June 2011: Does the Zipcar model provide a blueprint for 21st-century businesses?

By , June 13, 2011 10:22 am

June 2011, Market Intelligence Article for Sustainable Business Magazine, reproduced with permission.

Peter Winters, President, Haddock Research & Branding

Double-click on the offprint below to see it in a larger size.

Zipcar has just had a successful IPO and is known particularly by Americans who are green, from the East Coast, younger men without children, and those on the highest incomes. It will be interesting to see how well Zipcar can broaden its appeal from this profile to other demographics, and how appealing the proposition will be outside of North America where public transport is often more available. A broader issue is whether Zipcar provides a useful blueprint for other businesses in providing a viable consumer proposition based on sharing, and supported by modern smart technology and creative financing.

 

In April 2011, the car share company Zipcar raised $174 million from a successful IPO, over twice the company’s original estimate of $75 million[1]. This was an expression of investor confidence for Zipcar’s goal of getting people to think about car sharing as an alternative to car rental and car ownership. As Zipcar puts it ‘car rental is so last century’[2].

That there is something new about Zipcar’s value proposition has been picked up by the Economist in an article called The business of sharing: What do you do when you are green, broke and connected? You share[3]’. It discusses an emerging business model, adopted by companies such as Netflix and Zipcar, based on consumers renting things, rather than buying things. This business model is supported by cutting-edge IT systems and ready access to capital[4].  To lower costs, the company recently announced the creation of Zipcar Vehicle Financing[5].

Currently, Zipcar’s services are mainly available in the US, though there is also some coverage in Canada and England. In our Environmental Choices survey we measured the awareness and usage of car share brands, and the study showed that in late 2008, Zipcar was recognised as a car share organisation by 13% of Americans, 11% of Canadians and 2% of English people[6]. The survey also indicated that around 1.5% of Americans had actually used Zipcar by that time; these being members, or presumably their family, friends and other passengers.

The Americans who are particularly likely to be aware of Zipcar are those living in a city centre, to be from the New York/New England area, and to be younger men without children. They are also somewhat more likely to vote Democrat, more likely to be well-educated and more likely to be Climate Citizens; the group most concerned about climate change. Indeed, in North America there already seems to be a car sharing ethic amongst green-minded people. In households of 2 adults or more, there are significantly fewer cars per person where the respondent is a Climate Citizen, compared to those where the respondent is Sceptic/Uninvolved about climate change.

Yet Americans aware of Zipcar are far from being broke. In contrast to the theme of the Economist article, they are also much more likely to have a household income in the highest bracket – in excess of $100,000 per year.

Within their IPO filing[7], Zipcar rightly draw attention to the risk that ‘the rate of adoption and our associated growth in our current markets may not be representative of rates of adoption or future growth in other markets’. America has a transport infrastructure geared to cars and Zipcar may be meeting an accessibility need amongst Americans which is not nearly so pressing in other countries. According to the Environmental Choices survey, just 2% of English people are not in moderate, 20-minute walking distance of some form of public transport – whereas the equivalent figures for Canadians and Americans are 16% and 36% respectively. In some parts of America, such as the Deep South, the majority of people are isolated from public transport in a way which is really not experienced by people living in England. This difference in accessibility is reflected in the public’s attitudes. Whereas 36% of English people strongly believe they ‘really need their own personal car’, this proportion rises to 46% amongst Americans and 54% amongst Canadians.

It will be interesting to see if Zipcar develops as a niche transport option, or whether it can broaden its appeal to other demographics, such as with families requiring car seats. It will also be interesting to see how well the Zipcar service works outside North America.

Yet the broader interest in what Zipcar is doing is whether it provides a blueprint for other 21st Century businesses. Can more companies develop compelling consumer propositions based on leasing resources, enabled by smart technology and creative financing? Maybe owning all the stuff we have is very last century? Maybe the modern way is to rent stuff when we want to use it? Maybe we will not feel so inclined to use a car when the charge is on an ongoing basis rather than mostly in the initial purchase?


[1] ‘Zipcar’s stock price zomms upwards after IPO’, April 14, 2011, Venture Beat

http://venturebeat.com/2011/04/14/zipcars-stock-price-zooms-upward-after-ipo/

[2] Zipcar website http://www.zipcar.com/

[3] ‘The business of sharing: What do you do when you are green, broke and connected? You share.’, October 14, 2010, The Economist, http://www.economist.com/node/17249322?story_id=17249322&fsrc=rss

[4] ‘Press release: zipcar renews asset backed financing facility: continued relationship with credit agricole provides capital for domestic expansion’, May 11, 2011, Zipcar, http://zipcar.mediaroom.com/index.php?s=43&item=224

[5] ‘Zipcar Prices IPO at $18, Above Range, Debuts Thursday’, April 13, 2011, Gigaom,

http://gigaom.com/cleantech/zipcar-prices-ipo-at-18-above-range-debuts-thursday/

[6] ‘3.f – Transport, cars and car-share organizations, Environmental Choices 2008’, Haddock Research,

[7] ZIPCAR, INC. FORM S-1, REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, UNITED STATES SECURITIES AND EXCHANGE COMMISSION, June 1, 2010 http://www.sec.gov/Archives/edgar/data/1131457/000095013010001923/ds1.htm

Comments are closed

Panorama Theme by Themocracy