The Man Who Built the Apple Store Never Tried to Sell You Anything

0:02Turn back the clock to 2000. Apple was a 25-year-old company that had largely been defeated. Now they invented the personal computer. Steve came back in 97. Apple had 5 % market share. Microsoft had 95. Now if he translated that to a baseball game, they were behind 19 to 1.

0:35That was Ron Johnson, creator of the Apple Store and author of Shop Different, on why the world's most powerful retail brand never tries to sell you anything. I'm Motley Fool analyst Jason Moser. Ron spent years working directly alongside Steve Jobs to build the Apple Store from the ground up, And his new book reveals what that experience taught him about retail, leadership, and what makes customers stay genuinely loyal for life. In this conversation, Ron and I talked about the inside story of Apple's retail gamble, why he thinks new Apple CEO John Ternus doesn't need to be in a hurry, and what his very public stumble at JCPenney taught him that no amount of success ever could.

1:23We hope you enjoy. Welcome to Motley Fool Conversations. I'm Jason Moser, and today I am excited to welcome the creator of the Apple Store, Mr. Ron Johnson. Now, prior to Apple, Ron was a merchant leader at Target. At PostApple, he served as the CEO of JCPenney, and he's also an author. His new book, Shop Different, How Retail Revealed Apple's Genius, is out now and available wherever you get your books. Ron, welcome to the show. Well, Jason, thanks for having me on. It's great to be with you. That's a big thrill to meet you here. And I just looking forward to the conversation. I think I just want to get started here.

1:59You know, your career is unique. It covers such a broad cross section of the overall retail environment. So I guess I'd like to start at the beginning. Sure. Talk about your time at Target. What was it that drew you to that opportunity? Well, I was in business school. I went to Harvard Business School, but I'd grown up in a suburb of Minneapolis where Target was founded, you know, where Dayton Hudson was based. And I love being in stores. And so when I was graduating from business school, I had offers like a lot of the kids did to go into investment banking, like a Goldman or Solomon both offered me jobs.

2:36But I kind of wanted to do something I might love for a lifetime. And I didn't think it was banking. And so I picked retail. I love being in stores. and so I went to work with a subsidiary at the time of Dayton Hudson which got renamed Target as most of your people now I called Mervins on the west coast and I started after business school I got to unload trucks which was really fun I could do it really fast I could get a big trailer done in about 45 minutes on a good day and filled on the floor and in the stock room and then they let me work on the cash rep and straighten clothes. But eventually I, you know, ended up at Target at about age 30.

3:20It was a great time to be there. It was about 1990. And that's when the discount wars were at their peak. You know, the U.S. had about 10 to 12 discount stores, one for every region it seemed. But it was clear it was going to come down to Walmart and Target. And Target was the higher priced suburban differentiator and Walmart was the low cost rural operator. But they were now moving into the suburbs and it was a great battle. And so I kind of cut my teeth in retail really as a merchant at Target. And that was a big part of what I did. Okay. So now we're getting to a seminal moment in your life and that of apples, I might say as well.

4:02You go to Apple. Now, how did that unfold? I mean, going to such an important and amazing business, and even at that time, maybe it wasn't quite where it is today, still a big move. How did that unfold? Well, it was actually pretty contrary, but no one thought it was a good idea for me to go there. Because if you go, turn back the clock to 2000. Okay. This is when I went to Apple in 1999, late 99, Apple was a 25-year-old company that had largely been defeated. You know, they invented the personal computer. Steve came back in 97. Apple had 5 % market share. Microsoft had 95. Now, if he translated that to a baseball game, they were behind 19 to 1.

4:53I mean, that's how tough it was for Apple. Uh, but Steve concluded, uh, he wanted to open stores. And that says a lot about Steve, cause this was 2000 when the internet was going to take over the world and prominent venture capitalists like Mark Andreessen said, you know, stores in the future will no longer exist. It's like people today saying the AI, we're not going to exist. You know, people thought this technology would change the world in that way. and but steve knew and after 25 years if apple had better products but couldn't win you know with technology without a store that was the missing link and he wanted to improve apple's go-to-market he called me to talk to me about it because i had done some pretty significant work at target i was the guy who brought design to target you know i get all the credit for it a lot of people did that together but i brought a partnership with michael graves which kind of changed target uh for your investors out there target would have been a good buy in 1990 it went up 12 times during the decade oh yeah 12x was pretty good it really outperformed walmart during that period walmart's now won the last 25 years of that battle um but i went to apple to work with steve to create the stores now the reason was controversial is apple was trading a a little above cash value.

6:21You know, Apple was seen as a high-risk company. Steve was kind of legendary for firing people in the elevator. And I've had this great career at Target, which is just doing awesome. You know, people said, why would you leave to go to a company like Apple? And Target's got 100 ,000 products. Apple has four. What are you going to do? You're going to build a store on four products. and I just I met Steve and I said this is what I want to do and I did it you know I'm always amazed at how crowded those stores still are to this day it's it's it's always just astounding you could go to a mall and like every other store is empty the apple store you just you can bet dollars to donuts it's going to be full it's going to be busy and people are just loving being there uh now mentioned at the top of the show you're the creator of the apple store which I think is just phenomenal.

7:15Now, you talked about how you convinced Steve Jobs to build a store based on love. And the Apple Store shows how love, I think, works as a business strategy. How do you think companies can incorporate love into the workplace? Well, I think you need to, as I spoke to Steve, when I told Steve, he said, Ron, one of the first conversations is, what's our service strategy you going to be? And I said, we're going to love our customer. And he said, well, I don't love my, what do you mean we're going to love our customer? I don't, I don't love our customer. That's a strange word to him. Not that he didn't love his family and his wife, but he didn't understand love at work.

7:59And I said, no, love works. And I said, here's what it means. You love customers. I can tell because of how you design products. Now, your number one priority is ease of use. You do that to secure the good of a customer. That's all love is. You find a customer, you ask the question, how can I secure their good? What is it they need? So it's very simple, Steve. Everyone who comes in the store, we're gonna give them a warm welcome. We're gonna ask them why they came to the store that day because nobody walks in by accident. There's a lot of stores that came in here, whether they did browsing or I'd like to, I've never tried a Mac.

8:40Well, why don't we set you up on a Mac? We'll get you started. I'll let you go. And if you need any questions, just reach out and come back. If not, just have fun. And when you're done, you know, we'll see you next time. But it was all about whatever the customer needs. Let's make sure when they come to the store that day, they interact with an employee. we address their reason for coming and give them a fond farewell you know and that's what love was you know and so love starts by having a vision for how you're going to take care of customers but then it's most important how do you love your employees same thing how do you secure the good of an employee and you just got to go through every step in the hiring process your everything you do to create a place people love to work, you know?

9:28But it's really quite simple. We love people all day long in our personal lives. You know, it's just how do we do that at work, you know? We always had an idea, you know, Jason, that was don't try to sell anything. You know, I tell Steve, we're not going to sell our way to success. That's transactional. You're going to turn more people off trying to do it than you're going to turn on. You know, we're going to serve our way to significance. And that's significance in their lives.

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11:45i wonder what you could share about that mindset shift yeah uh target like many it was a great company in the 90s and it's still they're having a good period again now they've got a new ceo as we all probably know and yeah they seem to be getting back to their you know tarjay um but uh you know at target you were encouraged to be different because we had to be different than Walmart, but radical innovation wasn't really encouraged. Like when I did the big design industry for Michael Graves, the CEO said to me, Ronnie, he goes, I think it's a good idea. Why don't you use three items, put them on a backend cap and see if anyone buys them.

12:27And if they do well, do a fourth. Well, you know, we launched with 140 products. We took over the two main aisles of the home area. And in many ways it changed target. But, you know, when I was at Target, you know, you had to, if you thought big, there were a lot of people challenging why that maybe we shouldn't do that, you know, and there's a lot of kind of pullback and you push it through, but it was work, you know? So I get to Apple and, you know, I'm now reporting to Steve Jobs and whatever I thought of, he's thinking one step beyond, you know, he would, I think big, he'd think bigger, you know, Steve, I think had the privilege, you know, he changed the world in his early twenties, inventing the personal computer, you know, the Apple computer and, and went public and at age 24, he did it again with Pixar with movies, you know, so he lived his life to do these really significant things.

13:29You know, that was the iPod. That was the phone. That was the iPad. That was the music store. That was the stores to him. You know, he knew retail was important for Apple, but he wanted it to be great. And so he invested a lot of his personal time during the first year when we created the prototype to make sure it was the best that he could you know imagine and so to me where it got bigger was i always had an imagination i wanted to do big things but it's nothing like you know being in a room with steve jobs because he just thought bigger than any of us you know yeah no i can imagine um so steve jobs we go to tim cook now apple has just seen another meaningful transition in leadership to john turnus turnus taking over now for Tim Cook.

14:22He has obviously some big shoes to fill. I think, you know, I remember very vividly, we as a team, we're all talking about Tim Cook taking over for Steve Jobs. How's this going to work? Can he do it? I mean, you look back and you think, wow, what a track record. He obviously did a phenomenal job. In regard to John Ternus, what do you think his focus needs to be on? Is it more about trying to make some sort of a big splash in some way? Or is he better off, at least in the near term, just focusing on maintaining the status quo and let what's working keep on working? Well, that's a really good question.

15:00You know, Apple has had two great CEO transitions in a row, Steve coming back for a dozen years, 15 years, Tim leading for another 15 plus years, and now you got John. And I think the lesson is what makes Apple a great company is they never are really in a hurry. Yeah. That make sense? Yeah, absolutely. Steve famously just did great work. You know, we never looked at the stock price in the ET meeting. We never even talked about it. Yeah, we didn't manage a business to make money. We managed a business to create amazing products get them to as many people as to take care of customers and the outcome would be we made you know profit and steve led that way tim led that way you know tim and i think steve and tim were very unique people steve was a clearly a leader and innovator tim was more of a manager and operator but they both produced extraordinary results you know steve really helped build out the product line, Tim then optimized every one of those products, but took it to the world.

16:17You know, I mean, Apple's got nearly 2 billion users now around the world using products. When I started, it was 25 million. You know, and I bet if you look at when Tim took over as CEO, it was in the hundreds of millions. You know, the work, it's really hard to build an installed customer base, right? So Apple has this very loyal installed base of 2 billion customers. You know, the reality, you're not going to double the business by doubling your customers. There's only so many people in the world. So for Apple, and I think John, I assume he fully understands this. It's about making sure the customer has a great experience with every products.

16:58And you improve these products on a regular basis through a lot of hard work. And you're improving every aspect of the product. the chipset the hardware the software experience the apps these are very they're simple devices in some ways but they're very complex that everyone uses and so I think John doesn't need to be in a hurry Apple should be at the forefront of innovation on the hardware side the software side but I don't think he has to worry about there being a magic new device that's going to take away the iPhone You know, this iPhone has been the form factor for 20 years and it's portable.

17:40It fits in your pocket. It's got a really worthwhile size screen, you know, and Apple already has a lot of AI devices. You know, your AirPods are an AI device now. Yeah. Your watch is an AI device. You know, everyone talks about what's these next little pins and things going to be. Well, I'm personally not on pins and needles worried about that. No, nor am I. And then Apple is proven. And the mindset there now is it's not about being first. It's about being best. You said it. I was just going to bring that up. That's everything that you were saying right there just reminded me of. We've heard Tim Cook say this many times.

18:19It's just it's not about being first. It's about being best. And clearly that's working. It's working. And Apple, a perfect example is, you know, it was hard. I mean, Apple's arguably been behind on AI. Siri was announced a long time ago. It hasn't been at the standard that you'd expect from an AI agent. I've been using the new one with iOS 27. It's much, much better with the integration they have with Gemini, Android Chat, GPT, whatever they're doing behind the scenes. It's much better, you know. But the thing Apple's done right on that is its privacy. There's this huge concern people have for privacy.

19:00And Apple never sacrificed. They always protected that. Steve started that. When the internet came out, he created a product in 2001. He announced it called KidsSafe, which was meant to keep kids safe when they're online. and just last week Tim was in Australia with the prime minister minister talk about how do you keep iPhones safe for kids you know so privacy safety these are kind of core values of Apple and so when I look at John it's about leading that company with great people but protecting the values that make Apple great The ability to think different. The love of the customer and enriching their lives.

19:48This deep, deep, deep integration of hardware, software. From the factory to the store, owning that customer experience. These things are deep in Apple's core, and that's why we are so loyal to Apple. And I think John has obviously been there 25 years. So he's drank the Kool-Aid. He's soaked up the culture. He seems like just an incredible leader. I know from talking to people there that transition's been embraced fully. Tim's worked hard at that. I expect John will put a stamp on the company just like Tim did, just like Steve did. And that he'll be a leader there for a long time. That's what I hope and I expect that.

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21:39Okay, so circling back to the top of the show here, we talked about how your retail experience, your professional experience, such a broad cross-section of the retail environment. I wonder, what do you think companies can learn from your experience at Target, at Apple, at JCPenney that can help inform their design, their sort of understanding of the customer experience? Well, I think you can learn from my successes. You can learn from my failures. From my successes, I think you can learn how to really innovate, how to be bold, how to do things that haven't been done before. and you can learn how to really serve customers.

22:22And it goes back to what I said earlier, you're not in the transaction, you're in the relationship business. Yeah. You're a company, it's how many customers do I have? And how loyal are they? And how do I deepen that relationship? I would look at a business from a customer metric based, you know, how deep is that relationship? And that's what you learn from it. But, you know, I had a big failure When I went to Penny's, that didn't work. And so I could write a whole book about how not to transform a company. I went in there. Penny's was a difficult situation too, admittedly. I mean, that was a difficult situation.

23:01But I made it harder because I went in, you know, I had the impression they wanted to change. It turns out they really didn't. I hit a wall. Right. You know, the employees, quite frankly, felt that, you know, I looked at it. there had been 150 department stores in the U.S. in 1960, unique nameplates, you know, Dayton's, Marshall Field's, iMagnon, you name it. There were about 10 when I got the pennies and the department store segment had gone way down as the internet, specialty stores, big box retail had all gone way up. You know, the share of the business and department was way down. And so I thought if the department store had a chance, it had to reinvent itself for the next hundred years.

23:47Well, it turns out nobody else thought that, you know, at Pennies, they were just happy they had survived. They were like the champion of the lower income customer. And in spite of the stock being the same as it was 40 years before, they were winners. You know, so I go in there, having met Apple, where you're always trying to change the world and you're comfortable with innovation. I present an innovative vision. They didn't want to do that, you know? And then I could have taken my time, gone slower and really built a team to implement that. I could have brought in some new people. I could have taken the time to make sure people understood.

24:26I could have listened more to what were the real needs of that customer and not just putting my retail hat on from what all I experienced on the outside. You know, so I learned a lot about how not to transform a company because I made a lot of mistakes. I think the vision wasn't the issue. You know, it was the implementation of it. So for my career, you know, I've seen a lot of industries and especially in the retail, a lot of different types of formats. But I can help a lot with how to design a great customer experience, how to win on innovation, how to build a culture where people love to work that's built on love.

25:06but you're probably not going to hire me to do a transformation of a company because I don't have a good track record of that. Yeah. You know, I've, I've always felt like as investors, one of the greatest superpowers is learning how to embrace your mistakes because those really are the biggest teachers. And if you can have that humility and embrace them and actually almost look forward to making the mistakes, you just don't realize at the time, at least how much you learn from that. And then in looking back, it just, the knowledge that you gain from those experiences is just, it's just phenomenal.

25:40I agree. Well, I like that perspective and we'll leave it there. He's the author of the book Shop Different, How Retail Revealed Apple's Genius, which is out now available wherever you get your books. Mr. Ron Johnson, thank you so much for taking the time to join us today. The pleasure was mine. Thank you, Jason. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers.

26:17Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. To see the full interview, please go check our Motley Fool Conversations YouTube page. For the Motley Fool Investing Team, I'm Jason Moser. Thanks for listening. We'll see you next time.