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During the World Retail Congress in Rome in early April 2022, the IADS had the opportunity to be part of the panel interviewing retail veteran Ron Johnson. This IADS Exclusive issue is a transcript of the interview and fits perfectly into our Innovative Thinkers series, launched last September. Listening to Ron Johnson, his past experiences, questions and successes, casts a new light on some of the ideas that he pushed forward in some of his tenures, especially at JC Penney, at the light of what happened during the pandemic. Also, he shares an interesting retrospective vision of his own career and how he contributed to changing the way retail works, either through successful initiatives, but most often, in his own words, with “things that did not work”.

Introduction: who is Ron Johnson?

Ron Johnson, 64, joined Target after attending Stanford University, the Harvard Business School and after his initial experience at Mervyn’s. He spent 15 years at Target, being credited, among others, for having launched the Michael Grave private label as the Vice-President of Merchandising, which proved popular to the young and trendy crowd (contributing to transforming Target into the “Tar-Jay” destination store chain prized by fashionable and chic customers).

He then joined Apple in 2000 as the Senior Vice President for Retail, leading the development of a new breed of stores, first built as full-size mock-ups in a Cupertino warehouse and then rolled out across the US and beyond. According to the New York Times, he contributed to transforming the shopping experience “from the boring computer sales floor to a sleek playroom filled with gadgets”. He also achieved record growth, exceeding $1 bn sales within 2 years of the Apple Store’s existence, and opened 400 stores within 12 years.

Those two early and visible successes helped him secure the top job at JC Penney in 2011, where he led a total transformation of the company in order to radically reinvent it: a new brand identity, stop relying on heavy discounting and couponing and replace it with the “full but fair pricing”, reinvention of stores into shopping experiences with bazaar-like experience and cafés doting the shopping alleys, and reducing the focus on private labels (50% of the sales at the time) among others. This vision failed to convince customers and Ron Johnson was ousted 18 months after, with a -25% sales decrease (a $4.3 bn decrease in value) and a stock falling from $32 to $16.

Johnson then founded Enjoy, a retail start-up specialized in reinventing the shopping experience by focusing on the last mile, with the ambition of “bringing the store into the home” and mingling the convenience of online shopping with the confidence of buying from a trained salesperson.

Interestingly, his sting at JC Penny led (and still does after the pandemic) many experts and analysts to wonder if he wasn’t ahead of the curb with his vision of having stores as town-centre-like places of interaction and experience.

Question from Rob Hornby, MD EMEA, Alix Partners: How should retailers behave in a permanently disrupted world?

Ron Johnson: “History shows that there has always been someone ready to disrupt someone else. This time, the disruption becomes permanent because customers are inherently always looking for the next big thing and technology empowers them like never before. They have the control and can know everything before retailers!

As a consequence, the only challenge in retail, but a really big one, is to keep things rolling and figure out at the same time what is going to be the next big thing (ideally, before anyone else does). For instance, in the apparel industry, 50% of the product value goes into the last mile, which is the reason why I founded Enjoy in 2012.”

Question from Chip Berg, CEO, Levi’s: What were your biggest issues and top learning experiences at JC Penney?

R.J: “JC Penney has been retrospectively quite a demanding experience, and I learnt more from things that did not work, than from successful moves. At the time, we had a pretty compelling vision (reinvent the physical space, integrate new partners through a shop-in-shop approach, provide everyday value but not at a permanently discounted price, and find a way to interact with new customers). If you look at what is happening now, then you know that we were right at the time.

And yet… even though our strategy was right, you need as a CEO and a leader to take the time to onboard and motivate the teams, and make sure everyone embraces the change. I wanted them to change almost immediately and instinctively, which I know now is not possible without taking the appropriate steps. Also, I wanted to go fast, and bold, which was probably the biggest mistake. The total transformation and turnaround of a company founded in 1902 (and customers! and teams!) in 4 years was too ambitious. Everything takes time and each company has its own timeline that needs to be respected.

As an example, at Apple, in the beginning, nobody came into our stores. We did not give up because we believed in what we were doing, we had convictions, but this takes time. I should have remembered that at JC Penny rather than going fast and bold like that.”

Question from Walter Robb, former co-CEO, Whole Foods Market: How to promote as a leader the change in corporate culture?

R.J: “First, leaders need to have a clear purpose in mind. Second, this purpose needs to be communicated clearly with the teams, by making sure that everyone is working and exchanging together. And finally, you need to make sure that both you as a leader and the company itself are part of a community and are connected to the rest of the world.

I will never forget what Steve Jobs used to tell me: “if you can not communicate any idea in less than 4 words you have lost the audience”. Core values need to be expressed simply, in a memorable and compelling way, to make sure people are embarking on your adventure.”

Question from Selvane Mohandas du Ménil, MD, IADS: At JC Penney you were defending the physical store. At Enjoy, you tell us that stores are places of learning about products, not selling them.

What’s in this vision for department stores and how can they make a decent margin out of it?

R.J: “When a customer orders something online, the value lies in the last mile, which is why I founded Enjoy. I truly believe that there is a great outcome for premium products with an improved delivery process. This could be the best retail experience ever, and all this, from your home, which I see as the final frontier.

Department stores are big stores, the biggest ones in physical retail. But big stores do not make sense anymore if you rely only on selling products, when you can order something by the piece and be delivered at home (with hopefully great experience).

I still believe in experience, and for stores it means all about being a destination per se. Look at Apple stores, Selfridges, La Samaritaine: it is all about the place, people and experience, and not so much about products.

For me, we will always have stores, but only good ones: gone are the days of mediocre retail. In the future, retail will be offering only 2 types of experiences:

• Super fast and convenient (online),
• Great experience (offline).

There will be no middle ground.

Question from Kimberly Carney, CEO, Fashwire: as a successful retailer, what are the lessons you learnt in life that you can share with us?

R.J: “I am not successful! Years when things were going great can be counted on one hand! During most years of my career, I have been busy building, trying to get back on track, or transforming something.

At Target, we were having trouble and in the end, I only had had 2 great years out of 15! At Apple, we were not great at the beginning: stores were not big enough, not attractive, not making money…  JC Penney was not a great experience, as we all know. The company was bleeding money.

The idea that you are successful is dangerous, as it leads to complacency. Of course, we all want to be successful but this takes time! As far as I am concerned, I have learnt more from adversity than not.

I’d rather answer your question with 2 statements:

• Nothing works as well as you hope the first time,
• Even if this is the case, stick to your idea. Success is a lot of hard work.

Question from Marie Driscoll, MD, Coresight Research: what is your vision for 2030 in terms of the relationship between brands and customers?

R.J: “Ha! In 10 years things can change a lot. In the US, we will probably have fewer stores, as many malls will close. But it does not mean that the quality will decrease, on the contrary: fewer shops, but better. All stores will be placing a great deal of attention on presentation, product curation, and improved experience, always based on the reinvention of the relationship with employees.

On the customer side, we will probably own fewer products, but better ones. We will care more for the fewer things we will own.

As I said, I do not believe there will be a middle ground for mediocre or average retail. We will be choosing on an everyday basis between pure convenience and great experiences. But not mixing both options together.”

Credits: IADS (Selvane Mohandas du Ménil)