| Register/Subscribe Home |
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | DECEMBER 1, 2000 ENTREPRENEUR PROFILES Car-Sharing: Is It the Next Colossus of Roads? Neither a car-rental company nor a leasing outfit, Boston's Zipcar provides clean, reliable, no-fuss vehicles for members who need wheels only some of the time
When her friend Antje Danielson told her about a car-sharing service she noticed during a trip to Germany, the business potential hit home. Then Chase talked to Glen Urban, the former dean at her alma mater, Sloan School of Business, at MIT. He got it immediately. "He said 'This is...huge. You should do it quickly and make it much larger than you are talking about,'" Chase recalls. That was in the fall of 1999. In January, 2000, Chase and Danielson incorporated Zipcar, which opened for business in June in Boston. During the first five months, nearly 500 members have signed up. Over the next year, the company plans to expand to San Francisco, Chicago, New York, and Washington, D.C. WINDSHIELD SWIPERS. Zipcar, whose slogan is "Wheels when you want them," has a fleet of 27 Volkswagen Beetles, Golfs, and Passats at parking lots throughout the Boston area. A member reserves the car through Zipcar's Web site, where each vehicle's schedule for the next two months is posted. The user unlocks the car by swiping an encoded membership card across a magnetic strip in the windshield. The coding lets Zipcar's computer know who took the car, and how many miles and hours it was driven. "I'm trying in as many ways as possible to differentiate ourselves from a car-rental company," says Chase, who is Zipcar's CEO and aims to make hitting the road as easy as getting cash from an ATM. "If you had to go to the airport to get the car, and stand in line, and fill out forms each time, then it's not an interesting idea," she notes. If drivers keep a car beyond the reserved time, or if a user returns one littered with fast-food containers, the service won't work. That's why Zipcar's users are considered members rather than mere customers. "We want people to understand the rules of engagement," Chase says. The rules: Maintain a clean driving record, which means no major violations in the last three years. Don't leave trash in the car. Don't smoke in the car. Return it on time, and pay your own parking tickets. Any driver who gets into an accident pays the $500 deductible before insurance coverage takes over. Zipcar handles routine cleaning and repairs, buys the insurance coverage, and maintains the parking spaces. Drivers are asked to refuel the car when it's at a quarter of a tank and are reimbursed by Zipcar. KEYS TO THE HIGHWAY. Members pay a $75 annual fee and a $300 refundable deposit. They pay 40 cents a mile plus a per-hour rate -- $4.50 per hour for the Beetles ($45 maximum per 24-hour period) and $7 per hour for the Passat wagons ($70 maximum per 24-hour period). Craig Kleffman, 31, was one of the first to sign up. Someone he knew in Montreal mentioned joining such a service, and Kleffman thought, "If only they had this in Boston, my life would be whole." So he scoured the Web and spotted Zipcar, which at that point wasn't even operating. He dashed off an e-mail saying he wanted to be in line for the service. Kleffman, who's a drummer in a band and has a day job at a law firm, generally rides his bicycle or the train. But every 10 days or so, whenever he has to run errands or haul his drums, he gets a Zipcar. He considered buying a car of his own, but after adding up all the numbers he concluded it would cost $8,000 a year to have his own wheels in Boston. He figures he'll spend $2,000 to $3,000 a year on Zipcar. (Runzheimer International consultants estimates it costs between $6,400 and $9,200 a year to own a car in the U.S., depending on the location.) Because car-sharing eases congestion on campus, Harvard Business School awarded Zipcar a parking space. In another neighborhood, a convenience-store also set aside parking. Kleffman is trying to talk his landlord into letting Zipcar use his driveway as one of its parking locations. In most cases, Zipcar pays for parking spaces in lots near subway stops. SMART MOVES. In a just-completed survey, members ranked convenience as the biggest reason for using Zipcar, saving money as second. "Eighty to 90% of the time, I can get the car I want," Kleffman says. The survey showed half the members make more than $80,000 a year, and 90% have college educations. Zipcar has come this far on 10 employees, first-quarter revenue of $37,000 -- and $500,000 invested by friends, relatives, and small-venture enterprises. Chase estimates it will cost $350,000 per city to expand, and she' in the process of looking for $5 million to $7 million in venture capital. Once Zipcar is established in its first five cities, it could be a good candidate for franchising, says Chase, who already has had requests from people who want to buy one. Car-sharing services have been operating for more than a decade in Europe, where they are a $200 million-and-growing industry, and in Canada. A handful have started in the Pacific Northwest, some with public funding. Car-sharing services wouldn't stand a chance without the technology that allows reservations, mileage, billing, and other administrative aspects to be handled via computer and wireless systems, says Susan Shaheen, who did her PhD research at the University of California-Davis on car-sharing. She established CarLink, a car-sharing experiment targeting commuters in the San Francisco Bay Area, which was funded by the state Transportation Dept. and Honda. That experiment is being expanded, and her ultimate goal is to turn CarLink over to a private, for-profit operator. NOT AN EDSEL. The lack of parking spaces in congested urban areas is the biggest draw for car-sharing consumers, Shaheen found. "That's the way to get someone's attention. Then they realize, 'Oh, I'm saving money and I'm saving time.' Shaheen, who did much of her research in Europe because of the dearth of car-sharing in the U.S., sees access to reliable public transportation as another key to successful car-sharing: People willing to share cars generally have other ways of getting around most of the time. "When we get the technology developed that can provide a highly professional product and keep the costs down, then the revenues are only likely to increase as people value the service more and are more willing to pay for it," she says. William Ford, chairman of Ford Motor, apparently agrees. At a conference in London this fall, he said, "The day will come when the whole notion of car ownership is antiquated." Drivers of the future, he predicted, will prefer to rely on networks of cars to which they would have convenient access. Busy expanding Zipcar's network, Chase figures the key to success in each city will be having a person at the top who is very hooked into the community, and she has used her network from business school and elsewhere to line up the right people. Each city needs someone like Stephen Oakley, director of the Boston operation, who has lived in the area for 30 years, been a union organizer and a manager, and "is incredibly well read and knows the meter maids and the university presidents by name," Chase says. "We need to be hooked into the communities," she stresses. "Corporate, pasteurized, Middle America Company X would have a hard time making that transition." ROAD TO D.C. That nonpasteurized image is important to Chase, who keeps a sense of humor in her e-mails to members and recently had an open house so they could meet one another. "We are working to maintain a careful balance -- growing the company and yet make it never feel anonymous," she explains. Maybe that's why the cars are identified not by an ID or license plate number, but by name: The Gepetto Golf is in the North End, the Gianno Golf is in the South End, Bret the Beetle is in the St. Botolph neighborhood. There's no word yet on where they might park, say, Gore the Golf or Bush the Beetle when Zipcar expands into Washington.  By Theresa Forsman in New York Edited by Robin J. Phillips.  | | |
 Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
