There's a flurry of reactions around Avis' purchase of Zipcar. The most daring of those proclaim how "sharing economy's entering mainstream." Wait, what? Let's get this straight. Zipcar is an hourly B2C rental car service, not a P2P collaborative consumption platform. There's nothing about it that screams sharing economy.
Zipcar's true innovation was the car rental model based on the insight that in the age where people buy music by the song, they'd probably want to rent a car by the hour. And they were right. Alas, while they were first, they were not the only one. Hertz On Demand is an hourly car rental platform launched to take advantage of the fact that increasing number of people value access to cars more than their ownership. And get this: Hertz on Demand is the same as Zipcar, but no one calls it sharing economy.
More important, however, is that Hertz On Demand has, and Zipcar doesn't, a giant fleet of vehicles and already established and profitable operation. That's where the Avis deal comes in for Zipcar. At the time of its acquisition, Zipcar's costs of maintaining its fleet are at about 65% of its total expenses, which is massive. Its operational costs are high. There's a frequent shortage of available vehicles. So, while Zipcar may be known as a leader of the hourly car rental category, in reality it's not. It's hard to compete with Hertz.
It's hard to compete with Hertz for Avis, too. Avis' On Location hourly rental service is tiny, focused on corporate renters and all around lame. It doesn't have convenient pickup locations and a substanital car fleet. So when faced with "build or buy" dilemma, Avis choose "buy" in order to remain competitive. Zipcar's acquisition will solve at least one of Avis' problems.
The conclusion is that Zipcar has created a market that has been consequently penetrated by more powerful entrants. To stay competitive, Zipcar had to become bigger. And it did.
There's nothing innovative about that, neither in economic nor in social terms. If you want to talk about real sharing economy, look at what Getaround, RelayRides, Whipcar, and Wheelz are doing. But no one's lining up to buy them, lest Steve Case. There's still a long way for P2P innovation to prove its profitability and penetrate mainstream - and for sharing economy to become a norm. When it does, it probably won't happen via acquisition.
