Skip to content
Business
Link copied to clipboard

Zipcar makes new push for business in Philadelphia

Zipcar Inc., which bought its way into Philadelphia with its purchase of Flexcar Inc., is making a new push against local nonprofit PhillyCarShare for the city's government, business and residential Web-based car-share market.

From left: Mark Norman, president and COO of Zipcar, and Scott Griffith, CEO. The for-profit carsharing company, is challenging Philadelphia-based nonprofit PhillyCarShare for city government business and local market leadership.
From left: Mark Norman, president and COO of Zipcar, and Scott Griffith, CEO. The for-profit carsharing company, is challenging Philadelphia-based nonprofit PhillyCarShare for city government business and local market leadership.Read more

Zipcar Inc., which bought its way into Philadelphia with its purchase of Flexcar Inc., is making a new push against local nonprofit PhillyCarShare for the city's government, business and residential Web-based car-share market.

"My goal is to become the Whole Foods Market of the car-sharing category," said Scott Griffith, chief executive officer of Zipcar, of Cambridge, Mass., citing the organic-foods chain that has been competing successfully with neighborhood granola co-ops and regional chains.

Zipcar, which bought Seattle-based Flexcar last fall, is bidding to replace PhillyCarShare Inc. as car-share supplier to the City of Philadelphia, said Robert Fox, head of the city Office of Fleet Management.

Zipcar plans to convert its local 110-vehicle fleet to the Zipcar brand today. It is offering promotional pricing, including $6 an hour for a hybrid Toyota Prius, with free gas, miles and insurance. That compares with PhillyCarShare's weekday rate of $3.90 plus 9 cents a mile, and a free hour per month.

"They're trying to follow our lead in discounting hybrids," said Clayton Lane, deputy executive director at PhillyCarShare. "Because we're not trying to provide a financial profit, we can provide a lower price and invest more in our cars and systems."

PhillyCarShare said it earned a 10 percent surplus from its $10 million in sales last year, when it served 35,000 customers, up from 6,000 the year before. That money went back into the business for faster computer systems and a better variety of cars, Lane said.

By contrast, Griffith said for-profit Zipcar did not expect a profit until 2009, though it collected $100 million from 180,000 customers nationwide last year.

Venture capitalists - including Greylock Partners, of San Mateo, Calif., and Benchmark Capital, of Menlo Park, Calif. - have invested more than $35 million in Zipcar since 2003, enabling it to run a deficit as it builds market share. Griffith said Zipcar appealed to customers who traveled between cities such as Boston, Washington and San Francisco, far beyond the reach of local players such as PhillyCarShare.

Lane, of PhillyCarShare, said his company was expanding its network by entering nearby markets such as Wilmington, and by making deals with independent car-sharing nonprofit organizations in Chicago, San Francisco and other big cities.

PhillyCarShare's nonprofit status is part of its countercultural appeal to some customers, who include college students and other young fans.

Zipcar's backers - including America Online founder Steve Case's investment firm, Revolution Living L.L.C. - expect a healthy return as Zipcar's value rises.

Griffith, a Pittsburgh native and former Boeing Co. strategist, said the company eventually might sell shares to the public.

He and Lane both said they also expected traditional car-rental companies to invest more in car-sharing, as demand grows for the online-based service among people used to ordering and paying for services online rather than going into traditional service outlets.

While a majority of customers are individuals, PhillyCarShare counts the city, the University of Pennsylvania, and the law firm Blank Rome L.L.P. among its major business clients, Lane said. Winning that city business from PhillyCarShare would be a boost for Zipcar.

The cost-conscious city sees the contract as a simple business proposition, according to fleet manager Fox.

"Using PhillyCarShare allowed us to dispose of around 100 sedans" when the city cut its sedan fleet in half in 2004, Fox said.

"But after four years, the contract has been reopened and rebid," Fox added. "We'll open them within the next couple of weeks. It's easy for us: Low man wins."

Zipcar and PhillyCarShare at a Glance

Zipcar Inc.

Cambridge, Mass.

Owners: Greylock Partners, Benchmark Capital, Globespan Capital Partners and others.

Founder: Robin Chase, ousted 2003.

Chief executive officer: Scott Griffith.

Chief operating officer: Mark Norman

Customers in last year: 180,000.

2007 sales: $100 million.

2007 expenses: More than $100 million. Griffith says Zipcar depends on venture capital, but should break even in 2009.

PhillyCarShare

Philadelphia

Not-for-profit.

Executive director: Tanya Seaman.

Deputy executive director: Clayton Lane.

Customers in last year: 35,000.

2007 sales: $10 million.

2007 expenses: $9 million. Lane says the surplus is invested in new cars and systems.

SOURCE: Companies

EndText