Ron Johnson: How I built the Apple Store on experience, not commissions

9to5 Staff | Nov 21 2011 - 10:46 am PT

Ron Johnson, the CEO of J.C. Penney and the former senior vice president for retail at Apple, ran a guest post detailing his Apple tenure over at the Harward Business Review blog, accompanying a monster interview which appears in the December 2011 issue of the Harvard Business Review magazine.

Apple doesn’t owe its success in retail to shiny products, he said. “You don’t need to stock iPads to create an irresistible retail environment”, he said. “You have to create a store that’s more than a store to people”. Even though Apple products can be purchased for less elsewhere, people visit Apple’s stores for the experience, not products, he argued:

People come to the Apple Store for the experience — and they’re willing to pay a premium for that. There are lots of components to that experience, but maybe the most important — and this is something that can translate to any retailer — is that the staff isn’t focused on selling stuff, it’s focused on building relationships and trying to make people’s lives better. That may sound hokey, but it’s true.

Steve Jobs wanted his retail chief to become personally involved so Johnson oversaw every store design and interviewed every manager who ever worked in an Apple Store. Why? “I wanted to build relationships with all of them. They came to understand who I am and what I value. I don’t know if I’m a great selector, but I’m a great connector. The people I hire trust me because of this personal connection.”

So Johnson created the culture where store employees aren’t on commission, therefore aren’t incentivized to up-sell people to pricey products or services they have no need for:

Their job is to figure out what you need and help you get it, even if it’s a product Apple doesn’t carry. Compare that with other retailers where the emphasis is on cross-selling and upselling and, basically, encouraging customers to buy more, even if they don’t want or need it. That doesn’t enrich their lives, and it doesn’t deepen the retailer’s relationship with them.

Even department stores can flourish in this brave new world of retailing. “There’s a problem with the execution”. Retailers are not aware of their store environments and they often approach customers unimaginatively, he explained.

Even if it’s about the experience and not products, Johnson will need lots of imagination and all the help he can get in order to revitalize J.C. Penney’s poor man’s department stores scattered around the country. More quotes after the break.

A J.C. Penney mother store in Kemmerer, Lincoln County, Wyoming and their other department stores around the country are in a desperate need of Johnson’s retail magic.

Johnson highlighted the fact that Apple Stores average $40 million annually per store. They are “the highest performing stores in the history of retailing”, making Apple America’s greatest retailer. He thinks physical stores will remain the primary way people acquire merchandise decades into the future, highlighting the fact that approximately 9 percent of U.S. retail sales come from online transactions, growing at just ten percent a year.

Per website tracking firm Experian Hitwise and IMRG, the online Apple store is the second most trafficked online retailer in the U.K. Johnson is adamant that any online store can transact, but success comes only to the outlets that enrich people’s lives and add value beyond simply providing merchandise. So, how does a store accomplish those seemingly illusive objectives?

For most stores, moving from a transaction mind-set—“how do we sell more stuff?”—to a value-creation mind-set will require a complete overhaul. The Apple Store succeeded not because we tweaked the traditional model. We reimagined everything. We completely rethought the concept of “try before you buy”: You can test-drive any product, loaded with the applications and types of content you’re actually going to use, and get someone to show you how to use it. If you buy it, we’ll set it up for you before you leave the store. If you need help after that, you can come back for personal training. If there’s a problem, you can usually get it fixed faster than a dry cleaner can launder your shirt.

Picking the right person to work at an Apple Store can be a daunting task, requiring six to eight interviews. This ensures that future employees “feel honored” to be on the team. Apple was never interested in hiring folks at the lowest cost, available on Saturdays from 8 to 12, he said. Genius Bars weren’t that popular during the first years, he said. Johnson also dispelled a popular urban legend, that Steve Jobs originally hated the Genius idea:

Steve didn’t object to the idea but to the name. And it didn’t take long for him to embrace that, too. The next day he asked our legal team to trademark the name.

Additional backgrounder on Apple Stores can be found in our ten year anniversary feature titled “Retail stores: Apple’s risky gamble that paid off big time”.