New business model - take out the exploiter

Last July, I was talking to a bookseller who was complaining about the poor quality service being provided by one of the largest collectible and antique sites on the Internet. I was appalled to learn that this site was charging the seller a monthly listing fee plus an 8% commission on the sale of each book. I looked around other similar sites and they all worked on the same or similar business models. What these sites seem to be offering was a virtual 'shop window' where people interested in rarer books would search their catalogue. Individual books would not even been indexed by the popular search engines! Now, I am not against an entrepreneur making money and in business as in love or war, all is fair game, but this seems to me over exploitative. As any technologist knows, once a site is up and running, the costs of operation is based upon capacity. Therefore charging a commission on sales on top of a listing fee is just removing the cream! I know all you sales guys who look at opportunities for residual income will baulk at this, but, I think revenue models should, in some way, reflect the underlying economics of the business. Given this situation, my colleague, Peter Blue and I resolved to do something to help rare book sellers. First of all, we decided that we would not borrow money to invest in advertising but, taking a leaf from Friendsreunited, we would try and establish a site that would grow organically by 'word of mouth'. Secondly, we would provide a service to small booksellers based upon a membership fee and take no commission on the sale. Basically, we would act as an intermediary between potential buyers and sellers. Thirdly, we would design the technology in such a way that all the books listed would be indexed by the popular search engines. In August 2005, we launched our rare book site. Apart from a few conversations with booksellers at local book fairs, we have done no marketing as such hoping that word of mouth and our accessibility to search engines would promote the site. We set ourselves the target of breakeven in 12 months. We also decided that we should try and foster a community aspect to the site focusing on those who are interested in selling and collecting rare books. Like all new ventures, some of our ideas, whilst reasonable in theory, turned to be bad in practice. At first, we wanted all people who were interested in a particular book to sign on as members. We could see a lot of hits on the books but very few were willing to go through the rigmarole of sign up to contact the seller. We removed this restriction in November and the inquiries started flowing. We also thought it would be a great idea to allow members to 'chat' to each other interactively on our site but after a few months operation; it was obvious that no one wanted such a facility. We have now produced version 2 of our site. Our traffic has grown from zero in August 2005 to nearly 20,000 hits per month and rising. We have now achieved break-even six months ahead of schedule. So what does this all prove? I have always been suspicious of businesses that charge by volume whose costs are not volume related but capacity related. I class the telecoms suppliers, software producers and most media companies. We have been conditioned to pay per transactions for things when it is the capacity that dictates the costs. Bundled packages in mobile phones are a better match between the underlying economics and revenue than pay per call. Once a piece of software development costs are recovered the marginal cost is practically zero. Our experience with the rare book site would suggest that it is possible to compete with established businesses if we match the business model more closely to the underlying economics especially where this provides a better value proposition to the customers. It also suggests that many big established businesses are exploitative in the sense that they are making more profits through their charging models than economically justified. Business policy makers please note this point. Perhaps the next step is to look at why eBay are charging a commission on sales? Anyone want to have a go at them?