The club would charge a membership fee, and let people post their collection so that others could contact them about exchange.
Your identity would be rated according to the quality of the cd's you trade and speed of the exchange, etc.
There were also the artists at Sony and other labels that got upset that some listeners would actually dare to sell their unwanted CDs so that others could buy them USED. That "robs" the artists and labels of money (it has been claimed).
I don't see us being too far off from only buying a "license" to the personal use of the music on the album and therefore (like with some software packages), in absence of an authorized license from the manufacturer to resell the CD, be prohibited from selling it used.