00:00I mean, 25 years ago, however long it was ago, I mean, it seems like it was just yesterday.
00:04I mean, the Internet was supposed to kill retail.
00:07We know that story might have been overstated.
00:09But talk to me specifically, in 2026, why a company like Apple needs such a massive retail footprint?
00:18I don't mean just a flagship in New York, but why are they so dispersed everywhere physically?
00:22It's actually not a massive footprint.
00:24Apple has 530 stores.
00:27You know, people like the Gap still have nearly 1,000 stores in the U.S.
00:30Okay.
00:31That's a global footprint.
00:32Well, some people would say that 1,000 is too many.
00:34Some people say 500 is too many.
00:36No, but 500 is not too many.
00:38You really want customers to have a choice of where to shop.
00:42The Apple stores have always been the gold standard.
00:44But you've got to remember, no matter where you buy an Apple product, when you need help or you need
00:49a repair,
00:49you want to come back to the store because they're going to help restore that relationship.
00:53So, Apple's strength is not just its products.
00:56It's its 2 billion users worldwide.
00:59You've got to launch relationships, deepen, and then restore them.
01:02And you can do that best in a store.
01:04There are things you can't do online.
01:06There are a lot of people, particularly in this John Ternus era, and I guess more, we should probably call
01:11it sort of the new product era.
01:13This idea that as Apple introduces new products and products that are unfamiliar to at least the non-tech folks
01:20out there,
01:21like a foldable phone or a Vision Pro and things like that,
01:23that these are products that people want to have a little bit more of a hands-on experience with before
01:27they commit $2,000 or whatever to it.
01:30Does that help them having that physical footprint for a duo launch or whatever comes next?
01:35It absolutely helps.
01:37I mean, it's irreplaceable.
01:39People want to see products firsthand.
01:42Even when you upgrade each year to your new iPhone, even though it doesn't change much,
01:46people tend to go to the store to check it out before they buy.
01:49These are big investments.
01:50You know, it's over $1,000 for your entry-level phone, entry-level pro phone, and people want to make
01:56the right choice.
01:57So, Ron, what do you think of the current bet on automated AI-driven commerce,
02:03given that, you know, you built the genius bar on this idea of meaningful human interactions and face-to-face
02:09service?
02:10Well, AI is the next big technology, as we know.
02:13It's going to improve.
02:14It already is improving how we shop online.
02:16It's improving the experience in the store, right?
02:19I don't think it's going to change where we shop, but it will elevate the experience across all channels.
02:25Okay. And going back a little bit, you were at Target, I believe, when it became Target.
02:32And you also proved at Apple that consumers will buy a premium product if the service is, you know, flawless.
02:41But we're in an economy where the consumer is increasingly bifurcated.
02:45What do you think about that in terms of the experiential offering and premium brands?
02:52Can they really position themselves when the consumer is feeling strained and kind of in this K-shape?
02:57No, the consumer is really bifurcated, but both ends are doing well.
03:02You know, in the U.S., these dollar stores have been performing exceptionally well, you know.
03:07At the high end, the luxury stores have been soft, but overall, they're very successful, you know.
03:12And so, people are performing well in all types of formats.
03:16It's also been true that in the middle for a change, some of the long-term middle market brands, Macy's,
03:23The Gap, Levi, my former place, Target, kind of upper middle, are all performing pretty well.
03:29You know, so it's a misnomer that retail was going to get killed by the Internet, as you mentioned.
03:36Retail has thrived.
03:37It just took time for them to adapt to an omni-channel world.
03:41Well, with regards to that adaptation, and I do just want to get your thoughts, too, on Target's improvements.
03:47Because, let's face it, they had some issues, and some of that was very idiosyncratic to them rather than some
03:51of the broad-based issues.
03:52I mean, overall, when you look at what Michael Fidelke has done in this new team, you generally think they're
03:57pushing Target back in the right direction?
03:59Oh, everything they're saying is the right kind of stuff.
04:01They're really focused on merchandising, differentiation, and then improving the service in the store.
04:07Yeah.
04:07And you're starting to see that show up.
04:08Well, one reason why I ask that, because a big criticism of Target at the time is they lost sort
04:13of sight of who their customer was.
04:15It's the same issue with Apple with regards to how their approach, not only to the physical stores, but overall.
04:19They seem to have a general understanding, certainly Tim Cook did, certainly Steve Jobs.
04:23We'll see if Ternus does, a good understanding of who their customer is or what they want that customer to
04:28be.
04:28You went to JCPenney famously.
04:31Did that not necessarily work out the best?
04:33And I am curious as to what happened there and whether you misread who the JCPenney customer was, which I
04:40would think would be maybe a little bit different than who an Apple customer would be.
04:43Yeah.
04:43I think I understood who the JCPenney customer was.
04:46I moved way too fast and then alienated a core segment, which was that coupon-seeking value customer.
04:54What I was trying to do was get pennies to a younger customer base, which is essential for any brand
04:59to survive.
05:00I knew that at Target, we had a high market share of young families.
05:05Pennies had a quite older customer.
05:07I just moved too fast and the marketing was poor.
05:10Made a ton of mistakes.
05:11That gets to this idea, though, and other retailers have struggled, retailers that have gone down the road of sort
05:16of being known for value, offering a lot of discounts, coupons, et cetera.
05:19It's hard to pull back from that.
05:21It does.
05:21I think probably one of the more famous examples is Bed, Bath & Beyond.
05:24It became a joke where it was like, you know, I just wait for the next coupon to show up
05:27in mail before I would go there and no one ever pays full price.
05:30I mean, how does an executive sort of break free from that or I guess find a better bridge from
05:36being just all in on discounting all the time to maybe something that's a little more balanced?
05:40You got to move slowly.
05:41You got to communicate great.
05:43I mean, I made a mistake of going way too fast.
05:45I proved you can't just pull the needle out and go to everyday prices because at Pennies, we had lower
05:50prices for people every day than people were buying with all their coupons and all.
05:55You had to be a PhD in pricing, you know, but it didn't matter because the customer perceived value from
06:01saving.
06:03And middle American families felt that that was part of the role of the family to be a smart shopper.
06:08And we took away that psychological lift.
06:11So if you could give one single piece of advice to a retailer today, particularly when it comes to integrating
06:17AI, what perhaps would that be?
06:19I'd say embrace the new technology fully.
06:22When the Internet came out in 2000, it took a while for the physical retailers to embrace online shopping.
06:29Target, until 2008, its store was run by Amazon.
06:33Then it took it back and then got everything going with all this buy online, pickup store, everything that made
06:39it a better experience.
06:41Walmart did the same thing.
06:42Walmart today is worth eight times what it was in 2000.
06:45So they survived, you know, this online shopping, but they've got a great marketplace.
06:50Retail's got to move quicker on new technologies.
06:53Are they ready, though, for this?
06:55I mean, we've been talking for the last few days about Mark Zuckerberg's Meta's Muse and this device.
07:01The idea of having agents effectively do a lot of your tasks for you, which includes shopping.
07:06We've already heard from a lot of retailers on this program saying they're already contending with how do you deal
07:10with this when your entry point isn't so much the customer, the human anymore.
07:14It's going to be maybe some sort of technology layer.
07:17How do you approach that where it might be AI talking to AI determining whether I should spend $2,000
07:23on a duo?
07:24Well, I think you want to participate in that because that's the way it's going to go.
07:27Yeah.
07:27You know, customers are going to use AI to help their shopping.
07:30I think online shopping, the experience of buying online, needs a big upgrade.
07:35It's been the same for about 30 years, and it's not a great shopping experience.
07:39I think of an agent of commerce to help decide what to buy.
07:43It's going to be a great thing.
07:44I don't think we'll turn over just keep my pantry in stock.
07:48Yeah.
07:48That would be for the very few who really embrace it.
07:51But just real quickly, just on the human element, though, of in-store shopping, and let's just go back to,
07:56like, Apple and, you know, going into that store.
07:58It's not obviously touching the products, but you mentioned the Genius Bar and being able to get things fixed.
08:02Do we get to a point where, if AI is strong enough, do we need the geniuses, the human geniuses
08:07behind that bar anymore?
08:08You do, and you want to.
08:09Yeah.
08:10You know, remember, like, when I started the Apple stores, I told Steve, the stores are not, stores aren't in
08:15a product business.
08:17They're in a relationship business.
08:19We had 25 million customers.
08:21We had to launch new relationships with customers buying their first product.
08:25We deepened when they came back.
08:27We restored when they needed help.
08:29People love going to stores.
08:31Traffic to stores is up.
08:33You know, almost everyone is investing in these new DTC brands.
08:36They're investing in store footprints.
08:39Simon Mall's highest occupancy in its history, highest rental rates in its history.
08:44You can't get a space on Madison Avenue or Fifth Avenue.
08:47It's hard to find in Soho.
08:48This idea that retail isn't doing well is a misnomer.
08:52Else there wouldn't be all this competition for retail space.
