Former Retail Chief Recalls The Early Years

July 9, 2014

During a recent presentation at his alma mater, Apple’s first retail chief explained that the stores were originally conceived as places where communities would form, and that only one of every 100 store visitors actually makes a product purchase. Former Sr. VP Retail Ron Johnson told a Stanford University audience in May that store high-speed Internet connections—nearly unheard of at the time—were intended to attract visitors, allowing them to check their email or surf the Web. Johnson spoke as part of Stanford’s Graduate School of Business “From the Top” series that spotlights company executives. Johnson was an undergraduate at Stanford, and also attended Harvard Business School (HBS). Johnson recalled his close relationship with Steve Jobs, and the main lesson he learned from him—‟You have to be willing to start again.” He recounted the previously-told story (but in more detail) of how the original Apple store design was re-done at almost the last minute in 2001, because Jobs’ trusted Johnson’s evaluation that it didn’t match up with the company’s “digital hub” philosophy.

Based on Johnson’s statement, in fiscal 2013 the retail stores generated their $20.2 billion in revenues from just 3,950,000 customers, or one percent of the total visitors. Those figures indicate the average in-store purchase during 2013 was $5,114. [However, not all retail segment sales are made by physical visitors. Sales made via store-specific Web pages and from purchase orders are also attributed to the retail segment. These sales would affect the average sales figure shown above. Interestingly, Apple did not report the number of store visitors in its Q2 2014 financial report.]

Johnson mentioned that other types of retail stores experience a different level of purchases: about 25 to 30 percent of apparel store visitors make a purchase, while about 75 percent of grocery store visitors are buyers.

Johnson was hired in 2000 to create Apple’s retail presence, and he led a team of nearly 50,000 retail employees until 2011, when he left to become CEO of J.C. Penney. He recalled his goals to re-make JCP, and was frank in explaining why he eventually resigned in early 2013. He attributed his failure to “arrogance” and making changes too quickly within the Penney culture.

Johnson recalled the main lesson he learned from HBS—there’s no single answer to business problems. “Don’t just fall into the expected, obvious, easy path,” he told the audience. “Don’t just rely on numbers,” because following the numbers will lead all companies to the same conclusion. Sometimes the “left-field, oddball” approach is more appropriate, he said. “Sometimes it’s about picking the unexpected path.”

Johnson gravitated to retail after reading hundreds of case studies at HBS. “I liked walking through stores,” he told the audience. Also, not many people from HBS were going into retailing, which he saw as an advantage in seeking a successful career.

After HBS, he turned down a headquarters job at Mervyn’s, and instead worked at the company’s warehouse unloading trucks for three months, learning the most basic functions of the retail operation. He was promoted to different positions every six months to one year, he recalled, gaining experience at every level of the business. When Mervyn’s sister company Target became the faster-growing unit, Johnson transferred there in 1990 as a middle manager.

At Target, Johnson is generally credited with pointing the company towards creating well-designed products to sell. The lesson, he said, is that, “You don’t have to be the senior person in the company to impact the company. You can’t sit around in business waiting for people to do great things. I think it’s up to everyone in business to do great work.” Further, he said great leadership is not positional, but situational. “It’s not about who’s got a title. The leader is the leader of the moment who has accountability. That’s where the best leadership comes.”

Johnson said he believes that, “Everyone is a creator, and everyone is creative.” In his case, it was only after he left Target and arrived at Apple that he became creative. Steve Jobs gave him complete control of the retail store project and Steve trusted Johnson’s imagination. Johnson began with a list of eight or 10 things that would define the stores, including where to locate the stores, and how product support would operate. Steve Jobs approved the list without hesitation, Johnson told the audience.

“It was a pure play,” Johnson said of the store design. “There was really no compromise on any of the intuition. And I think that’s how the Apple stores connected (with visitors).” Even today, he said, people go to the stores, “just to go. They don’t go to buy. There are so many reasons to come.”

Looking forward, Johnson feels that technology has created much more intimacy among people. Retail stores will continue to exist, he said, but will need to provide personal service and experiences to stay relevant in the age of on-line shopping.

As for his future, Johnson said he took a year off after his Penney experience to determine what to do next. He was receiving 10 meeting requests an hour back then, but decided to book only three a day to help companies and individuals. He did that for several months to help him decide what path to take. He’s now created Johnson Partners to co-investing and advising investments. And in typical Apple fashion, he’s “working on some other things I can’t talk about yet.”

Lastly, Johnson revealed that he helped design and build a family home in France, using French limestone, brass, glass and wood. He likened the project to building a great Apple store. “It’s got to have a sense of place, a sense of connection, and it’s got to create a place you love to be, so it moves beyond being a home. It becomes a huge part of your life.”

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