Most people associate rental cars with airports and travel. But Boston-based Zipcar is trying to turn the car-rental equation on its head. It targets urban dwellers who need a car for a few hours at a time to run an errand, go out on a date, or get groceries. Using the Web, the cellular data network, and RFID cards for entry into the vehicles, Zipcar has created a self-serve car rental business that is targeting not so much the Avises of the world as it is the very concept of car ownership.
Since Zipcar members, who now number more than 100,000 in 23 cities, book and pick up their own cars, the company can manage its fleet of cars much more efficiently than incumbent car-rental agencies. (Zipcar can manage nearly twice as many cars per employee as Avis, for instance). It is on track to make $60 million in revenues this year, and says it is profitable in its four largest established markets (Boston, New York, San Francisco, and Washington, D.C.)
The downside to Zipcar's distributed network of cars sprinkled throughout residential neighborhoods is that there might not be a car available on the weekend when you want it. Or if the car you reserved is broken or dirty, you might be stuck without an alternative. Zipcar is trying to mitigate against such scenarios by clustering its cars together in denser packs. I visited Zipcar CEO Scott Griffith to learn more in this week's episode of the New Disruptors (video). (Full transcript after the break).
(More Disruptors videos).
HOW DO YOU TURN THE CAR RENTAL BUSINESS ON ITS HEAD?
BY TARGETING URBAN DRIVERS WHERE THEY LIVE. ZIPCAR OFFERS 3,000 CARS IN 23 CITIES, BUT YOU CAN’T RENT ONE AT ANY AIRPORT.
SCOTT GRIFFITH, CEO ZIPCAR: What we’re looking at is an alternative to car ownership as opposed to alternative of car rental.
ERICK SCHONFELD, BUSINESS 2.0 EDITOR-AT-LARGE: So how is Zipcar different?
SCOTT GRIFFITH: We think about transportation one hour at a time. So if someone just needs to go run a few errands we’ve got a self service model that allows them to make a reservation on the web, walk to a car and in a few minutes. Get in it, go use it, bring it back. No paper. No individual to pick up and drop off point.
ERICK SCHONFELD: So how does this work?
SCOTT GRIFFITH: We’re going to try to find a car that starts this morning at 9:30. Right next door is a garage. We can pick any of these cars. Let’s for example pick The Honda Element
ERICK SCHONFELD: Here we are at the First Street Garage. We’re going to pick up our Zipcar.
SCOTT GRIFFITH: Let’s go.
EACH ZIPCAR MEMBER GETS A CARD WITH A WIRELESS ID CHIP INSIDE.
SCOTT GRIFFITH: This is your ticket to ride in any one of our cars in any fleet from London to Boston to Vancouver now?
ERICK SCHONFELD: And that opens the door of any car or only the car you've reserved?
SCOTT GRIFFITH: It’s secure so it only opens the door of the car that you reserved for the time slot you have.
ERICK SCHONFELD: And the key’s in the car.
SCOTT GRIFFITH: Keys are in the car but the car won’t start unless you have a reservation that’s active.
MOST OF ZIPCAR’S RENTALS ARE FOR HOURLY TRIPS. GAS AND INSURANCE ARE INCLUDED IN THE PRICE.
AND INSTEAD OF THE TYPICAL WHITE SEDAN, ZIPCARS ARE MORE LIKELY TO BE MINIS, BMWS, OR JETTAS.
SCOTT GRIFFITH: . . . keep in mind we’re competing with car ownership here. So we want to give them the kind of car that they would aspire to drive if they owned the car.
FOUNDED IN 1999, THE BOSTON STARTUP NOW HAS MORE THAN 100,000 PAYING MEMBERS AND IS GOING THROUGH A MAJOR GROWTH SPURT.
IT CLAIMS TO BE TURNING A PROFIT IN ITS ESTABLISHED MARKETS: BOSTON, NEW YORK, SAN FRANCISCO, AND WASHINGTON, D.C.
ZIPCAR MANAGES ALL OF ITS MEMBERS AND ITS FLEET WITH ONLY 110 EMPLOYEES, MAKING IT MUCH MORE EFFICIENT THAN AVIS OR HERTZ.
THE DOWNSIDE TO NOT HAVING SO MANY CARS IS THAT IF SOMETHING GOES WRONG A CUSTOMER COULD BE STUCK WITHOUT A RIDE. THE UPSIDE IS IN THE ECONOMICS OF THE BUSINESS.
ERICK SCHONFELD: And who’s your typical customer?
SCOTT GRIFFITH: Well-educated, urban dwellers. People who tend to live in the city.
But the income and age range is very . . . has broadened a lot as we got bigger. I think we’re starting to hit the mainstream now.
ERICK SCHONFELD: How long have you been a customer?
SHERRY DOWNES: I think it’s close to two years.
ERICK SCHONFELD: Do you own a car?
SHERRY DOWNES: I do not own a car. I gave up a lease on a station wagon. And I thought I’d try a Zipcar to see if I can get along using mass transportation plus Zipcar whenever I need it.
SCOTT GRIFFITH: . . .about forty percent of our members either sell their car or choose not to buy a car. So that’s what we think of as a big disruption.
BY USING TECHNOLOGY TO LET CUSTOMERS SERVE THEMSELVES, ZIPCAR IS MAKING CAR-SHARING A PRACTICAL ALTERNATIVE. FOR THE NEW DISRUPTORS, I’M ERICK SCHONFELD