in the

00:17:46.706 –> 00:17:49.696
niece store three weeks ago and I was having this girl. I said,

00:17:49.696 –> 00:17:53.839
you seem so familiar. She goes, Mr. Johnson, I helped you five years ago.

00:17:54.266 –> 00:17:55.911
I had forgotten. But she didn’t remember.

00:17:56.126 –> 00:17:56.746
That’s amazing.

00:17:56.746 –> 00:17:59.521
She’s worked at that store since it opened 16 years ago.

00:17:59.700 –> 00:18:04.166
Yeah. And in some ways, I feel like that, I know it’s not directly analogous,

00:18:04.166 –> 00:18:07.446
but the evolution of consumer electronics in the U.S., like,

00:18:07.446 –> 00:18:10.596
you know, there was a time when there was this big battle between Circuit City

00:18:10.596 –> 00:18:13.266
and Best Buy. And Circuit City was the commission-based model.

00:18:13.626 –> 00:18:17.196
Best Buy was not. And obviously, Best Buy won because they’re here and Circuit

00:18:17.196 –> 00:18:20.106
City isn’t. But Best Buy was very low touch, right? And,

00:18:22.467 –> 00:18:26.166
you know, there was huge turnover. And so then the Apple stores emerged and,

00:18:26.753 –> 00:18:29.387
they’re non-commissioned but much higher touch.

00:18:29.573 –> 00:18:32.456
And you know they certainly you you invested a lot more in you.

00:18:32.456 –> 00:18:35.376
Know best buy under Herbert Jolie Mr.

00:18:35.376 –> 00:18:39.726
Jolie did a great job oh yeah he had a book what I found kind of funny is,

00:18:40.586 –> 00:18:44.962
our two-word goal for the apple store for service was to enrich lives,

00:18:45.682 –> 00:18:52.066
and in 2012 or 13 best buy said our goal is to enrich lives yeah but they started

00:18:52.066 –> 00:18:55.796
to put in store within a store throughout the store You know,

00:18:55.796 –> 00:18:57.239
Apple was probably the first one,

00:18:57.886 –> 00:19:01.924
and they have many of those, and those are sometimes staffed by partners.

00:19:02.371 –> 00:19:05.796
You know, so it’s become a great place to buy consumer electronics.

00:19:05.796 –> 00:19:06.248
Yeah.

00:19:06.353 –> 00:19:08.721
And I’m a great admirer of Best Buy products.

00:19:09.434 –> 00:19:13.371
They’ve survived. It’s a difficult category, but they’ve done a great job.

00:19:13.371 –> 00:19:20.001
Yeah, no, I totally agree. And I am also a Best Buy alum. So I appreciate that. It is funny, though.

00:19:20.861 –> 00:19:23.971
It was almost a self-fulfilling prophecy. Part of the reason that we had to

00:19:23.971 –> 00:19:26.941
open shopping shops at Best Buy is we used to have this great traffic driver

00:19:26.941 –> 00:19:29.382
in the middle of the store called Music.

00:19:29.718 –> 00:19:32.534
And people used to buy music on these plastic circles.

00:19:33.601 –> 00:19:37.261
And Apple may have had a role and making those plastic circles a little less

00:19:37.261 –> 00:19:41.931
popular. And so we had to find alternative uses for some of that excess footprint

00:19:41.931 –> 00:19:42.661
in the middle of the store.

00:19:42.721 –> 00:19:45.581
Oh, that’s so funny. That’s true. Yeah.

00:19:46.121 –> 00:19:50.351
You know, my moniker is Retail Geek, and I was accidentally involved in Best

00:19:50.351 –> 00:19:56.781
Buy’s acquisition of Geek Squad, which was founded by an entrepreneur in the Twin Cities.

00:19:56.781 –> 00:19:59.441
Yeah, that was like 1996.

00:19:59.441 –> 00:20:02.161
Yeah, Robert Stevens. History. Yeah.

00:20:02.161 –> 00:20:02.851
I knew Robert.

00:20:02.851 –> 00:20:03.471
Yeah, Robert.

00:20:03.471 –> 00:20:05.241
And then he moved to the Bay Area.

00:20:05.241 –> 00:20:05.675
Yeah.

00:20:05.948 –> 00:20:09.501
After later, after he sold Geek Squad to Best Buy. Yeah.

00:20:10.181 –> 00:20:14.711
He would say after after Geek Squad acquired Best Buy is how he would he would put it.

00:20:14.711 –> 00:20:17.941
He would say, no, it’s kind of funny because when I presented the idea of the

00:20:18.348 –> 00:20:21.361
genius part of Steve, I first talked about we’re going to serve people through a bar.

00:20:21.681 –> 00:20:21.891
Yeah.

00:20:21.891 –> 00:20:25.781
We’re going to dispense advice just like a bartender dispenses alcohol.

00:20:25.781 –> 00:20:27.380
He goes, I like that. He goes, what are you going to call it?

00:20:27.934 –> 00:20:30.531
I said, I’ll come up with the name. I don’t have it yet. So I called him up

00:20:30.531 –> 00:20:32.948
a week later and said, genius bar.

00:20:33.535 –> 00:20:40.495
He goes ron you can’t call it that and he said because the people who are going to be behind the bar,

00:20:41.150 –> 00:20:44.131
they don’t know how to talk to people if you want to call it the geek bar you

00:20:44.131 –> 00:20:48.141
can well he wouldn’t have known about the geek squad steve wasn’t in touch with

00:20:48.141 –> 00:20:53.793
that sure but that you know it’s interesting that that was the name that you know,

00:20:54.414 –> 00:20:58.471
the original founders of the geek squad chose because that’s kind of who technologists

00:20:58.471 –> 00:21:02.121
were back then they were these people that love technology kind of geeks and

00:21:02.121 –> 00:21:05.121
they spend all their time over themselves and yeah we’re great with customers

00:21:05.121 –> 00:21:06.941
but they know how to fix products yeah uh,

00:21:07.721 –> 00:21:12.201
but we we changed flipped that on said and called it the,

00:21:13.107 –> 00:21:16.230
probably the most you know relevant part of the store to most people.

00:21:16.544 –> 00:21:20.310
I would i i certainly would agree it’s a lot of pressure though to get a title

00:21:20.310 –> 00:21:24.170
like genius in your title seems geek seems a lot lower pressure i will.

00:21:24.170 –> 00:21:29.274
Say can i explain to you why we did that yeah please you know the key the key,

00:21:29.863 –> 00:21:34.220
you know i really think people want to have meaning in their life,

00:21:34.825 –> 00:21:38.780
and when we were opening our first store i said think of the i’m from minneapolis

00:21:38.780 –> 00:21:42.029
you know we’re gonna have our first store at the Mall of America in Minneapolis,

00:21:42.615 –> 00:21:45.529
we’re going to hire three geniuses, maybe it’s four.

00:21:46.180 –> 00:21:50.691
You have to be, you’re going to be credit for being the smartest Apple person,

00:21:51.289 –> 00:21:53.419
in Minneapolis and St. Paul.

00:21:54.394 –> 00:21:58.004
Well, if you love technology, what a great job.

00:21:58.740 –> 00:22:02.536
You are the smartest Apple person in the state of Minnesota.

00:22:03.196 –> 00:22:06.160
You know, and that gave people meaning and they’d stand behind that bar and

00:22:06.160 –> 00:22:07.950
they had to answer any question on the planet.

00:22:08.556 –> 00:22:12.742
And they were proud. that they could do that and they were proud that they were

00:22:13.090 –> 00:22:17.320
a genius at a genius bar yeah and that’s just part of conveying meaning and

00:22:17.320 –> 00:22:19.249
that’s really important to people who work in retail.

00:22:19.539 –> 00:22:24.260
That that seems totally fair and in that same era robert and i were we’re desperately

00:22:24.260 –> 00:22:27.780
telling everyone that geek is not a pejorative so that was kind of our right

00:22:27.780 –> 00:22:30.950
you know still a negative thing back then so i do want to touch on two things

00:22:30.950 –> 00:22:33.234
that are super interesting to me about the genius bar

00:22:33.606 –> 00:22:35.438
i i worked for a lot of retailers that

00:22:35.879 –> 00:22:38.680
opened stores and were inspired by by apple,

00:22:39.200 –> 00:22:41.130
And my hypothesis is they always got it wrong.

00:22:41.130 –> 00:22:45.290
Like, of course, every attribute of the store contributes to the experience

00:22:45.290 –> 00:22:48.713
and the success. I’m not trying to say there’s one thing that makes you success and one that not.

00:22:48.991 –> 00:22:54.470
But the things that people always noticed and tried to emulate are like negative

00:22:54.470 –> 00:22:59.260
space, wooden tables, better lighting, right? And those are all important things.

00:22:59.260 –> 00:23:00.474
I’m not saying they’re not.

00:23:00.601 –> 00:23:04.580
But when I look at Apple stores and say, hey, here’s why they stood out.

00:23:04.580 –> 00:23:06.952
Here’s why they won the hearts and minds of their consumers.

00:23:08.901 –> 00:23:12.591
Steve Jobs might disagree with me. It wasn’t as much about those design elements

00:23:12.591 –> 00:23:16.091
as it was the service model that you had.

00:23:16.091 –> 00:23:19.861
You had more people per square foot, that you had those people well-trained,

00:23:19.861 –> 00:23:24.153
that you had the service in the Genius Bar. And so I always felt like all these

00:23:24.461 –> 00:23:27.822
emulators were emulating kind of the wrong parts of your plan.

00:23:28.443 –> 00:23:34.021
You’re exactly right. You know, when I left Apple in 2012, we had a million

00:23:34.321 –> 00:23:36.442
visitors a day to our stores.

00:23:37.197 –> 00:23:41.761
I think a million people a day came to the Apple store and they came for,

00:23:41.761 –> 00:23:44.480
like we said, there were a lot of reasons to come.

00:23:44.613 –> 00:23:48.311
And it wasn’t about buying a product. It was so many other things.

00:23:48.311 –> 00:23:56.630
And but, you know, the reality is most people, what they call innovation is really improvement.

00:23:57.409 –> 00:24:00.210
Because when they do innovation, they go look at what someone else did,

00:24:00.210 –> 00:24:03.742
and they apply it to their store or their situation.

00:24:04.173 –> 00:24:06.849
And the customer sees that as a copy.

00:24:07.389 –> 00:24:10.041
It’s good to do, but you never get it right.

00:24:10.599 –> 00:24:12.857
You know, Microsoft tried to open retail stores.

00:24:16.172 –> 00:24:21.971
And they made the obvious, so many mistakes, it’s hard to, it’s not laughable, it’s sad.

00:24:22.527 –> 00:24:26.950
But you know they’re the big gorilla and they go open a store right next to

00:24:26.950 –> 00:24:31.890
an apple store that’s the same size so basically legitimized apple but they

00:24:31.890 –> 00:24:34.160
didn’t understand what made the apple store great,

00:24:34.980 –> 00:24:40.660
you know and it just felt different and they never even got traffic in the stores

00:24:40.660 –> 00:24:46.680
you know you’d go buy an apple store with people and this company serving 90

00:24:46.680 –> 00:24:49.582
market share had nobody in its yours.

00:24:49.867 –> 00:24:51.183
Yeah. Yes.

00:24:51.351 –> 00:24:51.642
Yeah.

00:24:51.787 –> 00:24:54.650
I remember well. And they, I mean, they, they literally followed your footprint.

00:24:54.650 –> 00:24:57.630
I think the first Microsoft store was also in Tyson’s corner.

00:24:57.630 –> 00:25:01.879
So that, yeah, yeah. Funny, unsuccessful part.

00:25:02.094 –> 00:25:06.810
But when I look at that store, one of the things that I think someone may have

00:25:06.810 –> 00:25:09.547
had an idea before, but it’d never been executed before.

00:25:10.020 –> 00:25:12.840
One of the things that was really interesting to me was, was mobile checkout

00:25:12.840 –> 00:25:17.850
that we went away from, from a cash register and know line of people checking

00:25:17.850 –> 00:25:24.040
out to sort of checking out in situ um was that like an accident or was that.

00:25:24.440 –> 00:25:29.120
A very intentional choice yeah it’s a great part of the book i think we tell

00:25:29.120 –> 00:25:33.240
about all those innovations but you know it was interesting because in 1984

00:25:33.240 –> 00:25:35.198
when i was at unloading trucks,

00:25:35.742 –> 00:25:39.829
someone at headquarters said i feel sorry for that harvard mba guy down there unloading trucks,

00:25:40.456 –> 00:25:44.450
why don’t we have do a little write-up on what should we do with the cash wrap,

00:25:45.038 –> 00:25:47.459
and i spent about three months studying the cash rep.

00:25:48.062 –> 00:25:51.290
And I just concluded, everyone hates, everyone loves to shop.

00:25:51.290 –> 00:25:52.602
Nobody likes to check out.

00:25:53.326 –> 00:25:56.379
You know, it’s just a really terrible experience no matter what you do.

00:25:56.844 –> 00:26:02.081
And so my dream was always to get rid of the cash wrap. And in 2008, we did.

00:26:03.141 –> 00:26:06.735
And what was the amazing thing is we had technology. We basically turned an

00:26:06.735 –> 00:26:10.664
iPod Touch into a mobile cash wrap. We gave one to every employee.

00:26:11.258 –> 00:26:16.105
And as the stores got really busy, you know, I remember the iPad launched.

00:26:16.570 –> 00:26:19.530
We had stores with 300 employees on the phone.

00:26:20.006 –> 00:26:22.102
Each was a mobile cash wrap.

00:26:22.264 –> 00:26:27.505
Yeah, which scales a lot better than some super expensive NCR point of sale terminal.

00:26:27.865 –> 00:26:28.965
We had no constraints.

00:26:28.965 –> 00:26:29.308
Yeah.

00:26:29.547 –> 00:26:33.023
We were selling 300 iPads a minute.

00:26:33.629 –> 00:26:33.785
That’s crazy.

00:26:34.005 –> 00:26:34.651
Can you imagine that?

00:26:34.993 –> 00:26:35.605
No, I cannot.

00:26:35.605 –> 00:26:38.889
And other retail stores would have lines at checkout.

00:26:39.167 –> 00:26:39.475
Yeah.

00:26:39.864 –> 00:26:42.923
We had lines outside the stores to get your hands on the product to try it.

00:26:43.295 –> 00:26:45.495
We had no operational hiccups, you know?

00:26:45.495 –> 00:26:47.025
Yeah, that’s amazing.

00:26:47.025 –> 00:26:48.025
No, I was really proud of that.

00:26:48.025 –> 00:26:52.655
Yeah. And then I feel like eventually you even expanded that to self-checkout.

00:26:52.655 –> 00:26:55.625
So your app was also one of the first. Yeah.

00:26:55.625 –> 00:26:59.560
2010, we just said, you know, we got this app. Let’s create an app,

00:27:00.170 –> 00:27:04.326
put it in the Apple’s. Just let someone just scam the barcode and check out themselves.

00:27:04.674 –> 00:27:04.999
Yeah.

00:27:05.121 –> 00:27:08.152
Not a lot of people did it. It’s like most new technologies.

00:27:08.686 –> 00:27:10.363
But in 2010, you could do that.

00:27:10.743 –> 00:27:18.406
And I don’t think mobile checkout really became a thing until the 2018, 19, 20 period.

00:27:19.247 –> 00:27:23.725
And now you’ve got people like Inditex and Uniqlo have the most amazing checkout

00:27:23.725 –> 00:27:24.714
experience I’ve ever seen.

00:27:24.970 –> 00:27:25.205
Yeah.

00:27:25.845 –> 00:27:27.657
And the world’s changing.

00:27:27.785 –> 00:27:31.445
No, no, no. It’s certainly having a moment now. I do a lot of work with our

00:27:31.445 –> 00:27:33.105
friends in Bentonville, and it’s

00:27:33.105 –> 00:27:36.876
one of the most beloved experiences at Sam’s Club is that scan and go.

00:27:38.187 –> 00:27:41.767
And yeah, in my mind, it all started in those Apple stores.

00:27:42.005 –> 00:27:45.487
I remember when you first launched that, I shopped one of your New York stores,

00:27:46.486 –> 00:27:48.347
the one in the train station. Is that Union’s?

00:27:48.947 –> 00:27:50.407
Yeah, Grand Central. Grand Central.

00:27:50.407 –> 00:27:54.157
Grand Central store. And it was such a surreal experience because already you

00:27:54.157 –> 00:27:56.317
made that store feel like part of the environment.

00:27:56.317 –> 00:27:59.607
It didn’t feel like you were necessarily like walking over the threshold of

00:27:59.607 –> 00:28:03.447
a store, right? So you’re kind of, you’re browsing, you see something you want,

00:28:03.807 –> 00:28:07.187
you scan it with your phone and you walk out. and I literally felt like I was

00:28:07.187 –> 00:28:10.207
shoplifting when I left with my first Scantico purchase.

00:28:10.207 –> 00:28:13.488
Isn’t that great? Yeah, I remember. Well, you know, that was a real fun store because,

00:28:14.175 –> 00:28:17.757
it turned out to be just a hugely successful store because so many people in

00:28:17.757 –> 00:28:21.209
New York, all the people from Greenwich and up north are going through that

00:28:21.535 –> 00:28:25.797
train station every day and they’d stop in to get help at the Genius Bar.

00:28:25.797 –> 00:28:27.874
They’d buy their Christmas gifts on the way home.

00:28:28.472 –> 00:28:31.417
It was a great store. But you know what? It was the lowest cost store we ever

00:28:31.417 –> 00:28:35.483
built because you didn’t have to touch the walls. You couldn’t touch the floor.

00:28:36.058 –> 00:28:40.527
We just put in our little wood tables and a little lighting, and we were good to go.

00:28:40.847 –> 00:28:42.544
Yeah, it’s nearly a pop-up store.

00:28:43.062 –> 00:28:46.917
Yeah, it’s a beautiful store, though. It’s a beautiful building, beautiful space.

00:28:47.097 –> 00:28:49.937
Yeah, yeah. No, that was super fun. And then one other thing,

00:28:49.937 –> 00:28:52.860
and in my mind, this might have evolved a little more over time, but like…

00:28:53.691 –> 00:28:58.427
So one interesting thing when you do mobile checkout versus a traditional cash

00:28:58.427 –> 00:29:01.907
wrap is you kind of move from this adversarial thing where the customer is on

00:29:01.907 –> 00:29:07.947
one side of a desk and the clerk is on the other side and they’re taking money from each other.

00:29:08.367 –> 00:29:11.286
They’re negotiating. It doesn’t feel like a collaborative win-win.

00:29:12.859 –> 00:29:15.907
You move to the shoulder-to-shoulder experience where two people are working

00:29:15.907 –> 00:29:17.896
together to solve a problem, which I love.

00:29:18.413 –> 00:29:22.157
And I feel like Genius Bar evolved to that over time as well.

00:29:22.157 –> 00:29:25.077
There may have been a time when people sat across from each other in the Genius

00:29:25.077 –> 00:29:29.877
Bar, but over time, the Genius Bar moved to those tables, too.

00:29:29.877 –> 00:29:34.907
They’re bringing back. Some of their newer stores now, they’re bringing back a bar.

00:29:34.907 –> 00:29:35.354
Okay.

00:29:36.407 –> 00:29:41.694
And I think what happened is, and I’ve talked to them about it,

00:29:42.159 –> 00:29:44.806
people like to walk in the store and know what’s going on.

00:29:45.482 –> 00:29:48.327
And the challenge when you have a lot of tables with people sitting side by

00:29:48.327 –> 00:29:50.068
side, what are they doing? Where do I go?

00:29:50.656 –> 00:29:54.327
You know, because there’s setup at those tables, there’s classes at those tables,

00:29:54.327 –> 00:29:56.449
there’s genius bar at those tables.

00:29:56.710 –> 00:30:02.307
It’s very flexible, but you lose a little bit of the understanding of what’s

00:30:02.307 –> 00:30:04.267
being offered here, you know.

00:30:05.343 –> 00:30:07.073
And so things evolve.

00:30:07.289 –> 00:30:11.247
Yeah. And so speaking of evolve, I am curious, and I’m not trying to throw shade

00:30:11.247 –> 00:30:14.857
on anyone, but like when you walk in an Apple store today, is there anything

00:30:14.857 –> 00:30:17.587
that’s changed that you go, oh, man, I wish we didn’t cave on that?

00:30:18.927 –> 00:30:22.261
Is there anything that bothers you at all in the current Apple experience?

00:30:23.247 –> 00:30:31.845
No, there’s one thing we did, though, that I absolutely love that they eliminated is, you know…

00:30:33.163 –> 00:30:37.401
We wanted to find a way to create perfect placement where every product was

00:30:37.401 –> 00:30:39.165
exactly where it should be every time.

00:30:39.807 –> 00:30:44.033
And when the iPad came out, we created these beautiful acrylic displays.

00:30:44.370 –> 00:30:45.978
You might remember these with an iPad.

00:30:46.088 –> 00:30:46.465
Yeah.

00:30:46.657 –> 00:30:52.050
There was a point of sale device and the products like the phones would be right attached to that.

00:30:52.450 –> 00:30:56.441
And we powered the phones through the acrylic display and we just updated the

00:30:56.441 –> 00:30:58.254
software, but we could tell stories.

00:30:58.556 –> 00:31:00.791
So if the store is busy, you could read about it right there.

00:31:00.791 –> 00:31:02.347
It’s like going online and learning.

00:31:02.800 –> 00:31:06.531
You could check all the configurations all the price points you could and so

00:31:06.531 –> 00:31:11.391
we had really reinvented what i’d call point of sale how you communicate to

00:31:11.391 –> 00:31:16.549
a customer shopping on their own and for some reason apple decided not to continue up,

00:31:17.238 –> 00:31:21.421
you know and i and i think it then it requires you when you’re in the store

00:31:21.421 –> 00:31:23.195
on your own if a person’s not there,

00:31:23.934 –> 00:31:28.437
what do you do now with some products like a computer they put it on the screen,

00:31:29.017 –> 00:31:32.599
but with the phone it’s too small you know that was an interesting one to me.

00:31:32.744 –> 00:31:37.471
Yeah. Yeah. That is, I do, I think that in my mind, and this maybe only a geek

00:31:37.471 –> 00:31:40.231
would notice this, another innovation of the store, like, you know,

00:31:40.231 –> 00:31:43.491
traditionally you put product on the shelf and then you put merchandising around

00:31:43.491 –> 00:31:44.929
the product to try to tell the story.

00:31:45.190 –> 00:31:48.499
And it’s all static merchandising. And so you can’t tell a super rich story.

00:31:49.163 –> 00:31:51.951
I would actually argue Bose was doing this for quite a while,

00:31:51.951 –> 00:31:54.421
even before there were Apple stores, but in the Apple stores,

00:31:55.221 –> 00:31:58.901
every device in that store had software on it to tell a story about that device

00:31:58.901 –> 00:32:03.981
like like you kind of built the custom the shopping customer experience into

00:32:03.981 –> 00:32:08.221
the device which is one of the nice advantages when you’re the manufacturer of the device,

00:32:08.961 –> 00:32:12.871
exactly and and so i do i think that no you’re in there’s a that’s.

00:32:12.871 –> 00:32:16.236
A big part of the store because we delayed our first store six months.

00:32:16.833 –> 00:32:17.571
Because we.

00:32:17.571 –> 00:32:21.221
Went from the whole store was organized like a,

00:32:22.012 –> 00:32:27.521
And then it’s a great story, but Steve decided he’s going to reposition the Mac as the digital hub.

00:32:28.109 –> 00:32:32.387
And that means the Mac is about not about the computer.

00:32:32.811 –> 00:32:37.641
It’s about the software that allows a digital device like a camera to become

00:32:37.960 –> 00:32:43.654
something you can create with, you know. And so then all the software got put on the computers.

00:32:44.176 –> 00:32:47.102
And that’s what people love. They get on those computers to learn how to do

00:32:47.102 –> 00:32:48.495
something they’d never done before.

00:32:48.994 –> 00:32:49.272
Yeah.

00:32:49.272 –> 00:32:53.278
You know, and the stores came out when we were still in an analog world,

00:32:53.743 –> 00:32:57.394
you know, in 2001, 90% of people owned analog cameras.

00:32:58.212 –> 00:32:58.750
Oh, yeah.

00:32:58.750 –> 00:33:02.501
They were still good. They were walking to the grocery store to get their phone to go.

00:33:02.652 –> 00:33:05.270
Yeah, it’s a little known fact, but in the early days, a lot of people walked

00:33:05.270 –> 00:33:09.356
into that Apple store to get Internet access. Like it was like the public library.

00:33:09.582 –> 00:33:13.450
They would sit on the devices and use the device for free and have Internet

00:33:13.450 –> 00:33:17.709
access. And I think there’s some some really popular social creators that actually,

00:33:18.474 –> 00:33:20.140
did all their content in the stores.

00:33:20.140 –> 00:33:24.630
No, you’re exactly right. No, even when Facebook came out, you know,

00:33:24.630 –> 00:33:28.233
kids would come in there and that was the way they could do their Facebook thing

00:33:28.587 –> 00:33:32.644
because they didn’t have couldn’t afford a phone and they come use the Apple computers.

00:33:32.993 –> 00:33:37.930
But no, we had someone write a book for 30 days. He came into the Soho store.

00:33:37.930 –> 00:33:40.290
I don’t know how she wrote a book in 30 days. It took me three years.

00:33:40.290 –> 00:33:40.640
Yeah.

00:33:40.640 –> 00:33:43.170
But now it’s 10 minutes with a robot.

00:33:43.170 –> 00:33:43.993
But that’s it. Yeah.

00:33:44.260 –> 00:33:47.198
She just wrote a novel in the store and we let her do it.

00:33:47.354 –> 00:33:47.830
That’s amazing.

00:33:47.830 –> 00:33:51.278
Well, see, the thing is, I always said good things happen when people come to the store.

00:33:51.843 –> 00:33:55.320
And people would walk by the mall. And the truth is, Apple was a free internet

00:33:55.320 –> 00:33:59.800
cafe. Yeah. In 2001, 2002, no one was buying Macs.

00:34:00.639 –> 00:34:03.435
No one understood why we were learning to sell them, et cetera,

00:34:03.893 –> 00:34:06.135
how to create an experience that we get someone to buy.

00:34:06.622 –> 00:34:09.322
But the stores were packed with people on their computers.

00:34:09.443 –> 00:34:09.830
Yeah.

00:34:09.830 –> 00:34:13.750
And they thought the Mac was so fast, and they didn’t realize it was just high-speed internet.

00:34:13.896 –> 00:34:15.250
Yeah. That’s amazing.

00:34:15.250 –> 00:34:16.960
But it’s interesting.

00:34:16.960 –> 00:34:22.160
Yeah. You know, you referenced 2001. I feel like you and I both had some novel

00:34:22.160 –> 00:34:25.845
experiences around, you know, the unfortunate event that year, which was 9-11.

00:34:27.169 –> 00:34:30.332
On 9-11, I was in a conference room in Minneapolis.

00:34:31.721 –> 00:34:39.151
Jeff Bezos as Target was signing a contract to outsource e-commerce to Amazon,

00:34:39.151 –> 00:34:42.146
which would end up being an ill-fated decision.

00:34:42.861 –> 00:34:46.101
We were all stranded in Minneapolis with Jeff.

00:34:46.441 –> 00:34:50.861
He found better accommodations than I did for a number of days.

00:34:51.641 –> 00:34:54.673
I understand you have a special memory of 9-11 as well.

00:34:55.294 –> 00:35:00.586
Yeah the same it’s just that was a really tragic day but,

00:35:01.410 –> 00:35:08.060
I was up early, as I always got up early, and I got an email about 7 o’clock from Steve.

00:35:08.733 –> 00:35:14.233
And it said, in light of today’s events, you know, you’re welcome to stay at home.

00:35:15.279 –> 00:35:19.368
And then he followed up with a note to me. He said, Ron, I know we have a meeting

00:35:19.368 –> 00:35:22.419
with your team at 9 o’clock at the warehouse. We’re designing our store.

00:35:22.919 –> 00:35:25.705
He says, I personally would love to come in and be with people.

00:35:26.296 –> 00:35:31.308
I said, I’ll be there, too. dude but i remember telling my wife said karen what

00:35:31.308 –> 00:35:35.901
happened today and we turned on the tv and we saw all the images of the tower

00:35:36.151 –> 00:35:40.754
yeah and so i spent that day with that morning for three four hours with steve,

00:35:41.361 –> 00:35:45.548
and it was a day to reflect it was eerie i mean you know cupertino’s right where

00:35:45.548 –> 00:35:50.073
san jose airport all the planes are coming you’re driving there’s no planes in the sky,

00:35:50.646 –> 00:35:52.972
it’s quiet nobody’s on the roads,

00:35:53.540 –> 00:35:57.598
nobody knew what was happening that tragic day oh my gosh it was also,

00:35:58.218 –> 00:36:01.248
it was also you know it’s interesting to think back,

00:36:02.042 –> 00:36:05.358
because that was the birth of e-commerce and everyone had to figure out what

00:36:05.358 –> 00:36:10.458
to do but target didn’t think they had the skills to build their own site so

00:36:10.458 –> 00:36:16.592
they literally farmed it out to amazon till 2008 yeah they you know and yeah.

00:36:16.951 –> 00:36:21.378
They were not alone. It was, you know, Borders and Toys R Us and Dick’s Sporting

00:36:21.378 –> 00:36:26.618
Goods and lots of, but yeah, I was both involved reluctantly in outsourcing

00:36:26.618 –> 00:36:30.068
it. And then I was involved in bringing it back in-house a little later. So it worked out.

00:36:30.068 –> 00:36:33.438
You know, I thought I had the most fun job in retail. I think you had it.

00:36:33.438 –> 00:36:34.538
You were doing all these cool things.

00:36:34.678 –> 00:36:38.888
No, no, no. You and I were in similar places. You were just wildly more successful

00:36:38.888 –> 00:36:41.239
in each one of those places. And now I know the secret.

00:36:41.465 –> 00:36:47.158
It’s because you get up early and I sleep in. I feel like that’s the path not traveled for me.

00:36:47.628 –> 00:36:50.808
I do want to do a hard pivot, though, because there’s a chapter of your career

00:36:50.808 –> 00:36:54.998
everyone’s always super interested in. It’s a whole other discussion point is

00:36:54.998 –> 00:36:57.101
at the peak of Apple’s greatness.

00:36:57.339 –> 00:37:00.599
You you decided to leave Apple and take on a new challenge.

00:37:01.212 –> 00:37:03.354
Yeah. Yeah. I was turning 50.

00:37:04.327 –> 00:37:09.336
And I had looked at my career in 10-year cycles. I was at Target for 10 years.

00:37:09.336 –> 00:37:10.922
I had been Apple for 12 years.

00:37:11.491 –> 00:37:16.140
And I kind of asked the question, because opening Apple stores had become a hobby.

00:37:16.721 –> 00:37:20.709
I had such a great team, 60,000 employees.

00:37:21.625 –> 00:37:26.766
I was just having the fun of imagining an e-store, designing it,

00:37:27.106 –> 00:37:28.646
bringing it to life. They all worked.

00:37:29.286 –> 00:37:33.146
It really wasn’t a challenge. It was just recreational.

00:37:33.726 –> 00:37:38.966
And and I kind of felt like I want my favorite days were creating the Apple

00:37:38.966 –> 00:37:41.307
store, bringing design to Target.

00:37:42.015 –> 00:37:46.408
You know, figuring out to resize kids’ clothes. And I wanted to have one more

00:37:46.408 –> 00:37:48.196
chance to do something really hard.

00:37:48.786 –> 00:37:54.833
And this after he came around, a couple of investors had taken a stake in JCPenney.

00:37:55.414 –> 00:37:58.612
Bill Ackman, who’s still quite famous, most people probably know on this show.

00:37:59.222 –> 00:38:04.219
And Steve Roth was running one of the large real estate funds, Vornado.

00:38:04.759 –> 00:38:08.984
And they wanted another board member. So they asked if I’d do that. I met them.

00:38:09.837 –> 00:38:12.068
And then in the process at the

00:38:12.068 –> 00:38:17.891
next meeting the ceo longtime ceo a very nice man got in a car accident,

00:38:18.454 –> 00:38:21.088
and it made the board get a little worried about succession plan because he

00:38:21.088 –> 00:38:26.668
was probably 66 anyway so they pivoted and said ron would you be interested in running jc penny,

00:38:27.314 –> 00:38:31.358
and i look back you know i’d started at mervins which is a competitor pennies

00:38:31.358 –> 00:38:35.738
yeah you know i’ve been watching department stores my whole life and i said

00:38:35.738 –> 00:38:37.967
wouldn’t it be a great challenge,

00:38:38.501 –> 00:38:44.153
challenge to try to see if the American department store can be reinvented, transformed.

00:38:44.851 –> 00:38:48.048
And, you know, I was led to believe that JCPenney wanted to do that.

00:38:49.108 –> 00:38:53.098
You know, it turned out, I don’t think there was as much passion for change

00:38:53.098 –> 00:38:54.779
as I had. And it was very difficult.

00:38:55.220 –> 00:39:00.992
But I made a ton of big mistakes doing that. It was the hardest year, 18 months of my life.

00:39:01.610 –> 00:39:04.888
I was situationally arrogant where I really believed, you know,

00:39:04.888 –> 00:39:10.618
I’d been very successful at Target, Apple, and I think I believe that I could

00:39:10.618 –> 00:39:14.063
convince anybody that this is what we ought to do and let’s go do it.

00:39:14.667 –> 00:39:20.118
And it turned out the team wasn’t ready for it. Our board wasn’t ready for it.

00:39:20.118 –> 00:39:22.260
Our customers weren’t ready for it.

00:39:22.854 –> 00:39:26.458
And, you know, I went from being kind of the top of the retail world to the

00:39:26.458 –> 00:39:29.101
bottom, you know, reputationally and all that stuff.

00:39:29.656 –> 00:39:35.068
But it was a good learning experience. And I address it head out on the book,

00:39:35.508 –> 00:39:37.631
and I think people will enjoy reading that.

00:39:38.405 –> 00:39:40.815
Because it was a tough time for me.

00:39:40.988 –> 00:39:46.120
Yeah, I can well imagine. As an independent observer, I mean,

00:39:46.120 –> 00:39:50.750
there’s this debate we’ve had in retail for 6,000 years, everyday low pricing

00:39:50.750 –> 00:39:54.550
versus high low pricing, right? And of course, the Walmarts of the world are

00:39:54.550 –> 00:39:55.768
famous for everyday low pricing.

00:39:56.013 –> 00:40:00.550
Before you came to JCPenney, they were one of the most extreme practitioners

00:40:00.550 –> 00:40:03.210
of high low pricing, right? And so there were tons of promotions.

00:40:03.210 –> 00:40:08.157
Oh, they were the most. No, the average item. pennies sold,

00:40:08.997 –> 00:40:12.637
less than 1% of its merchandise at the everyday price.

00:40:12.782 –> 00:40:13.118
Yeah.

00:40:13.118 –> 00:40:16.520
And the average item was over 60% off.

00:40:16.735 –> 00:40:17.095
Yeah.

00:40:17.800 –> 00:40:22.498
And the company began with the golden rule where JCPenney, James Cash Penney,

00:40:22.498 –> 00:40:25.712
said, we will never offer a product on sale.

00:40:25.996 –> 00:40:27.813
Truth begins on the price tag.

00:40:28.033 –> 00:40:28.399
Yeah.

00:40:28.806 –> 00:40:33.028
You know, look how that evolved. But, you know, the reality is we all know today

00:40:33.028 –> 00:40:34.151
everyday pricing won. Yeah.

00:40:34.998 –> 00:40:39.318
Yeah, there are people that look at look at what’s happened to Ross and Marshall’s

00:40:39.318 –> 00:40:42.510
and the off price industry that continues to grow.

00:40:42.777 –> 00:40:43.102
Yeah.

00:40:43.706 –> 00:40:49.000
It’s everyday pricing and they they pretend it’s 60 percent off 40 to 60 of department store.

00:40:49.447 –> 00:40:51.786
Well, none of this merchandise sold at department stores anymore.

00:40:51.978 –> 00:40:52.309
Yeah.

00:40:52.511 –> 00:40:55.891
But but it’s an everyday low price strategy. Walmart’s everyday place.

00:40:56.001 –> 00:40:56.368
Yeah.

00:40:56.368 –> 00:40:59.048
Targets a large, you know, everything’s everyday place.

00:40:59.048 –> 00:41:04.998
Yeah, I do think the conventional wisdom today is everyday low pricing is a

00:41:04.998 –> 00:41:12.688
better business model, comma, if you’re already high-low, it’s very hard to roll that back.

00:41:12.688 –> 00:41:13.028
It’s very hard.

00:41:13.028 –> 00:41:18.848
It is. And JCPenney would be one of the top case studies of how hard that was,

00:41:18.848 –> 00:41:21.988
although not the only one. Macy’s and others went through similar struggles.

00:41:21.988 –> 00:41:26.028
But, you know, it is interesting. Our sales went down the first year because

00:41:26.028 –> 00:41:28.234
we just basically took off all promotion.

00:41:28.490 –> 00:41:28.839
Yeah.

00:41:29.105 –> 00:41:31.020
And our sales went down 20%.

00:41:31.304 –> 00:41:31.559
Yeah.

00:41:31.751 –> 00:41:36.952
Our plan was to be down 15. It was, you know, 5% worse because it’s hard to predict these things.

00:41:37.063 –> 00:41:37.388
Yeah.

00:41:37.388 –> 00:41:42.448
When I was at Apple in 2002, our sales went down 40%.

00:41:42.568 –> 00:41:42.844
Oof.

00:41:43.617 –> 00:41:47.315
As we transitioned the operating system and our processors.

00:41:47.907 –> 00:41:52.577
And that was really comfortable for Apple because we knew that we had to get

00:41:52.577 –> 00:41:57.597
to a new processor family, get off Motorola, get to Intel, to get to the other

00:41:57.597 –> 00:41:58.688
side to continue to grow.

00:41:59.283 –> 00:42:03.446
But in retail, people are saying, why would you fire your customer?

00:42:03.771 –> 00:42:04.096
Yeah.

00:42:04.403 –> 00:42:07.747
Well, we had an old customer. We wanted to get young people to shop at Penny’s.

00:42:07.747 –> 00:42:11.657
And to do that, we had to get these new brands to want to come.

00:42:11.657 –> 00:42:17.407
And we created a store with 100 store within a store. It’s kind of like Best Buy is today.

00:42:17.407 –> 00:42:17.825
Yeah.

00:42:18.178 –> 00:42:24.597
And we’re gonna fill those with all these DTC brands that now all have big footprints.

00:42:24.597 –> 00:42:25.860
Yeah. Look at Warby Parker.

00:42:26.418 –> 00:42:30.702
Look at Vori. Look at all these people. Who are just winning through stores.

00:42:30.940 –> 00:42:31.147
Yeah.

00:42:32.567 –> 00:42:37.317
In my mind, I think people look at your tenure at JCPenney, and if they want

00:42:37.317 –> 00:42:41.177
to be really superficial, they’re like, oh, man, he came in with the wrong strategy,

00:42:41.177 –> 00:42:43.108
and the customer didn’t accept it and fired him.

00:42:44.255 –> 00:42:47.407
I look at that, and I’ve worked with a lot of very big retailers.

00:42:47.407 –> 00:42:50.867
And what I’ve learned in my career is the hardest thing is not – knowing what

00:42:50.867 –> 00:42:53.148
to do is very hard, but it’s not the hardest thing.

00:42:53.375 –> 00:42:56.567
The hardest thing is the organizational change management.

00:42:56.567 –> 00:43:02.307
It’s getting 1.7 million Walmart associates to do their job differently tomorrow

00:43:02.307 –> 00:43:06.047
than they did it yesterday or any of those things. And so I don’t think the

00:43:06.047 –> 00:43:10.198
data is there to say that any of your ideas of JCPenney were necessarily wrong.

00:43:10.867 –> 00:43:15.607
I think it was really hard to implement those ideas, and it probably required.

00:43:15.927 –> 00:43:18.627
No, the way I implemented it was a disaster.

00:43:18.627 –> 00:43:18.998
Yeah.

00:43:19.927 –> 00:43:23.187
And if you look back, at Apple, I was the only retailer for a while.

00:43:23.187 –> 00:43:26.520
Then I built the entire team, and we created the store together.

00:43:26.915 –> 00:43:28.287
Yeah. So you didn’t have the change.

00:43:28.987 –> 00:43:31.919
I didn’t have the chance to. I went to Penny’s. The board wanted to go.

00:43:32.511 –> 00:43:33.945
And I just said, here’s what we’re doing.

00:43:34.218 –> 00:43:34.427
Yeah.

00:43:34.727 –> 00:43:39.303
And that was bad. The team wasn’t ready for it. They didn’t understand it.

00:43:39.910 –> 00:43:43.160
You know, so it was, there’s a lot, but there’s a lot of good lessons.

00:43:43.747 –> 00:43:46.247
Oh, for sure. And that’s, that’s, you know, why I wrote this book.

00:43:46.247 –> 00:43:49.627
You know, when I look back at my career, you know, when I was young,

00:43:49.627 –> 00:43:51.171
you remember this, there were people like Tom Hanks.

00:43:51.821 –> 00:43:52.845
Tom Peters.

00:43:52.845 –> 00:43:53.225
Oh, yeah.

00:43:53.225 –> 00:43:54.795
In search of excellence. And,

00:43:55.237 –> 00:43:59.145
there are all these great books we used to read. Stephen Covey’s books.

00:43:59.145 –> 00:43:59.602
Yeah.

00:43:59.730 –> 00:44:03.875
You know, and, you know, you read a book and you get one thought and you apply

00:44:03.875 –> 00:44:05.419
it to work and it can change the game.

00:44:05.564 –> 00:44:06.225
Yeah.

00:44:07.503 –> 00:44:11.595
Hopefully my book, someone will read it and say, I like how they thought about people.

00:44:11.595 –> 00:44:14.275
I like how they thought about culture, how they thought about real estate,

00:44:14.275 –> 00:44:18.405
how they thought about design, how they thought about change,

00:44:18.405 –> 00:44:22.975
you know, and hopefully people will you know think about it and and maybe it’ll

00:44:22.975 –> 00:44:24.604
give them a chance to do something different.

00:44:24.865 –> 00:44:29.165
Yeah i i love that and i’m sure that that will happen uh my we’re coming up

00:44:29.165 –> 00:44:33.039
on time but my listeners will murder murder me if i don’t bring up two other topics,

00:44:33.538 –> 00:44:38.713
one is a debate we’ve been having for as long as the the internet’s existed is the whole,

00:44:39.185 –> 00:44:42.375
role of brick and mortar stores versus digital right and we have this funny

00:44:42.375 –> 00:44:46.735
saying the internet saw buying but broke shopping and there there’s a lot of

00:44:46.735 –> 00:44:50.915
people that say like oh man stores are done i think mark andreessen at one point

00:44:50.915 –> 00:44:53.802
said that you know stores are going to go away that hasn’t happened,

00:44:54.680 –> 00:44:59.375
the i’m kind of curious where where you sit you lived through the whole digital

00:44:59.375 –> 00:45:00.405
revolution of retail like what,

00:45:01.826 –> 00:45:02.905
like are they it’s.

00:45:02.905 –> 00:45:07.675
Not there’s not even a debate anymore the answer is in front of us yeah stores

00:45:07.675 –> 00:45:10.575
didn’t win online didn’t win omni-channel one.

00:45:10.575 –> 00:45:10.986
Yeah.

00:45:11.547 –> 00:45:16.735
It just took time you know today 85 percent of revenue comes from well 70 of

00:45:16.735 –> 00:45:19.225
revenue comes from physical stores 30,

00:45:19.785 –> 00:45:25.075
from online but half of that is the online arm of a physical store like walmart

00:45:25.075 –> 00:45:29.545
or target or the gap yeah so there’s only one out of seven dollars that comes

00:45:29.545 –> 00:45:31.505
from a pure play online store,

00:45:32.245 –> 00:45:35.396
and every online store has tried to open physical stores,

00:45:36.155 –> 00:45:39.294
Look at what Walmart’s tried all these years or Amazon’s tried all these years.

00:45:39.434 –> 00:45:40.289
Yeah, Amazon, sure, sure. Amazon.

00:45:40.515 –> 00:45:44.374
Yeah. And they’re now building a 250,000 square foot super center in suburban Chicago.

00:45:44.374 –> 00:45:48.138
I know. I live in Chicago. I’m, I drive by. I’m, I’m super excited to see what they do with it.

00:45:48.694 –> 00:45:54.614
But the, the proof to me, the biggest proof point is if Amazon hurt any retailer,

00:45:54.614 –> 00:45:55.824
it would have been Walmart.

00:45:55.987 –> 00:45:56.319
Yeah.

00:45:56.748 –> 00:46:02.674
Walmart was the low price category killer. They had everything in the physical

00:46:02.674 –> 00:46:05.032
world and that’s what Amazon became.

00:46:05.622 –> 00:46:11.044
But walmart today its stock prices eight times yeah now hit a trillion dollars

00:46:11.044 –> 00:46:16.824
recently it was worth 130 million back in 2000 when the dot-com thing started,

00:46:17.312 –> 00:46:22.384
yeah and so what truly happened in retail is retail got overstored in the 80s

00:46:22.384 –> 00:46:26.194
and 90s when there was abundant capital like we talked about early that’s what

00:46:26.194 –> 00:46:28.994
people were doing the only way to grow is to add more stores,

00:46:29.514 –> 00:46:32.509
and if you weren’t opening 10 new stores a year there was a problem,

00:46:33.078 –> 00:46:37.844
we had overstored when the internet came on it took time for retail to learn

00:46:37.844 –> 00:46:41.864
how to do online shopping look at target we talked about took eight years they

00:46:41.864 –> 00:46:46.634
brought it on their own yeah but eventually they figured it out then they could reduce the the.

00:46:47.494 –> 00:46:52.464
The overstoring they got to the right equilibrium and now you’re in a position

00:46:52.464 –> 00:46:57.550
where retailers are stronger and customers sometimes go online sometimes go to stores,

00:46:58.102 –> 00:47:01.704
stores you know but only channel is how we shop yeah you know that’s just the

00:47:01.704 –> 00:47:07.389
way it is so i think physical stores actually the online was the rebirth of the store,

00:47:07.976 –> 00:47:11.094
and gave them a chance to rethink that whole customer experience model,

00:47:11.694 –> 00:47:17.134
but it didn’t kill stores stores have thrived amen and it’s just the fact that

00:47:17.134 –> 00:47:21.944
you can’t argue about it now stores did hurt small town yeah you know where

00:47:21.944 –> 00:47:24.270
you couldn’t afford. You have people buy online.

00:47:24.635 –> 00:47:26.841
There’s just not a lot of volume that supports stores.

00:47:27.690 –> 00:47:31.179
Stores online hurt tired retail. It always has.

00:47:31.733 –> 00:47:36.593
Tired retail never works. But most of the great stores, look at the gap today.

00:47:36.593 –> 00:47:39.713
The gap’s on their way back at all their divisions, right?

00:47:39.713 –> 00:47:39.953
Yeah.

00:47:40.493 –> 00:47:45.273
It wasn’t an online issue. It was a merchandising, a branding issue that Richard

00:47:45.273 –> 00:47:50.057
and team are bringing back. And so the reality is tired retail doesn’t work. Omnichannel does.

00:47:50.348 –> 00:47:54.683
No, I think that’s very evident. And so then forecast that to the next thing.

00:47:54.683 –> 00:47:57.343
All anyone wants to talk to me about these days is the robots,

00:47:57.343 –> 00:48:01.593
is AI, right? And so, you know, I started e-commerce in the 90s.

00:48:01.593 –> 00:48:05.168
We had to figure out card not present transactions because they were illegal.

00:48:05.504 –> 00:48:08.593
Now they’re trying to figure out human not present transactions.

00:48:08.593 –> 00:48:12.260
And there’s a bunch of talking heads that are like, oh man, the robot’s just going to shop for us.

00:48:12.585 –> 00:48:16.956
We’re going to stop shopping on our own. We’re going to stop picking brands and going to stores.

00:48:17.793 –> 00:48:20.973
How do you see AI playing out and and what will.

00:48:20.973 –> 00:48:25.140
That add or subtract yeah we’ll have a ai it’s just it’s another technology,

00:48:25.725 –> 00:48:29.410
you know and technology has always helped retail it’s always helped business

00:48:29.847 –> 00:48:33.283
takes a while to learn how to use it there’s a lot of fear that ai is gonna

00:48:33.283 –> 00:48:38.773
eliminate jobs and it will but it’ll also create jobs you know it’s so interesting you read now,

00:48:39.366 –> 00:48:42.393
the jobs report the last three months has been really good.

00:48:43.173 –> 00:48:48.203
And you read about people like block and you know meta laying all these people

00:48:48.203 –> 00:48:49.634
off. That’s big headlines.

00:48:49.971 –> 00:48:51.463
The reality is we’re still hiring.

00:48:51.997 –> 00:48:55.783
And most companies are using AI in really smart ways.

00:48:56.329 –> 00:49:00.993
But with retail, we’re all starting to use agents to shop. Walmart’s got the

00:49:00.993 –> 00:49:02.673
lead there, really doing a great job.

00:49:03.453 –> 00:49:07.513
Amazon’s trying there. They have an agent shopping thing. It’s very slow.

00:49:07.513 –> 00:49:10.822
And I don’t think it’s particularly good. I was playing around with it today.

00:49:11.454 –> 00:49:16.722
But the world’s changing. But I expect, I really believe Like, you know…

00:49:17.357 –> 00:49:23.496
In a world of the world’s gotten way too digital and the people in their 20s

00:49:23.496 –> 00:49:28.106
and 30s, they’re joining running clubs and they’re looking for human connection.

00:49:28.106 –> 00:49:32.076
And, you know, they’re the ones going back to stores and, you know,

00:49:32.076 –> 00:49:36.596
malls where I live, Stanford Shopping Center, where people have been trying

00:49:36.596 –> 00:49:41.711
to put stores out of business for 30 years is the hardest parking place in the valley.

00:49:42.112 –> 00:49:45.336
You know, so I just think people are looking for a connection.

00:49:45.336 –> 00:49:50.346
And, you know, hopefully AI, because we’d be more efficient at getting general

00:49:50.346 –> 00:49:55.875
knowledge, will let us spend more time connecting, you know, is what I hope for.

00:49:56.119 –> 00:49:59.966
Yeah, I think I share your hope. And I think there’s there’s reasonable optimism

00:49:59.966 –> 00:50:01.296
that that’s how it’s going to play out.

00:50:01.296 –> 00:50:04.356
Yeah. And I just did build a build off that real quick. I read an article last

00:50:04.356 –> 00:50:08.620
week. Satya Nadella was talking about where he sees AI going.

00:50:09.218 –> 00:50:18.305
And he talked about human capital and he talked about, what was his word for it? Token capital.

00:50:18.954 –> 00:50:23.032
That’s the same as physical retail and digital retail.

00:50:23.572 –> 00:50:27.281
Omnichannel is the intersection of physical and digital.

00:50:27.838 –> 00:50:32.086
What Satya is saying is really, it’s almost like there’ll be this new category

00:50:32.086 –> 00:50:37.680
called omniintelligence, which is agentic intelligence. It’s general knowledge,

00:50:38.150 –> 00:50:40.013
applied with human knowledge.

00:50:40.550 –> 00:50:43.168
And the bringing of that together is really the future, I think.

00:50:43.777 –> 00:50:47.556
And I think we’re going to rely more and more on people’s own lived experience.

00:50:48.056 –> 00:50:50.906
And we’re going to be bringing our own personal geography to work where we grew

00:50:50.906 –> 00:50:52.601
up, the lessons we learned.

00:50:53.106 –> 00:50:55.653
And that’s what’s going to matter. That’s where the value will be.

00:50:56.100 –> 00:50:59.806
And how you bring that together with knowledge you get from AI.

00:50:59.806 –> 00:51:01.522
It’s not going to be AI telling you what to do.

00:51:02.120 –> 00:51:04.304
It’s how it enables you to think differently.

00:51:05.054 –> 00:51:07.717
Yeah, I think that is a really interesting way to think about it.

00:51:07.717 –> 00:51:10.617
And I think that’s going to be a great place to leave it because once again,

00:51:10.617 –> 00:51:12.817
we have used up our listeners time.

00:51:12.817 –> 00:51:16.327
But this super interesting conversation. I’m so grateful for you taking the

00:51:16.327 –> 00:51:19.611
time. I’m so grateful for you writing the book. And I’ll remind listeners,

00:51:19.948 –> 00:51:25.489
Shop Different is coming out on September 22nd, and we’ll have links in the show note to buy it.

00:51:25.762 –> 00:51:28.800
But Ron, thanks very much for sharing some time with our listeners today.

00:51:29.424 –> 00:51:30.968
The pleasure of mine. Thank you.

00:51:31.259 –> 00:51:34.534
Yeah. And until next time, happy commercing. you.