Lessons from eBay

By
From The Economist print edition. The author talks about threats to online businesses.

The remarkable tale of eBay's growth points to some important lessons for any business trying to operate online—and today that includes, one way or another, most firms. The commercial opportunities presented by an expanding global web seem almost limitless. But the pace of change is rapid, and so is the ferocity of competition. To succeed, firms need agility, an open mind and the ability to reinvent themselves repeatedly. Most of all, they need to listen carefully to their customers, paying close attention to what they do and don't want.

Such qualities, of course, would be valuable in any kind of business. Yet for online firms they are not a luxury, but necessary for mere survival. This is true for a variety of reasons. The internet is not only growing, but changing rapidly—which, in turn, changes the rules of the game for any business relying on it. The barriers to entry are still low compared with those for most offline businesses, which means that just keeping track of your existing rivals is not enough. These may not represent the greatest competitive threat tomorrow or the next day. That could come from a number of directions—a firm in a different type of online business; one that does not yet exist; or even from one of your own customers. On top of all this, the behaviour of many consumers is constantly changing as well, as individuals discover new ways to shop and interact with each other via the web.

The relatively low barriers to entry remain one of the most alluring features of the internet—and the greatest threat to any incumbent firm. Millions of people have already set up small web businesses, and millions more will do so, many of them using services provided by eBay, Amazon, Google and Yahoo!. A few, it seems safe to predict, will become the giant-killers of tomorrow.

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