The Friendliest Store in the Mall | Ron Johnson Built the Apple Store

23:18Get them excited about the product. Thank them for coming and say, I can't wait for you to come back again. I'll show you something else. And eventually when they came in, they said, Hey, you know, I've been to the store four or five times. I'm ready to buy my first Mac. Yeah. So we never hurried the customer. Yeah. We were really trying to just get them into the belief that they should become a part of Apple, right? Where at Target and other stores, you got to sell things.

23:46James Altucher:Look, so this is interesting because Target and Walmart are, and you describe the differences between them in the book, but they're competitive, right? They're in the same business. You even mentioned they started the same year. I didn't know that. And 1962, how did you differentiate Target from Walmart? I always think of Walmart as low-grade and Target as slightly more upgrade. Yes. No, that's what it's always been. Target was a suburban strategy to start created by a department store company that wanted to build an off-mall strategy. So Dayton Hudson Corp., one of the great department stores, Dayton's, invented Target at the same time that Kmart and Walmart launched, when these discount stores started to come.

24:31Walmart was coming from small-town, rural America, Bentonville. And, you know, rural people don't have near as much money as city and suburban people. So Walmart went to be the low-priced leader on a broad selection of goods for everybody. And to this day, that's their strength. That's their position in the marketplace. Target has to be different than them because you never want to look just like your competitor. So Target was slightly upscale with Walmart. It'll have the same everyday items, like your soft drinks, like your basic food, like your health and beauty aids. But then when it comes to apparel or home, Target's going to be a little more fashionable right?

25:11the big change I did in the 90s is I just caught this idea that design was coming that there is a third dimension for merchandise you know there's basics things you just use there's fashion things you wear for a season design was this timeless beauty

25:31James Altucher:take a quick break if you like this episode I'd really really appreciate it it means so much to me Please share it with your friends and subscribe to the podcast. Email me at alcatra at gmail.com and tell me why you subscribe. Thanks.

25:54James Altucher:It strikes me that the Tesla store looks like an Apple store. Like I bet they kind of stole, not stole, but they kind of were inspired by the design concepts of the Apple store. Like I, I don't even drive a car. I don't have a driver's license, but I like walking into a Tesla store. Can I tell you something pretty interesting? George Blankenship, who did the real estate for the Apple stores, after a number of years left to go do something different, and he went to Tesla and launched the retail stores. But no, Tesla went to shopping malls too. Yeah. Isn't that interesting? Yeah, no, it's a very similar strategy.

26:31James Altucher:And kind of the open feel, the way the Apple stores do, the fact that you could see the products very easily. It's very different from any other kind of car dealership, obviously. He was one of the first people Tesla hired when they wanted to do retail. And I'm sure they talked a lot about what made the Apple store work. And they talked about the environment we created and how it became a place you had to walk into. And the Tesla store was always very inviting, is very inviting. And so I think people have a big impact on what people do. So Steve Jobs as a manager, like there was a couple instances in the book where maybe sales weren't going so well in apple stores particularly in the beginning and he was all so nice everything hey let's fill this and then he's like what are you doing here you didn't sell anything last week like was there ever a point where he was like whoa steve i'm an adult you can't talk to me this way or like was there ever any friction no no so i remember the day you're talking on the book it was uh we had opened our third store.

27:29We opened on a Saturday. As of Monday morning, when I would go to the executive team meeting at Apple, we'd all show up at nine o 'clock. We hadn't sold a computer yet. I didn't think Steve would know that, but he was paying attention to this stuff, looking at sales reports. And I walked in, he looked at me, said, what are you doing here? I said, well, it's nine o 'clock Monday morning. He goes, you haven't sold a computer in Texas yet. Not just the store we had. You haven't sold a computer in the state of Texas. What are you doing here? You know, it was interesting. You know, he could be very direct.

28:02But I just sat down. I said, I'm here to learn and help, and I'll fix the computer problem. Yeah. But he was very direct. But, you know, Steve was never criticizing you as a person. He was criticizing your performance. He was criticizing you weren't up to the standard he expected from you. And as a high-performing person, which I and most people worked from work, you'd love that challenge to meet his standard. That's kind of one of the fun things to work in for someone like Steve. And so you never knew how he would be, what he would say, but he was very insightful and really smart. And what did you learn from him as a manager?

28:46Well, as a leader, I think I learned about leading from Steve. Steve wasn't a manager. You know, we never talked about a stock price at an executive team. We never talked about business performance. We talked about what are we doing next? What can we do to better serve a customer? You know, he believed in these very high north stars, you know, doing these incredibly hard things. So I learned about setting big goals, how to hold people accountable by setting high standards, by inspecting what you expect, by paying attention to all the details. You know, and those are the kind of things I learned from Steve.

29:22And I became a better leader because of that. You know?

29:26James Altucher:And it seemed like, like you look at his, the bench, the people who were underneath him doing the big items. So there was you, Tim Cook, Johnny Ive. These are like the best in the world at what they were doing. How did he keep that tension? How did he keep them inspired? And also, was there a time when there was somebody who wasn't at their level? Steve didn't realize it and he just had to get rid of them. Yeah, of course. Well, Steve was a master delegator. And so you're exactly right. Tim Cook was clearly the best supply chain manager operator in the world. And Steve let him run operations for Apple and then gave him more and more.

30:07But Steve never interfered with Tim's work. He let him run that. Steve wasn't all the time, how's this going? How's that going? Whatever. he was asking how can I help you know Johnny was is one of the great hardware product designers in the world and Steve knew that when he got to Apple and he worked side by side with Johnny all the time and he worked with A players and Steve always said you want to hire A players that people are the best in the world at what they do and then learn how to manage them you know so Steve surrounded himself with A players

30:44James Altucher:and like was there ever a time he made a mistake in that and someone seemed like an A player or maybe they were the CEO of a big company and oh just they didn't fit in. Yeah not often but he made mistakes and he moved quickly when he did. You know I'm not going to name names at one point he hired a head of marketing for Apple right and this guy came in and you know the marketing creators can be kind of you know unique and he came in and the first thing he did he wanted to paint all the walls in the design studio, a new color. The person lasted one week. A week leader said, Steve said, thank you for joining us, but you're done.

31:24And he went on. So Steve judged people very quickly. And if you were on the team, you were going to be a partner of his for the rest of your time at Apple until you wanted to leave. And if he didn't find a lot of talent in you, he was quick to move on that decision. you know, but most people were very loyal to Steve and worked with him for a long time.

31:49James Altucher:You mentioned in the book, a lot of people ask you now about the future of retail. I'm going to do the same. I go to the mall now. Most malls seem kind of half empty. And obviously, look, when I go into a bookstore, I confess, usually I'll just take photos of the books I want to buy and then I'll go buy them on Amazon so I don't have to buy them and then carry them around. And what is the future of offline retail? I think there's a huge misunderstanding. People think stores are dead because you see stores that go out of business, right? But retail's always had transitions. Now, if you look back over my 40, 50 years in the industry, when it started, the department store was the, that's where we all shopped.

32:34There were 150 unique department store nameplates in the U.S. in 1980. Think about that. They were all local family-run businesses that had drawn buying teams. Today, there are 10. The department store has gone away, but the specialty store has arisen. Online shopping has come on, but most of us, target stock is approaching one of its highest levels in a number of years. Another banner growth, you know, a quarter. So this idea that stores are dead is just not true. There's always been stores that, you know, do well and stores that do poorly, and the tired ones go away and they're replaced by something new.

33:15But if you take a shopping center, the biggest mall operator in the world, in the U.S., is Simon Properties. Their centers are 96 % leased, the highest they've ever been in the history of the company. Their average rent per square foot is the highest it's been in the history of the company. It's up like 6 % over the last year. There's huge demand for physical space because all of these new DTC companies are scrambling to get retail stores open as quick as they can. You know, think if you want to buy activewear. There's Worry. There's Aloe. They're trying to beat up on Lululemon. which has kind of been around for a bit.

33:58There's all these new ArcDirects, on-running shoes, Hoka shoes, competing with Nike. They're all building out their own stores. So this idea that retail is failing is just not true. You know, Walmart's stock price is almost eight times higher than it was in 2000 when we opened the Apple stores. And that's with the dot-com boom and all that happened with online shopping over the last 25 years. You know, so people buying stores and they always will. So it's interesting. So why do you think retail is not dead? Well, because there's convenience, which has always been an attribute of buying in stores.

34:36Before online, you would say, okay, how do I deliver value? It's the merchandise I offer. It's my pricing. It's the people that interact with the customer. It's the excitement and the quality of the shopping experience. and it's got something like fast checkup. But convenience wasn't the driver of a physical story. It never has been. The Apple Store, sure, it's located where you can park and come in, but it's never about waning on convenience. It's about waning on an experience, on going to a place that I love to be and I belong. The online can't do that. Online is very convenience-oriented. It's transactional.

35:19That's all it is. and that's not how most people choose to shop. And it's a settled question. That's the interesting thing. Everyone thinks this is changing. It's not. You have been buying, making a choice every week for 30 years. Do I buy online? Do I go to a store? And you make that differently for every category, for your groceries, for your apparel, for your Apple products, where you go to the Fifth Avenue store. But you've made that decision, right? And you're probably not changing your buying behavior much today compared to last year or the year before. Well, every customer goes through that same experience.

35:58They shop all the time, right? And they've got built-in habits. And those are well-engrained now because having the chance to go online is not a new thing. We've been doing that for 30 years.

36:09James Altucher:But, you know, some store categories do seem to be fizzling out. Like you spend time, obviously, at JCPenney. And, you know, that was a very different experience. I feel like that's like this sort of mid-category. I don't know how to describe JCPenney. It's basically an anchor store in a mall, and it's like mid-category. It's not high-end. It's not low-end. I describe it as tired retail. Like JCPenney stores, it's a big store with an internet or Instagram, and I can find an item and know what I want to buy so quickly. Why do I want to walk in a big, tired, poorly lit, disorganized store? I don't want to do that.

36:48That's a tired retail format. That's largely what happened to the department stores through the years. They've gone away. They've been replaced by vibrant stores, generally specialty stores and others, that are a much more exciting place to shop. So you're right. The tired stores go away. They always have. But the data is really clear. Every year there are published reports, what's bought online, what's bought in stores. It varies by category. It varies by city versus rural, but it's largely pretty static today and has been for a number of years. Online shopping isn't growing. Now, it might be within a certain retailer.

37:29Walmart's online store is doing really well. They've really worked hard in their marketplace. Target's isn't growing as fast online, but their stores continue to grow. Both Target and Walmart had very positive comp store growth this quarter. You know, it's this idea that, you know, people aren't shopping in stores. It's just not true.

37:47James Altucher:obviously you keep up with all this like what's what's kind of like your dreams now for yourself for the for the future you obviously wrote those great books shop different but you know you're you love stores you love the retail experience i love going to stores i i walk into stores every day you know if i'm in a city i'm gonna go through stores i just i i feel energy in a store i love being in stores and it's like it's like art for me it's seeing what people do because everything in there is a decision someone made in the last 90 days. The merchandise was selected, how it was presented, you know, all this stuff, it's alive, it's fast moving, and it's fun to watch how these things evolve.

38:30Every time I walk in a store, I'll notice the change from the last time I walked in that store.

38:34James Altucher:I feel like you could write a book called Bad Retail Decisions, where you analyze 100 different stores and see the bad decisions they've made? What's the last time you've walked into a store and you think to yourself, huh, that was a bad decision? Oh, and it happens every time I go out to stores. You see it. What's an example? Well, I was in Target recently. Oh, I shouldn't. Well, I'm going to say it. I'll tell you the truth. But I was curious because people say Target has lost its edge in like home and apparel. So I went in and I remember exactly by every single category in the home area target, the price points we offered, what products we offered 25, 30 years ago compared to today.

39:27And I asked myself, I went through every aisle in the home and I said, would I prefer to shop the assortment today at these price points they're offering with the presentation or would I have preferred to shop 30 years ago? And it was unquestionable. Target was a more exciting store with better merchandise, more interesting things 30 years ago than it is today. Unquestionable, right? So people change.

39:52James Altucher:Also, there's more choices now too. Like, you know, I can go to Louisville Lemon for t-shirts instead of Target. Although, by the way, I do buy all my t-shirts, Goodfellow brand from Target. Oh, that's great. That's great. No, but my only point is these stores, you know, you walk in. So when I look at what targets during the day in some categories, I go, I kind of scratch my head and go, why would they have evolved to this? But you realize institutional memory fades pretty quickly in companies. You know, if you aren't staying pure to what your vision is, you're going to see an evolution away from what made you successful.

40:30The best companies never do that. You look at these luxury brands like Louis Vuitton. You know, they are so pure on what their customer values. The Apple Store. I think the Apple Store is as great an experience today as it was when I led it, you know, 15 years ago. It's still a vibrant store. You walk in, it's got a heartbeat. People are connected. They're alive. It's a great experience, right?

40:53James Altucher:But what's like a decision in Target that brought it down? What do you see as, huh, they made that decision? And it doesn't have to be Target, but like what maybe because you just brought it up. What's a decision specifically that they made that you're like, I would not have made that decision? The floors. You know, when I was at Target, we were famous for these white floors that we'd clean every night. We'd run this thing, and the whole store looked clean. And the merchandise would reflect off that, and all the colors. It was a happy place. It was alive. You wanted to be there. They made a decision probably a decade ago to start transitioning to these dark, gray, concrete, warehouse-looking floors.

41:34which were supposedly pretty hip, but they weren't. They were hip for a moment in a few places, but it's taken down the entire feeling of walking to your Target store. Just look at a picture of a modern Target and look at it from 20 years ago and you'll see the difference, right? But someone made that decision and they didn't understand how important that little decision was to Target.

42:01James Altucher:So let's say you were the CEO of Target and someone came to you and said, listen, I want to try this new hip thing. Everybody's doing it. All the kids are doing it. It's the gray concrete whatever floor. How would you have responded? I would have said no because stores have an identity just like Target's red bullseye is a big part of the identity of Target. They've done a great job of marketing the Target brand. to me that white floor said target you know with these big aisles you know you'd walk in the target there was a racetrack we called it it ran around and all the merchandise was organized off that racetrack that was sacred to target to me so i would have said no it's not like apple like the apple stores there's certain things in that store that are pretty sacred so it's sort of like each store should almost figure out its bible like this is why we're alive this is why this has been working.

42:57James Altucher:This is why we've survived the test of time. This is the Bible. And you kind of have to stick with it, even if it was new fads. You got to be really careful because, and you guys walk through all the elements of marketing, your presentation, your products, your pricing, how you promote, your people, each one of those. What is our secret sauce? What does the customer expect to find in this store? And how do I make that a little better every year? But you don't want to walk away from that core value proposition that customers rely upon. Now, I kind of want to ask the cliche question here because you've had so much experience with kind of the heart of industry, which is basically retail sales, and you worked with the best entrepreneur potentially history, Steve Jobs.

43:47James Altucher:After all this, what is the best piece of business advice you've gotten that has really stuck with you? Don't be in a hurry. You know, it's so easy for people in business to be moving too quickly, right? And things take time. You know, and I use Steve Jobs is a perfect example. Steve left us way too early at age 57, right? Yeah. But in his career, he launched, created the personal computer. He invented the animated digital movie, you know, turned movies into digital movies that became a big deal. But he only did one thing at a time. You know, he only let Pixar make one movie a year while he was there.

44:35You know, it'd be pretty easy. Let's build a business. Let's do two movies. We'll get double the revenue. Steve knew they could only make one great movie a year. They wanted to do insanely great movies. You know, we launched the iPod, the music player, the first thing after a Mac, years later. It took six years until we went and made a phone because we had to do a great job with the iPod first. And then we did a phone. And it was three years until we did another product, and that was an iPad. But if you think about that, Apple was never in a hurry. We focus on doing things really well and learning how to make them better.

45:14And then we earn the right to do another thing. But some people in business seem like they're in a hurry. Sure, you got to make good decisions and do great work. But at the end of the day, business seems to move fast. Customers don't move at that pace. You got to do great work.

45:32James Altucher:That's a really great point. I think about this in the context of AI right now. Like you see every company is scrambling over themselves to spend hundreds of billions of dollars on an outcome that is very unclear. Like we all know the world's moving towards AI, but we don't really know who's going to win. What are the features that are going to win? Who are the customers that are going to spend the most? I like how Apple sits back, doesn't spend a dime, surveys the landscape. And eventually I'm sure they're going to do a lot of stuff with AI, but they just don't have to do it today. They're sort of waiting to see.

46:01Right. Well, I think a lot of that is a function of, you know, when you see an example, Apple went from being a very low-valued company by really winning in the smartphone, a device that everyone used. It became, you know, a trillion-dollar company. Google, with one great technology application called Search, became a trillion-dollar company. so I think investors today view AI like the next Google search the next smartphone and they think it's a trillion dollar plus idea and they think it's going to be a winner take all thing now just like Google one on search Apple's kind of one on smartphones I think this money and therefore the way AI is being developed there's some big companies that are competing like Google like NVIDIA and then you've got investors to keep up with them.

46:58They've got to put a lot of money into this, like in Anthropic and OpenAI. So there's this big race. There'll be winners, but there are going to be some big losers through this investment too. I think that everyone knows that and you're just hoping you're on the right side of the right company. Well, Ron Johnson,

47:16James Altucher:I just want to mention again, such an honor to have you on the show and talk about this. I mean, I've been a huge customer of the Apple store over the decades. it's literally brought a smile to my face. Like the first time I bought an iPod at the Apple store on Fifth Avenue, I just walked out of there smiling, listening to all the music of my childhood, which I hadn't heard in years. So it was such an amazing experience. But you wrote a book, Shop Different, How Retail Revealed, Apple's Genius. Again, great book, so many valuable lessons there, not only about retail and stores and your experience, but also Steve Jobs and working for such a legend.

47:53James Altucher:and thank you once again for coming on the show. Well, I'm just happy you enjoyed the book and I hope other people will too. It was really a thrill to write it, to look back and all the things I got to experience and to share those stories with others. So I hope people enjoy it like you did. Thanks, Ron. Write another one. I will. Thanks, James. Great to see you.

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