ZipCar, the metropolitan car sharing service, has filed for an IPO. I've never used ZipCar, but as a former NYC resident, I've seen them frequently, and I get the impression that their user base loves the product. In case you're unaware, from the filing:
"Zipcar operates the world’s leading car sharing network. Founded in 2000, Zipcar provides the freedom of “wheels when you want them” to members in major metropolitan areas and on university campuses. We provide over 400,000 members, also known as “Zipsters”, with self-service vehicles that are conveniently located in reserved parking spaces throughout the neighborhoods where they live and work. Our vehicles are available for use by the hour or by the day through our easy-to-use reservation system, which is available by phone, internet or wireless mobile devices. Once the vehicle is reserved, a Zipster simply unlocks the vehicle with his or her keyless entry card (called a “Zipcard”), and drives away. Our all-inclusive rates include gas and insurance so Zipsters can easily estimate the total cost of their trips. Zipsters choose the make, model, type and even the color of the Zipcar they want based on their specific needs and desires for each trip. Upon returning the Zipcar, the member locks the vehicle and walks away, free from the costs and hassles of car ownership. Zipcar provides its members a convenient, cost-effective and enjoyable alternative to car ownership."
I found it interesting that Zipcar later says, ">We target large, densely populated markets with high parking costs and strong public transportation systems."
Now, large densely populated markets: that I understand. Why strong public transportation systems? If you have a strong public transportation system, don't you need cars less? The filing mentions many times how public transportation is not suited to many uses that suit the Zipcar well, but then why target markets with strong public transportation? Similarly, they target high cost of parking markets, because those markets make it harder for individuals to justify buying a car, and thus easier to justify Zipcar. However, it makes it difficult to park your Zipcar somewhere while you're using it (Zipcars have reserved parking spaces, but if you want to drive to a friend's house in the city, obviously, you still need to find a space to park when you get there). I am guessing that Zipcar's target market in these tough parking areas is "errand-runners," ie, people who don't need to park the Zipcar in front of their apartment when they get back, but rather just need to unload the bounty they just picked up at Costco in the Zipcar.
This brings me to the part of Zipcar's business model I never understood, and couldn't gain much insight into from reading their IPO filing: THEIR parking costs. In NYC, it can easily cost $400/month or more to park a car. Does Zipcar get discounts from the parking lots? Or do they just rely on the assumption that they'll bring in revenue that will allow them to shell out massive parking costs?
Anyway, it's an interesting company, with what I think is a fanatical, loyal user base. Of course, the company cautions in a disclaimer:
"We have experienced net losses in each year since our inception, and we expect to incur net losses in 2010. We do not know if our business operations will become profitable or if we will continue to incur net losses in 2011 and beyond. We expect to incur significant future expenses as we develop and expand our business, which will make it harder for us to achieve and maintain future profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability."
-KD
note: in case it's not obvious, this post is not a recommendation to buy or sell shares in Zipcar
5 comments:
In most places, you won't get into a car unless you own it or you know the person who does. By targeting cities with lots of public transit, they target people who routinely get into vehicles they don't own, whose owner they don't know.
Or, from another perspective, cities with lots of public transit are full of people who do not need to have a car, and could be induced to purchase one for hours at a time rather than years at a time.
"Why strong public transportation systems?"
In areas where public transportation is "weak" as it were, everyone has a car already.
byrne, nucleus - good points. thanks.
KD, only when you can take a quick bus ride to the carshare lot does the business model make sense. Therefore, you need both transit and density.
Byrne, millions of people who have never set foot on public transit routinely get into vehicles they don't own or know. Here in the US, we call these unusual vehicles 'rental cars'.
Not that it matters, but here in SF the only thing I seem to see is City Carshare. Zipcar has a lot near my work, but I never see them in use. CC's are the cars I see in the Moldy Foods lot down the hill.
FD: we own a car. I have never used a car share. I have rented cars before.
Good public transport displaces the car as a commuter vehicle, leaving a niche for zip car to fill as a provider of occasional, on demand vehicle hire. Why not hertz or avis? because they charge by the day, not by the hour, and you can't pick it up at three in the morning!
The typical zip car or streetcar customer does not have their own car -- they commute to work using public transport, and on the rare occasion when they need a vehicle ( e.g. for a big shopping trip or to visit friends out of town) then they grab a zip car for an hour or two.
On the economics of parking, in the UK car clubs like zip car and streetcar are strongly encouraged by local authorities since they reduce demand for parking from residents overall. I believe, although I do not have proof, that car clubs get significant discounts for on street parking spots.
And yes, I am a loyal -- nay fanatical -- streetcar customer. since the recent merger with zip car I guess that makes me a zip car fanatic.
thanks for the great blog, keep up the good work.
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