A convenient location also allows local retailers to charge more for their products, and thus survive, despite the existence of wholesalers and category killers. But on the Internet, geographical barriers are all but eliminated. Competition is direct and immediate. Consumers have direct visibility into retailers' pricing structures, and profit margins are reduced to bare minimums. While few analysts listed consolidation among their 1998 predictions for the Internet industry, it should come as no surprise.
Consolidation plays a natural role in any growing, maturing industry.
Today there are only two. In the past year there have been too many portal mergers and acquisitions to mention. While any competitive industry is subject to consolidation, online businesses seem subject to extraordinary pressures to consolidate. More than just the streamlining of operations, online businesses will arguably experience greater competition simply because they lack the geography penalty. For example, the geographic distribution of offline bookstores enables hundreds, if not thousands, of competitors to profitably co-exist.