Apple and understatement aren’t close relatives. Not that they don’t have a right to strut a bit: after all, under its returning co-founder, Apple 2.0 performed the most stunning corporate turn around ever -- and shows no sign of slowing down. As a result, product launches, developer conferences and quarterly earnings announcements all turn into opportunities for the company to blow its own horn.
So, when the 10th anniversary of the first Apple Store came by, I expected a big celebration: fireworks, decorated stores, laser engravings on Anniversary Edition iPods, a coffee table book with a Steve Jobs foreword, a speech, a video… Yet, on May 19th, nothing happened. At least publicly.
All we got was a leaked internal poster celebrating 10 years of achievements and learnings:



An eyeful or an eye-chart. You can get a more legible PDF version from ifoAppleStore.com. Or, courtesy of Tech Evangelist Joey deVilla, a version obligingly rendered in text with paragraphs. Longish as it might be, the document is worth reading: it rings true and proud; it is manifesto of Apple’s retail philosophy -- and of its impact on the entire company.

I decided there had to be a reason for the official quiet. I wanted to make the anniversary a Monday Note topic, but hearing the silence and unable to ascribe a meaning to it, I decided to bin the topic for a while.

The wait didn’t last long: Ron Johnson, Apple’s Sr. VP or Retail Operation announced his departure right after the June 6-10 WWDC. Divorce papers the morning after the anniversary… The muting of the celebration made (some) sense.

But why did Ron Johnson leave?

Under his tenure, Apple Stores have become the envy of the retail industry, breaking one record after another: revenue per square feet, year-to-year growth, store size, foot traffic and architectural design. (See here for a neat set of Apple Store statistics.)
With such a record, one can easily see Apple’s “retail guru” standing up, declaring “My Job Is Done” and leaving on a high note.
Then, sparing us the rote “spending more time with my family” explanation, Ron states he always wanted to be the CEO of a major retail chain. JC Penney just happened to need a new CEO, this was an opportunity to fulfill a long-time ambition, to become his own boss.

All very logical, but, for a number of reasons, the polished tale doesn’t quite ring true.

First, with 326 Apple Stores, the job isn’t quite done. Exceedingly well done so far, but not complete. For example, after the US, China is now Apple’s second market, it is where Apple experiences its largest year-to-year growth. According to ifoAppleStore.com, the site that does an excellent job of documenting the life of Apple Stores, Apple will open 25 more stores in China by the end of 2012. My own observations of Apple’s third market, Western Europe, lead me to believe Apple is very far from reaching saturation there. For example, with a population of about 36 million, California has 49 Apple Stores. France, with a population of 62 million, only has 7. Per capita GDP differences ($47K vs. $34K yearly) don’t account for the disparity. We can safely assume this applies to Western Europe as a whole, showing how much headroom Apple Stores still have there.
No one knows what the saturation is, fortunes have been lost by those who believe trees grow to the sky, but there is no reason to consider Apple Stores are “done”. One could just as easily call today’s Apple Stores network ‘’a good start’’.

Second, Apple Stores are always evolving. This gets us much closer to the real explanation than my previous point. The never ending stream of changes, the attention ranging from architectural design to minute furniture details all bear another man’s imprint: Steve Jobs’. We’ll recall he picked Bohlin Cywinski Jackson as the architects for Pixar’s elegant headquarters -- and kept using the firm for most Apple Stores building or renovation projects. In the process, several Apple Stores became architectural icons. Then, when it came to interior design, Jony Ive, Apple’s Senior VP of Industrial Design took a lead role.
For the ever changing details, watch Steve Jobs proudly take us through the first Apple Store in this 2001 video. And compare with today’s setup.
For amateurs of minutiae, ignore the main checkout podium where MacBooks run transactions and, instead, take a look at a standard product display table. Your friendly Apple Store employee just performed a painless cashectomy using the newer iPod Touch-based portable Point Of Sale terminal. Now, where is the printer for your receipt? Affixed under the table’s main board, upside down, invisible. No unseemly display of non-Apple appliances. For the occasional cash transaction, foreign visitors mostly, a few tables also carry a barely visible cash drawer cut in the side.

Recently, stores reduced space dedicated to accessories, peripherals and, with the Mac App Store in mind, boxed software. This resulted in more room for something called Personal Setup, where an Apple employee helps a customer get started with his/her new purchase.

You get the idea: “Apple”, meaning Steve Jobs, is never satisfied, always looking for ways to improve its stores or, for that matter, anything else Apple.

In the end, in spite of his signal contribution to Apple’s success, Johnson must have felt disenfranchised. Coming in, he brought with him expertise and contacts “Apple” didn’t possess. Over time, Jobs’ keen interest in the matter turned into heavy involvement in every facet of the operation. Apple Stores became Steve’s brainchild, not Ron’s. Hence his decision to look for an opportunity to be really in charge, as opposed to working for a gifted, focused and strong-willed visionary.

Now, why did Ron Johnson pick JC Penney?

He doesn’t need the money, we’re told he made about $400M working at Apple. And JC Penney, to say it politely, isn’t the most attractive of US retailers. Once an American icon, JC Penney is now a tired chain. All the better, some say: Ron Johnson will bring some of the Apple magic and revive the company. This is drawing a very superficial comparison:  the two kinds of retail establishments couldn’t be further apart. Apple runs with a very small number of SKUs (Stock Keeping Units), a very short product line. Conventional retailers tens of thousands of different products. Apple is willing to spend tens of millions on a single store, JC Penney never did and very likely never will. Apple products are often elegant, if not iconic, not something that can be said of JC Penney’s merchandise.
Further, it looks like Ron’s CEO title isn’t exactly endowed with full meaning: Reuters and the WSJ let us know his role will be “limited”, at least initially, “focussed on marketing and merchandise selection, while Ullman [the real CEO and Chairman] will oversee the more common executive responsibilities of accounting, finance, corporate strategy and logistics…”
The Ullman in question is Myron (Mike) Ullman, age 64, a veteran retail executive with experience at LVMH’s DFS (Duty Free Stores) business unit and RH Macy, among others. He also sits on the Board of Directors of companies such as Starbuck’s and Global Crossings, and of several Bay Area charitable organizations.
Another unexplained datum is Ron’s start date: November 1st. The most likely but hard to confirm explanation must lie in a paragraph of his Apple exit agreement.
When that date comes, we’ll see if Mike Ullman really handles the reins to Ron or if the Apple alumnus finds himself working for yet another strong-willed boss.

Back to the Apple stores and to Ron Johnson’s legacy: quoting David Berman and his quarterly DeeBee Index, USA Today reports Apple contributed to 20% of “all sales growth by publicly traded retailers in the U.S”, this for the first three months of 2011. One has to qualify the number a bit: it relates to publicly traded retailers only, not to the entire US retail sector. Still, keeping in mind the likes of Walmart are all publicly traded, Apple’s share is surprisingly high.

We’ll now more in a few days, when Apple releases its numbers for Q2, the April to June 2001 quarter.

JLG@mondaynote.com

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