Uber vs Zipcar

How Uber turbo-charged the sharing economy business model

and why it can can achieve much faster growth than on-demand business models (Zipcar)

Zipcar Uber

On-demand (=pay-per-use) business model

Sharing economy based business model

Photo credit: http://www.freestockphotos.name/Economic benefits of not owning a car: • Average cost of ownership of a car per year in US: $8,558 ($23 / day) • Cars are utilised only 5% of the time (72 mins / day) • Economic benefit for consumer of $6.8b (in the US) in 2015 from Uber alone

Image credit: https://digitalsynopsis.com/wp-content/uploads/2014/06/supercar-wallpapers-bugatti-3.jpg

Zipcar Uber

Zipcar uses an on-demand business model

It owns assets (=cars) that it rents out as demanded by

their customers

Uber also provides an on-demand service But the more important aspect is that it utilises already existing assets that are owned by others This is a characteristic of the sharing economy

And Uber make use of it even if they do not embody the original spirit of the sharing economy

The value proposition is different but partly overlapping (on short distance, short term usage)

Zipcar

Uber

Using a car from 1 hour (minimum) up to 1 day

Get picked up and dropped off

Value propositions are not the same but similar

Zipcar avoids having to check the car after each ride and pushes some other costs onto the user (avoiding operational costs that a classic car rental incurs)

Zipcar

Uber Zipcar

Keeping clean + fuelling up Driver User

Fuel costs Driver Zipcar

Parking (at car’s home base) Driver Zipcar

Maintenance costs Driver Zipcar

Depreciation Driver Zipcar

Purchase costs + cost of capital Driver Zipcar

Core transaction costs (server, app) Uber Zipcar

But Uber pushes all operational, maintenance, depreciation & capital costs to the driver

Don't miss the forrest for the trees: Uber’s massive growth would never be possible without this

Zipcars located in Lower Manhattan where I have to pick

them up myself

Uber cars near my pick-up location (w/ real-time

updates) come to me

Distribution model

Safety, insurance, liability

Ensure safety

Provide appropriate insurance

Uber

Use technology to further improve safety

Uber

https://newsroom.uber.com/feedback-is-a-2-way-street/

Real-time feedback about drivers means Uber can correct for issues big and small – while ensuring that only the best drivers stay on the road. We take this feedback seriously – depending on the circumstances, rider feedback may lead to deactivating a partner from the system or serve as validation that the driver is providing great service.

An Uber trip should be a good experience for drivers too – drivers shouldn’t have to deal with aggressive, violent, or disrespectful riders. If a rider exhibits disrespectful, threatening, or unsafe behavior, they, too, may no longer be able to use the service.

Have partner drivers been deactivated for consistently poor ratings? You bet. Have riders been given a temporary cooling off period or barred from using the app for inappropriate or unsafe behavior? Yes. The system works to make sure the most respectful riders and drivers are using Uber. For example, in San Francisco only 1% of trips have a low rating of 1 or 2 given to a rider or a driver.

Also check out: https://www.uber.com/en-AU/legal/community-guidelines/us-en/

P2P platforms: manage “human interaction risks”

Uber strives to add value to the community (possibly to improve their image)

Uber

People trust brands they know Sharing economy companies can use their capex and revenues to

build a brand and acquire customers at turbo pace

http://www.nielsen.com/au/en/insights/reports/2015/global-trust-in-advertising-2015.html

Build and buy trust

Transaction cost = $0 (well, not quite but much leaner than classic car rental)

Zipcar

Offer convenience

Remove barriers: register to first ride ~10 mins

Zipcar

Uber

Measure customer experience and improve

Puts traditional taxis experience-wise on the backseat

Uber

Sharing economy ideals do not really align with hyper-growth and profit-seeking.

As sharing economy business, understand your impacts on: - Incumbents - Existing workforce - Environment - Community - Public opinion - Laws

Source: Bloomberg

1. Economic benefits 2. Asset ownership model 3. Demand-vs-supply management (e.g. surge pricing, market place) 4. Intermediated audiences (peer-to-peer, business-to-business,

business-to-crowd) 5. Self-regulating elements (driver/rider rating) 6. Predominantly mission or profit driven (alignment with user benefits) 7. Governance model (corporate or a collaboratively governed) 8. Asset management model (operational, maintenance costs) 9. Product/service distribution model 10. Transaction costs 11. Customer experience & quality management approach 12. Localisation 13. Footprint/impact on existing businesses, workforces, environmental

impacts, legal risks  14. Growth, funding and critical mass

Important elements of sharing economy based business models

On-demand business model Sharing economy based business model

Zipcar has a fleet of 12,000 cars

(despite being around a good 10 years longer than Uber)

Uber commands a fleet of 1,500,000 cars

Majority of capital to be invested in fleet acquisition

Opex goes into operating & maintaining fleet, depreciation, …

Investment in fleet = $0 (except some self-driving test vehicles)

Much lower operational costs

Underpins the potential of sharing economy based business models, but …

More capital available to invest in turbo growth

• Many of the early sharing economy based businesses (2009-) have failed for various reasons …

• They didn't get some part of the business model right, e.g. sufficient benefits for the user, trust, value proposition, customer experience, the platform …

• or it was not good enough without smartphones and dedicated apps to get to a critical mass …

• Like the dot-com boom-bust cycle, many of first wave sharing economy based businesses have failed, but there are massive opportunities waiting for those to get it right

Conclusion

Click here to get this presentation and other related downloads:

www.InnovationTactics.com/uber-sharing-economy-presentation-pdf

Feel free to share around the web. But please don’t alter any of its contents when you do.

Dr Murat Uenlue, PgMP, PMP