Zipcar – An effective car sharing system
Zipcar is a car-sharing company that has been able to provide a reliable transportation alternative, defying the car ownership.
“We are redefining the way people think about transportation” (1)
Zipcar has established itself as the leader of cars on demand. Their business model is to provide an efficient, easy to use and trusted alternative to facilitate transportation and defy the need for traditional car ownership. Through a membership and the use of a “zipcard”, “most residents of major cities will live within a five-to-ten-minute walk of a self-service Zipcar”. (2)
With over 900,000 members and more than 10,000 vehicles in urban areas, the system that Zipcar has in place is mostly automatized and depends heavily on the community.
Business Model:
As a car sharing platform, “Zipcar offers its members the freedom of on-demand access to a fleet of vehicles at any hour of the day or night, in their neighborhood or in any of our Zipcar cities and locations, without the cost of hassles of vehicle ownership” (3)
Operating model:
The operating model of the company has several characteristics that reflect the effectiveness of the business. These can be summarized in the following elements:
- Keep it simple:
The platform is extremely simple to understand. Through the phone or the computer, every member can see all the zipcars that are available when and where needed. With only one tap, a member can reserve a car.
Moreover, the same zipcard that identifies you as a member works as the car’s key. As soon as your rental time starts, your card will activate and open the car. You just have to walk to the car you selected.
You can drive wherever you want. You don’t have to worry about the miles, the gasoline or the insurance. All of them are covered by the price and the membership. Just be aware of the time you selected to return it.
- Trust and confidence:
As mentioned above, the company has the ambitious goal of having a zipcar location less than 10 minutes away of every member and major city. This reflects the commitment of the company and the trust it is trying to build with customers.
Also, there is a continuous message of responsibility directed to the community. Every user is constantly reminded about the importance of leaving the car clean, in good shape and with enough gasoline. Being a Zipster is like being part of a club, where all the members are responsible for the good shape of the business.
- Impact
The mission of the company is not only to help its users reduce their monthly budgets but also to change the world. Just as they mention on their website: “We envision a future where car-sharing members outnumber car owners in major cities around the globe” (2). This commitment engages the potential users, such as millennials, who prefer more sustainable and environmental-friendly initiatives.
In the end, the technology friendly system and the community involvement are crucial for Zipcar’s success. Both elements are very important, especially under this highly capital intensive business.
References:
1) Zipcar (2015). Website: http://www.zipcar.com/about accessed 12/04/15
2) Zipcar (2015). Website: http://www.zipcar.com/mission accessed 12/04/15
3) Avis Budget Group – Annual Report 2014
4) Zipcar (2015). Website: http://www.zipcar.com/press/overview accessed 12/04/15
What do you think the future holds for Zipcar? It feels like this area is in a huge state of flux right now with things like electric cars, ridesharing (Uber, Lyft), and carsharing (RelayRides) coming into play. Also – I’ve noticed that a lot of the rental car companies are offering cars more cheaply than Zipcar (e.g. $20 for a full day!). In this world of fierce competition and heavy upfront investment costs, how do they continue to win?
Nice post Arturo! I agree with Anna Marie about an uncertain future for companies like Zip-Car given lurking competition from a host of services. It seemed odd to me at first that they appeal to the environmentally friendly urban millennial but I understand now that they are positioning themselves as being more as a lifestyle company rather than a car-rental company.
Thanks for your comment Anna Marie!!!
I think that Zipcar has four key advantages: 1) Through a membership you just go to the car and take it: No paperwork needed (better than rent-a-car alternatives), 2) Zipcar is currently owned by AVIS group, so they can benefit from their extensive car ownership, providing economies of scale, 3) According to their model, they want to be at 5-10 min walk from every member so they will have the most convenient service for members, 4) Huge entry barrier: Network of more than 900,000 members and more than 10,000 cars in various locations.
Even though I agree with your point that the competition and environment is fierce, I believe that their operating and business model give them advantages to succeed in the market.
Nice post, Arturo! I remember in its early days Zipcar required its customers to return the car to the same location from which they rented it. Do you know if this policy has since changed, and if not, do you think Zipcar will have to make such changes in order to create more value for its customers within such a competitive landscape, as mentioned in the comments above?
One of my favorite examples of a company with a very similar operating model is a local startup in Cambridge called Zagster. Zagster is a bike-sharing company that works with cities, universities, and corporations to create customized bike-sharing solutions (think Hubway within Boston). Check it out if you’re curious! – http://zagster.com/