Marketizing Zipcar

There are normally lots of Zipcars near me, but looking at Thanksgiving day things look pretty bleak…

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If I want a Zipcar on Thanksgiving, my only option is to wait and hope someone cancels their existing reservation (which for other reasons will all likely happen 3 hours and 1 minute before the reservation start times).

Maybe a little marketization could fix this problem and make everyone better off….

Make Reservations Freely Transferable

Zipcar could solve this problem completely by adding a single new option to an existing reservation:

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That’s it!

The moment they did this, I would be able to buy a reservation from someone who already had one. People would start offering their Thanksgiving day reservations for sale on Craigslist, and whole new websites would likely show up where you could buy and sell reservations (ziphub.com is taken, damnit!) .

Since the cost of transfer (to both members and Zipcar) is almost zero, Coase tells us that every car would ultimately end up with the optimal person – and many people would be made better off along the way.

Zipcar Futures Trading

I  predict that speculators would start buying reservations without any intention of ever using them – they’d buy them to sell them at a profit.

Low hanging fruit would be Thanksgiving and 4th of July, but reservations for sunny weekends in June are also in high demand, so whoever can earliest and most accurately predict the weather would stand to profit handsomely for the information they are injecting into the system.

The large costs of Zero-cost options

What’s to stop someone from making a crapton of reservations and then just canceling the ones they don’t want/sell – serving only to increase prices to real buyers by intermediation?

This is a symptom of Zipcar’s existing broken cancellation policy, and is a problem with or without transferable reservations. Today people make reservations anytime there is any chance they might want them and then ride the free option until the end of the cancel window. This hurts members because they can not reserve a car that will ultimately be available when they wanted it, and hurts Zipcar because the car ends up sitting idle even though there was a member who would have used it if it was not being blocked by a free option holder.

No more cancels

Luckily, you can get rid of cancellations altogether once you have transferable reservations. If you don’t want a reservation any more, then you can try to sell it. If no one else wants it, then you are stuck with it. This is good because it will prevent people from riding that free option, and assigns the costs of unwanted reservations to the people best able to predict, avoid, and mitigate these costs.

This does mean that you will now have to ask yourself :

  • What are the chances that I will not use this reservation I am about to make?
  • What are the chances that someone else will want this reservation if I don’t use it?
  • Am I willing to pay the potential cost of making this reservation and then not using it?

These are all valuable questions for a potential reserver to ask before reserving.

Other Zipcar Problems and Solutions

Late returns

Problem: I show up to pick up my car… and it is not there because the person before me is late.

In the new Zipcar world or transferable reservations, as soon as it was clear that my expected Zipcar is not going to make it back on time, I can go buy a replacement reservation on the secondary market and make the late person pay for it.

This is like the “buy-in” procedure that happens when someone fails to deliver a stock and the person who bought the stock needs to use it.

In practice, a buy-in can be very expensive for a seller who fails to deliver, so sellers go to significant lengths to make sure they never get bought in – which is a better result.

In the meantime…

…some other easy and low risk changes that could make Zipcar so much better.

Early late warning

Please do not make me go to the parking lot to pick up a car that is not there. The moment that a car is past the point-of-no-return (it can not be returned on time based on GPS location and google maps travel time predictions), send me a text telling me so. Tell me the soonest it could potentially be back, and give me a list of other cars I could alternately get into sooner.

Let me search for cars that have gas

It is hard to get gas in Manhattan. Getting into a Zipcar that has 1/4 tank in it dooms me to a 20-60 minute round-trip (depending on traffic) gas quest. This is a deal killer for short trips within the city.  If I was planning on a 1 hour trip across town and the car has 1/4 tank in it, I have no choice but to abort the mission. This is a double whammy because (1) I don’t get to do whatever I planned on doing, (2) I still have to pay for the Zipcar I can’t use.

On the other hand, this is no big deal for people who are planning on heading out of the city anyway. 1/4 tank is more than enough to make it to a shiny suburban gas station that is right on the way to wherever you are headed.

So please give me a way to only reserve cars that have 1/2 tank or more. Or at very least, give me a way to check how much fuel is in the car I have reserved (Zipcar already knows this in real-time) to save me from the crushing fate of having to go to the parking lot and deal with that mess (see below), only to find out that I can not even use the car.

Gas delivery

There are now innovative companies that solve the urban gas desert problem by bringing the gas to the car.

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Zipcar should contract with one of these companies to automatically bring gas to low cars between reservations, or just do it themselves in places with lots of cars and few gas stations.

Parking lot pain

Every Zipcar I’ve ever used in Manhattan lives in a parking lot, and all these parking lots have attendants who interpose themselves between you and your car, presumably to collect rents tips.

To add insult to injury, I am paying for the car with both money and time while I must wait to get access to it. In my experience this typically takes from 5 to 15 minutes. This is a deal killer for trips less than an hour, and a huge pain point for all others.

Listen Zipcar, you know exactly when I am coming to get my car so why not have the car ready for me to hop in and drive away when I get there?

If that’s not going to happen, then at least give me this button…

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…to make the whole untidy transaction less time wasting and more palatable.

No more deadman extension texts!

I don’t know why, but it bothers me so damn much every time I get “Do you want to extend your reservation?” text…. 30 minutes after I’ve already returned and checked in  the car. It is functional state fingernail on a user experience blackboard.

Here is a pull-request for you, Zipcar…

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FAQ

Why would Zipcar not want to make reservations transferable?

I honestly do not know. It would take a nominal amount of work to implement and there should be almost no cost involved with making an actual transfer (it is updating a number in a database).

It has almost no impact on people who do not choose to use it other than adding an extra menu option to existing reservations. If you want to be extremely low risk , then do not even link to the reservation transfer page from a reservation so people must explicitly (know about it and) go to it.

Maybe they were worried about people misunderstanding what it means and getting inappropriately mad? Even Ticketmaster recently made tickets freely transferable on their system, so I think people will get it.

Why would Zipcar want to make reservations transferable?

  1. Higher car utilization which means higher revenues. Zipcar does not make any money on a canceled reservation, and they have an opportunity cost when they loose a legitimate paying reservation due to free option riding.
  2. Earlier information on fleet utilization means more actionable information. Once a reservation becomes a reliable signal, Zircar can do things based on that new valuable information. Today you don’t know if a reservation is “real” until 2 hours and 59 minutes before it starts.
  3. Happier members. There are lots of people I know who don’t even consider using Zipcar because the few times they tried, they predictably found no cars were available. By keeping free riding out of the system, the availability of cars goes up – especially during peak demand.

Why wouldn’t Zipcar just implement demand pricing and capture the marginal profits themselves?

The head of Zipcar has said that other car share companies have tried demand pricing in the past and they went out of business. She thinks it is too complicated for people to grok.

That was a while ago. Today airplane tickets, hotel rooms, and even  tubes of toothpaste are dynamically priced, so maybe the time has come for Zipcar to reconsider this position.

It is true, however, that dynamic pricing does make some people mad. Those people are just wrong, and it is a mistake to try to placate them.

That said, doing optimal demand pricing is hard. Zipcar has a core competency in managing vehicle fleets, and those skills might not translate well to developing a real time data driven prediction engine. By making reservations transferable, they get out of the way and open the doors to others who do have these competencies and still get some of the benefits.

At very least, Zipcar could capture some of the value of high demand reservation slots by having an opening auction 1 year and 1 day out. The opening price for a reservation would be the normal rate. In the case where of low demand slots (no one wants it a year ahead of time), then the auction closes with Zipcar owning the reservation and then it is just like it is now. In the case of high demand slots, the member who bids the most gets the slot and they are happy because they avoid the current unpredictable discontinuity lottery. Zipcar wins because they capture the marginal price increase, and they stretch the current system point load over a full day.

My hamster died and I am so sad that I can’t drive, so I can’t use my ZipCar reservation to go to HamsterCon in New Jersey next Tuesday morning. I tried to sell my reservation but there are lots of cars already available then so no one wants to buy my reservation for full price. Now what do I do?

Try selling at a lower price. Eventually someone might be willing to buy your reservation at a low enough price. That’s how markets work.

No one wants my reservation. So you are saying that not only did I loose my dear friend of 27 months, I am also loosing my $54? This is insult and injury! I hate you and I hate Zipcar and I will never use Zipcar again and I am tweeting this so none of my 25,000 hamster loving followers will ever use Zipcar again either!

While a no-cancel policy correctly assigns costs to people best able to predict, control, and mitigate those costs, some people have a hard time swallowing policies like this for irrational psychological reasons. Zipcar could take a middling approach to this and follow the airline model: charge a cancellation fee that ends up being marginally enough to prevent free riding while being generous enough to make people not feel so angry.

Why do you hate Zipcar so much?

I * LOVE* Zipcar! I love Robin Chase! I am grateful that I do not have to own a car – Zipcar is so much better at it than I am!

I wouldn’t care about these small issues if Zipcar was not already so amazingly great on the big and important ones. These suggestions all come from a place of love and admiration. I want Zipcar to be the best Zipcar they can be so they can take take over the world!

You should Maven/Car2Go/Enterprise!

I think I am a member of every existing (and defunct!) carshare in NYC.  They are all interesting and useful, but as a practical matter Zipcar usually ends up being my goto.

That said, if Car2Go could somehow make their model work in my neighborhood, then I’d be all over that!

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