Jamie Kripke

Zipcar Makes the Leap

The car-sharing darling makes its play for the mainstream by emphasizing economics and lifestyle over environmental impact.

If there is a phrase that describes the Zipcar car-sharing service—and I don't think there is yet—it would be some mix of Volkswagen's Fahrvergnügen (driving pleasure) and Napster "Own Nothing, Have Everything" advertising slogan. The experience is what it is all about: I reserve a Mini Cooper online, walk one block from my house in San Francisco to a car lot, swipe my card across the windshield, get in, adjust the seat and mirrors, and motor off. For $11 an hour, my insurance and gas are covered. By block two, I'm thinking of selling my station wagon. Turns out, I'm far from alone. "Forty percent of our customers either sell their car or halt a purchasing decision of a car," says Scott Griffith, Zipcar's CEO.

Griffith, 48, has spent the last decade laying the groundwork for the moment when that question—Would I really get rid of my car?—doesn't sound so crazy. Late last year, Zipcar merged with Flexcar to become the nascent industry's dominant player. The combined company has 180,000 members, who pay at least $50 a year to access cars in 50 cities in the U.S. and the U.K., and is expected to hit $100 million in revenue this year. Integrating the two services should be completed this month.

Now Zipcar is ready to shift into second gear driving toward an IPO, 2 million customers, and $1 billion in annual revenue. High oil prices and environmental concerns should ease its path, but even though Zipcar's mission is to take cars off the road, its bid for the mainstream soft-sells the green benefit in favor of the total experience. "We know we're up against an ingrained culture," Griffith admits. "It's a rite of passage to buy a car when you graduate college."

To that end, Griffith's strategy is to intercept customers before then. "We're borrowing from Apple's early days," he says, "when it went after students to be its early adopters." Zipcar is available on 70 college campuses, including such behemoths as Michigan, Ohio State, UNC, and Florida. Griffith expects that number to grow "by a factor of three to five" in the next year or two.

He woos universities to give him prime campus parking spaces as a money-saving hedge against having to build more parking structures. MIT, for example, estimates that it has saved $9 million in capital costs through its alternative-transportation program, which includes Zipcar. Griffith attracts students with cars that they might aspire to own one day, from 3- and 5-Series BMWs to pickup trucks, and the promise of cost savings. "Economics and convenience drive choices, not green," he says, citing that his average customer uses the service two or three times a month, spending less than $100.

The real payoff, then, comes after graduation day. Almost half of Zipcar's college customers move to a major-metropolitan area that Zipcar serves or plans to serve. Many of them continue their membership. "There's a tremendous opportunity to extend that," Griffith says. "We want to fit into a smart, urban lifestyle." The long-term vision is to leverage its lifestyle-brand status to create other revenue streams.

Zipcar was born during the first Web boom and for a long time had the whiff of a dotcom era curiosity. It presciently eschewed check-in counters in favor of a Web- and phone-based reservations system, using digital key-card systems to unlock cars. Now any Web-enabled phone can manage reservations, and the company aims to extend the features it can offer via text messaging as the medium evolves. "Our goal is truly cars on demand," Griffith says.

Ideas on the drawing board include one-way travel between cities and designating cars for longer distances (it now limits how many days in a row you can rent and charges extra for going beyond 180 miles a day). Zipcar is already observing that customers use its service outside of their home market—challenging the rental-car business. "You go to a city for three days, and your rental car sits idle for two and a half," he notes, offering the alternative of simply using a car when you need it. "We think about lifetime membership; rental-car companies focus on transactions."

Indeed, Zipcar may be on a collision course with the Enterprises of the world. "The rental-car companies are feeling—if not exactly heat—some warmth from the car-sharing companies," says car-sharing gadfly Dave Brook. Enterprise, Hertz, and Thrifty now offer hourly options in select cities, and even U-Haul rents PT Cruisers by the hour in 12 markets. "We're fulfilling existing customer short-term transportation needs while also tapping into a whole new customer base," says Hertz marketing VP Frank Camacho.

Griffith considers these moves "an affirmation of how big the category could be." By positioning himself as the Whole Foods of the category, the rental-car companies end up being the grocery stores that add an aisle or two of natural foods. He believes he has got a five-year head start in technology—and, I'd add, he's eons ahead in service. Enterprise still charges extra for insurance. Hertz's sign-up process for hourly rentals in Boston is slow and tedious.

While other companies wrap themselves in green with every modest, earth-friendly nod, Zipcar has adopted a set-it-and-forget-it model. "There is a feel-good component to car sharing, but we let customers come to that conclusion," Griffith says. "We don't have to advertise it." But, hey, it couldn't hurt to come up with a word for that feeling.

Jamie Kripke

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  • Dick Nepon

    Doug, there was a time when these conversions were legal and recommended by government. It now appears to have been a short sighted plan. They are no longer legal, and are being addressed as illegal conversions are discovered. The prior, legal conversions are enough to choke the city. Even a single family home with 4 or more drivers and cars is enough to choke the city.

  • Doug Brunner

    Dick Nepon says: "This also has the added benefit in inner cities of helping to reduce the parking congestion from conversion of large single family homes into multi-family units."

    From my understanding, it is the illegal conversion of single family homes into multi-family dwellings that has brought your once great city of Allentown down the poop chute. How many gas guzzling broken down cars are parked outside your own home? If you want to not go shopping 'whenever you feel like it', take the bus. Oh, sorry, is public transportation in A-town too scary?

  • Dick Nepon

    Also not covered, the idea of municipalities using the non-profit car-sharing as a basis for reducing overhead. Sharing vehicles with residents, even if pre-reserving them during the business hours, allows for reducing the cost of owning and maintaining a fleet. Most municipal fleet vehicles are unused evening and overnite. This also has the added benefit in inner cities of helping to reduce the parking congestion from conversion of large single family homes into multi-family units. A twelve foot frontage city home might need four or more parking spaces. With 12 houses on a block, you can see why there is never a spot to park. We will need to rethink our expectation of shopping when we feel like it; we'll need to plan ahead and reserve. But the benefits are obvious.

  • David Brook

    This was an interesting article but doesn't even mention the very successful non-profit carsharing companies that successfully compete with Zipcar in several cities - San Francisco, Philadelphia, Vancouver. More are on the way.

    I believe the wording in the sidebar graphic may lead to misunderstanding of the effect of carsharing. It says "Carsharing members report a 47% increase in mass-transit use, a 26% increase in walking rather than driving and a 10% rise in bicycling trips." If I'm not mistaken, I believe what the member surveys have shown is "47% of members report an increase in mass-transit use" not that they're taking 47% more transit trips than before joining. The wording is confused for the other modes as well.

    And, as someone who follows the industry, I would be interested in the details behind the statistic: "Zipcar members drive 369 miles annually compared with 5,295 miles before joining." The 5,295 miles before is certainly reasonable but I suspect the 369 miles reflects the average number of miles members drove Zipcars, not all the driving they did. For example, a 2 car family cutting back to owning 1 car + Zipcar would likely be putting more miles on their remaining car each year.

    Nitpicking? Perhaps - but I've seen statistics get picked up and thrown around for years before someone stops to ask some basic questions.