Location becomes unimportant. Every time a conventional online retailer adds a new user, it's just one more person who can buy its products. But every time eBay adds a new user, he can buy from or sell to any of the 7.7 million people already on the network. A retailer, in other words, is one to many, while eBay is many to many. Online auctions have their limits.
Auctions are most useful for setting the price of goods of indeterminate value.
But online auctions are shaking up the way America does business. People are quitting their day jobs and finding they can support themselves entirely by selling on eBay and other auction sites. Traditional retailers are significantly augmenting their revenue by selling on eBay, and some are shutting down their stores entirely.