Zipcar Case

Executive Summary

Zipcar represents a new take on an old business model. It is an alternative to both the traditional car rental and car ownership. When it launched in 2000 it was operating in a niche segment of the car rental industry. In much the same way that Netflix exploded the video rental industry, Zipcar has the potential for disruptive innovation. Instead of renting out cars in increments of days and weeks like the traditional car rental players, Zipcar presents a low-cost alternative by providing cars to users who typically need them for several hours or less. Zipcar charges its users by the hour and strips away the hassle of having to locate brick and mortar sites to rent vehicles. Zipcar covers the maintenance, insurance, and housing costs for the vehicles making usage much more attractive than owning a car to the company's target users. Users avoid the inconvenience of dealing with rental counters, long lines and often insensitive personnel. Instead they are able to go online or use the telephone to make all the arrangements pertaining to their use of the Zipcar. They then can unlock the vehicle with their keyless entry card and drive away. The company focuses on providing ease of access and convenience to the consumer. The typical subscriber "rarely has more than a five-minute walk to a Zipcar parking location." The Zipcar concept has societal value as well in that it reduces the number of vehicles owned and results in less traffic congestion and pollution. Zipcar's founders firmly believed they had uncovered a need in the American marketplace that they could exploit.

Industry Analysis

The concept of car sharing is not a novel one. Car sharing as a business originated in Switzerland in 1987 when two separate cooperatives were founded. The basic business concept behind car sharing is to spread the overhead costs of the service over enough vehicles, being driven enough hours and miles per day that prices can be set at a level sufficient to entice and retain members. The car sharing industry has particularly appealing growth potential in light of the serious economic conditions facing most people in today's world. Car ownership is becoming a less attractive option for an increasing segment of the global population. Car sharing allows the consumer to reap the benefits of private car utilization without the high costs of car ownership. The car sharing industry in which Zipcar operates is similar to the car rental industry in terms of structure; however there are several key differences which separate car sharing and qualify it as a niche segment within the car rental space. The typical car rental customer takes possession of the car and uses it for days or even weeks. The target car sharing customer only needs the vehicle for several hours or less. Chase's financial plan for the Boston target market