Why Did Amazon Start with Books? A Strategic Analysis Using the CIRCLES Method™

This blog post delves into the strategic thinking behind Amazon’s decision to start with books, using the CIRCLES Method™ framework. This approach helps us dissect and communicate the rationale behind this crucial business choice.

Introduction

As aspiring product managers preparing for interviews at top tech companies like Amazon, understanding the strategic thinking behind notable business decisions is essential. One typical question that arises is, “Why did Amazon start with books first?” This question tests your business acumen and your ability to analyze and communicate the rationale behind strategic choices.

Detailed Guide on Framework Application

Choosing a Framework

For this type of strategic decision-making question, the CIRCLES Method™ can be highly beneficial. CIRCLES stands for Comprehend, Identify, Report, Cut, List, Evaluate, and Summarize. Let’s apply this framework to the question at hand.

Step-by-Step Application

Comprehend

First, we need to understand the context. Amazon, founded in 1994 by Jeff Bezos, strategically decided to start with books before branching into other product lines. To appreciate this choice, we must understand the e-commerce landscape of the mid-90s.

Identify

Next, we need to identify the customer needs and business objectives at the time. Customers sought a more extensive selection and convenience, while Amazon aimed to establish itself as a dominant online retailer with a scalable business model.

Report

Now, let’s report the advantages of starting with books. They have a global market with uniform demand and can be stocked easily due to their standard sizes. Additionally, books offered a relatively low cost and high SKU count, allowing Amazon to demonstrate the “long tail” business model effectively.

Cut

However, we must also consider the challenges and limitations of books. These include potential damage during shipping, the rise of e-books, and competition from brick-and-mortar stores and other online retailers.

List

Let’s list alternatives and why they might be less favorable. Options like electronics or clothing were considered, but these markets had their specific challenges, such as returns, sizing issues, and the need for more hands-on customer experiences.

Evaluate

Now, we need to evaluate the data points and rationale. For instance, consider the size of the book market, internet penetration rates, consumer reading habits, and technological advancements. Globally, the book industry was valued in the tens of billions, with a growth trajectory that Amazon could tap into.

Summarize

Finally, we can summarize the key reasons. Books provided a market of sufficient size, with products that were easy to handle, ship, and had a vast, diverse selection capable of showcasing Amazon’s range and efficiency.

Hypothetical Example

Imagine if Amazon had chosen electronics as their starting point. They’d have faced complex inventory challenges, higher capital requirements, and would have struggled to display a unique value proposition compared to established retailers. On the other hand, books allowed them to grow their customer base focused on selection and convenience.

Facts Check and Assumptions

It’s crucial to anchor assumptions in reasonable approximations. For example, it’s fair to suggest that the global book market size was significant and growing; online shopping was still nascent but expanding; and that a book could represent a wide range of customer interests, thereby making it a wise first choice.

Communication Tips

When articulating your response in the interview, clarify your assumptions, stick to the structured response, communicate clearly, and ensure each point flows logically to the next. Back up your answer with data points that lend credibility to your analysis.

Conclusion

By applying the CIRCLES Method™, we can articulate well-thought-out answers to strategic decision-making questions. Examining the decision to start with books through this lens provides insights into Amazon’s early strategy and demonstrates the candidate’s analytical prowess. Remember, practice is key, so continue applying these frameworks to various questions to ensure a polished performance in your FAANG interviews.