ZipCar represents a product business model in the automotive industry that mobilizes location technology and cardkey technology. The sells access to a network of cars owned by ZipCar located in densely populated residential areas to drivers who need a car for a short time. Bookings are made in advance by telephone, through the website or the app. The service mobilises location- based technology by helping customers and ZipCar locate the vehicles, cardkey technology to unlock vehicles and smartphone technology allowing customers to make and alter their booking from their mobile device.
HISTORY – THE EXEMPLAR FIRM AND OTHERS:
Founded in Cambridge, Massachusetts by Antje Danielson and Robin Chase, ZipCar debuted its first cars on the streets of Boston and Cambridge in June 2000 after raising an initial US$75,000.
- In December 2002 ZipCar raises US$4.7m in a series B round.
- In November 2006 ZipCar opens a London office as part of a European expansion effort at the same time as a venture round of US$25m.
- In 2007 ZipCar merged with Seattle-based Flexcar.
- In June 2009 the Zipcar iPhone app is announced so users can locate Zipcars, check on their availability, reserve them and even unlock them.
- In April 2010 Zipcar buys Streetcar, the largest British car-sharing company for about US$50 million.
- In December 2010, Zipcar raises US$21 million from Meritech Capital Partners and Pinnacle Ventures.
- In April 2011 Zipcar goes public, earning a market valuation of more than $1 billion, though in the months to come its stock price will fall from a high of more than $28. On Dec. 31,
- 2012, it trades at $8.24.
- ZipCar revenues in 2012 were US$186m.
- In January 2013 Avis Budget Group purchases ZipCar for US$500 million. The logic behind the Avis acquisition is they saw a synergy for fleet optimisation since their vehicles are used mainly during the week, whilst ZipCars are used mainly on weekends.
- By January 2014 Zipcar has 850,000 members, more than 700 employees and 11,000 cars available in the U.S., Canada and Europe.
Although ZipCar has bought several competitors in recent years, other competitors do exist including Car2Go and DriveNow, and peer-to-peer firms like RelayRides and Uber.
CUSTOMERS – WHO THEY ARE:
ZipCar is for people, usually city residents, who need occasional access to a car, but who prefer not to carry the expense and burden of owning one. Customers become members and must be 21 years or older, unless they are affiliated with a university that offers ZipCars, in which case they must be 18 or older.
ENGAGEMENT – value creation proposition (including network effects):
The principal value proposition to the user is access to a range of cars 24-hours a day without the burden of ownership. ZipCars are available only to ZipCar members, charged by the hour (prices include fuel and insurance), are bookable in advance and collectable from multiple locations typically in densely populated residential areas. ZipCar owns the cars and agrees with city councils and universities to provide dedicated parking spaces, and ZipCar members can see through the website or the app where cars are located.
The cars are fitted with technology that enables the cars to be unlocked by a ZipCard, which each member has, or by a smartphone. Once inside the car, the ignition keys are found within the glove
box. A refuelling card is provided should the vehicle need refuelling during use, and a book is provided to record any damage found on the vehicle or caused during use. After the vehicle is used it is returned to the same location with a minimum of 1⁄4 tank of fuel onboard.
DELIVERY – THE VALUE CHAIN:
ZipCar maintains a fleet of nearly 10,000 vehicles of different types. Each vehicle is fitted with a “kill switch” that allows the company to remotely prevent the car from starting in the event of theft. After a member has booked a car in advance, she uses her ZipCard by placing it on a sensor in the windscreen to enter the car. While using the car, if the member wants to return the car earlier or later, she can access her booking and amend it subject to availability. For occasional drivers it is usually cheaper to use ZipCar than to pay to own a car. ZipCar also provides different kinds of vehicles so depending on your journey you can book a specific vehicle.
Local councils will typically provide dedicated and free parking spaces for car club vehicles because they reduce local community congestion, and universities are also interested in finding ways to reduce congestion as well as infrastructure investment and maintenance costs.
According to UK Transport Minister, Norman Baker, “Each car club vehicle can result in taking 24 private vehicles off the road and the low carbon vehicles used typically emit approximately 33% less CO2 than the average car. This is why we are supporting the continued growth of car clubs across the country”.
Tracking technology within the vehicle has been developed in-house by ZipCar engineers, enables ZipCar to track vehicles in-use, find vehicles should they be stolen, and collect data on member usage.
MONETIZATION – VALUE CAPTURE:
In the UK, members either pay an annual fee of £59.50 plus a minimum £5/hr when using a vehicle, or they pay a monthly fee of £6/month for 12 months plus a minimum £5/hr when using a vehicle. ZipCar limits the journey to 40 miles/day and then charges a fee per extra mile driven. Package discounts are provided to universities.
Written by Stephan Newbury and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School, this case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2014