Zipcar is a car sharing service that Cambridge, Massachusetts, residents Robin Chase and Antje Danielson launched in 2000. Scott Griffith, a former Boeing engineer, now leads the firm. Although Zipcar didn’t pioneer the idea of car sharing—it first emerged in Europe—it is the largest car sharing company, and is changing the way people think about car ownership in urban areas. From its start in 2000, the company now has over 500,000 members. A total of 40 percent of its members say they’ve either sold a car or have decided to not purchase a car because of their Zipcar membership.
Business Model
Zipcar is a membership-based system. It charges a onetime application fee of $25 and an annual membership fee of $50. Zipcar cars have permanent parking spots in convenient locations in urban areas. Each member is given a membership card (called the Zipcard) that gets them into the cars. Reservations can be made from minutes before a car is needed up to a year in advance.
Once a reservation is made, the member simply approaches the car, opens it with the Zipcard, and drives it away. It costs about $9 an hour or $65 per day to rent a car. The cost includes the car, gas, and insurance. The car must be returned to its original parking space. The member simply leaves the keys in the car, locks it with the Zipcard, and walks away.
Zipcar is an entirely self-service business. As much as it loves it members, it tries to talk to them as infrequently as possible. None of its locations are manned. Cars are available 24 hours a day, seven days a week. As of December 2010, Zipcar offered a fleet of over 8,000 vehicles in urban areas throughout 28 North American states and Canadian providences, as well as London.
Zipcar’s goal is to take the concept of car ownership and turn it into a service. As a result, it doesn’t see its competition as car rental companies, like Avis or Hertz;
rather, it sees its major competition as car owners.

Piggybacking on Environmental Trends
Zipcar envisions itself as ideally positioned to take advantage of environmental trends. Currently, about 50 percent of the world’s population lives in urban areas, a number that’s steadily on the increase. According to surveys conducted by Zipcar, the two biggest complaints that people who live in urban areas have are (1) the high cost of living and (2) traffic and congestion.
Zipcar sees itself as at least a partial solution for both problems. In regard to the high cost of living, Zipcar has found that only about 10 percent to 15 percent of the people who live in urban areas and own cars need them on a daily basis. It costs anywhere from $6,000 to $10,000 a year to own a car in an urban area, considering the cost of the car, insurance, maintenance, gas, and parking. In some areas of New York City, for example, it cost upward of $500 per month just to park a car. According to independent research firm Frost and Sullivan, Zipcar (along with other car sharing programs) can save urban residents 70 percent of their total transit costs, because they only pay for the hours they use the vehicle, with no responsibility for gas, insurance, maintenance, or parking. In regard to congestion, Zipcar has documented what it calls its “1 to 15 phenomenon.” For every parking place that a city designates for a Zipcar, about 15 cars are taken off the road. This number results from the 40 percent of Zipcar members who say they either sell their car or decide not to purchase one as a result of their Zipcar membership.
This statistic hasn’t gone unnoticed by city governments, which are trying to develop comprehensive strategies to address traffic congestion. London, for example, has literally removed traffic meters in some locations and has given the parking spots to Zipcar and other car sharing services because they help relieve congestion.
Zipcar also contributes to environmental sustainability, although that’s not the point that the company emphasizes in its advertising and promotions.
Its cars are energy efficient. Studies have shown that when people rely on a car sharing service rather than owning a car, they drive about 50 percent fewer miles per year. Based on 500,000 members, Zipcar members reduce CO2 emissions by more than 500,000 tons a year as a result of fewer miles driven.
Another trend favoring Zipcar is that an increasing number of young professionals are either moving to or staying in urban areas. There are upscale neighborhoods opening in the inner-city in places like Miami, St. Louis, and Atlanta, where young professionals are deciding to locate and start families rather than moving to the suburbs. This demographic is an ideal target market for Zipcar.

Discussion Questions
1. How does Zipcar’s business model motivate its customers and its partners (such as the cities, businesses, and universities it partners with) to participate with its business? On a scale of 1 to 5 (5 is high), how motivated do you think each group is to do business with Zipcar and help it succeed?
2. At the beginning of this chapter, the statement is made that “at its simplest level, a business model is a story of how a company operates.” Do you think Zipcar has a good story to tell? When it goes to a city, a business, or a university to pitch its idea, do you think it’s easy or hard for Zipcar’s employees to clearly explain what it does and what the benefits of its service are?
3. Look at Figure 6.3 in the chapter. Explain Zipcar’s business model in each of the four areas. Is there anything in Zipcar’s business model that makes what it is doing hard to replicate? Explain your answer to this final question.
4. Do you think Zipcar is growing too rapidly? In what ways can rapid growth jeopardize the strengths of Zipcar’s business model?

Application Questions
1. What are the main challenges that you feel Zipcar will face in both the immediate and the long-term future?
2. In San Francisco, Zipcar competes with City Car Share, another car sharing service. Compare City Car Share and Zipcar’s business models. Use information you find about each firm to determine the ways these companies are similar and the ways in which they are different. Are there any areas in which you feel City Car Share’s business model is superior to Zipcar’s?