Part I — Amazon’s product strategy in the early years
The story…
Back in 1994 on a hot summer day, young Jeff Bezos took the plunge of quitting his high-paying job as senior vice president at D.E. Shaw & Co. ( Wall Street-based investment banking firm) and drove across the country to start an online bookstore way out west in Seattle.
It wasn’t as rash as it seemed, Jeff had thought it through, the internet was seeing a usage increase of 2300% per year and Jeff wanted to be a part of it. While driving across the country with his wife he drew up his business plan and decided to start by selling books.
“Books were great as the first because books are incredibly unusual in one respect, that is that there are more items in the book category than there are items in any other category by far.” — Jeff Bezos
Books had an inherent characteristic: vast selection.
“In the book space there are over 3 million different books worldwide active in print at any given time across all languages, more than 1.5 million in English alone. So when you have that many items you can literally build a store online that couldn’t exist any other way.” — Jeff Bezos
The clever selection of books gave Amazon the unique selling point (USP) of a store that would have a selection so large no brick and mortar store would be able to compare.
He looked around for some talented and hungry engineers to help get his site up and running, and within a year they’d be doing a couple million in revenue; by 1997, Amazon would go public.
The breakdown…
So how did they do it? It’d be easy to dismiss Amazon’s amazing growth story by saying that they rode the internet wave in the late ’90s, but that would be a naive generalization as many many internet companies went bankrupt when the bubble burst. What really made them successful? What made them grow beyond any other internet business of the same era? What were the key ingredients that made Amazon successful?
Looking back at its origin story, Jeff Bezos made 2 very key decisions that enabled Amazon to get off to a hot start:
- Jump on the rocket ship that is the Internet
- Selling a product that had a vast selection (Books)
Not only did he spot a rapidly growing trend (the internet) and decided wholeheartedly to jump on the rocket ship, he picked the perfect product to sell on it.
What made books perfect as an online product to sell? Books had a vast selection, books don’t spoil like food when stocked as inventory, and books were relatively easy to ship, it usually fits in a rectangular box due to its shape.
[on the growth of the Internet] “That’s huge — nothing usually grows that fast outside a petri dish,”
[on selling books] “the idea of building an online bookstore with millions of titles — was very exciting to me” — Jeff Bezos
The internet combined with books gave Jeff the opportunity to create not only a new store but a new store with a unique selling point (USP). His store would be a unique store that was open 24/7, 365 days a year with a selection so large it would put brick and mortar bookstores to shame.
But what made Amazon grow to such an incredible size?
To understand this I read through all of Jeff Bezos's annual shareholder letters from 1997 to 2020 and I’ve come to the conclusion that it is because of Amazon’s ability to hone in on one very specific focus: customer experience.
Jeff knew from the very onset that it's one thing to pick the right market trend and the right product, but in order to get Amazon to grow into the market leader that he envisioned, it would need to focus relentlessly on the customer.
in order to get Amazon to grow into the market leader, it would need to focus relentlessly on the customer.
What do customers want when it comes to shopping?
Customers want as much choice as possible; they want it as cheap as possible, and they want to get it as fast as possible.
By focusing on the customer, instinctively Jeff knew that Amazon’s mission should be to give customers the most convenient (better, cheaper, and faster) experience.
And this is what Amazon’s vision was from the late ’90s and into the 2000s — To give customers the largest selection of products it possibly can and to make it as easy to use it as possible.
To give customers the largest selection of products it possibly can and to make it as easy to use it as possible.
So to sum up, the 3 key strategies that constituted the success of Amazon in the early days were:
- Jumping on the rocket ship that is the Internet
- Selling products that have a vast selection (Books, eventually Music, CDs and everything else)
- Giving customers the most convenient experience possible
Now let’s try to fit it all together, a typical strong product has 3 basic elements: vision, strategy, and tactics.
The vision is the overarching imagination of what a product wants to achieve, while the strategy is how to achieve said vision, and tactics are the individual features to support the strategy.
We can fill in the diagram with what we’ve learned from Amazon’s origin story:
To take it a bit clearer, we can use the Product Strategy Table:
And we can fill it in for Amazon:
Since vast selection and convenience are high-level strategies, I think we need to break them down to “sub-strategies” before we get to the key features.
Vast Selection (High-level Strategy)
Sub-Strategy #1. High distribution capacity — Able to handle large delivery needs
Sub-Strategy #2. High system capacity — Able to handle large traffic needs
Sub-Strategy #3. Excellent & efficient operations — Able to efficiently handle orders
Convenience (High-level Strategy)
Sub-Strategy #1. Easy delivery — Able to get the product fast and easily
Sub-Strategy #2. Easy to make a decision — Able to gain all knowledge about a product and make an informed decision
Sub-Strategy #3. Easy to complete purchase — Able to easily transact on the platform
Sub-Strategy #4. Easy to find what you like — Able to discover desired products
Sub-Strategy #5. Easy to trust Amazon — Able to believe Amazon is the best place to get what they want
From the sub-strategy level we can then map the many features that Amazon has launched to help support each sub-strategy.
To support the easy delivery sub-strategy, not only did Amazon invent and popularize “Two Day Shipping”, it has continued to innovate and launch “Same Day Shipping” and “Two Hour Shipping”. To make it easy for customers to make a decision on a product, they’ve launched “Reviews”, “Product Information Pages”, “Store-wide Sales Ranks” for you to see bestsellers, “Look Inside the Book” for you to preview a book before deciding to buy it, “Used and New Product Comparisons” and many more. To make it easy to find what you might like they organized the site into many categories and other easy to browse options, product search in the form of a search bar, and personalization features like “Instant Recommendations” and “People Also Bought”.
Many of these features have been popularized and copied over the years where it is now commonplace, but note that in the late ’90s and early 2000s these were some of the most advanced innovations at the time.
It’s clear now that when Amazon develops a feature, its purpose is guided by the high-level strategies and their sub-strategies. It is by this method that Amazon has been able to keep true on their direction to serve customers and grow to the size that they are at today.
The logic is simple and elegant: to build the Earth’s largest and most customer-centric online store, we will offer a selection so large and so easy to use that customers, and it echos in their Founder’s letters to the shareholders
We are working to build a place where tens of millions of customers can come to find and discover anything they might want to buy online. — Jeff Bezos, 1998 letter to shareholders
So there you have it, a complete breakdown of how Amazon did it in terms of product strategy: To build an online store so large and so convenient that customers can find anything they want and get it as easily as they possibly could.
Let’s fast forward and take a look at how Amazon’s product strategy evolved in their expansion years.
This series is broken into 4 parts:
- Intro — Amazon’s product strategy
- Part I — Amazon’s product strategy in the early years
- Part II — Amazon’s product strategy in expansion
- Part III — Amazon’s product strategy as a conglomerate
I hope you enjoy the article, click below to read part II:
#2. Amazon’s product strategy in expansion
Best,
Albert T.
My other product strategy articles on Medium:
