Wednesday, October 31, 2007

End of an Era - Flexcar to Merge with Zipcar

The announcement makes it official - ending weeks of rumors and speculation. Driving home yesterday I heard the first movement of Bach's Goldberg Variations on the radio and it captured my mood perfectly.

The "merger" puts an end to the long, bumpy ride for Mobility Inc., Seattle (or is it Washington DC?)-based owners of Flexcar. And it makes good a threat that Zipcar would come to Seattle that CEO Scott Griffith made in 2005.

At the time of the merger Flexcar had about 1,500 vehicles in 15 cities and Zipcar had just over 3,000 vehicles in 35 cities, in the US (as well as 2 cities in Canada and also London, England). (In classic Zipcar move, the joint press release appears to overstate their vehicle count by almost 500 cars.) Zipcar's Scott Griffith will continue as CEO and Flexcar's Mark Norman will be the Chief Operating Officer, according to the press release.

It ends 7 years of Flexcar's wild ride, alternating between the grandiose after each round of financing, followed by starvation after they'd burned through the capital. During the ride Flexcar made a series strategic errors, struggling valiantly to recover from each one. The partnership and investment by Honda diverted Flexcar's attention to concentrate on cities in California that weren't good candidates for carsharing. But Flexcar shot itself in the foot with its ill-fated Bay Area expansion starting from San Jose and its strategy in Los Angeles continues to be a head-scratcher. Their first generation car computer caused no end of member (and staff) frustration, probably caused in large part by some early design specifications, compounded by rolling out the technology before adequately testing it. Even the acquisition by Revolution LLC didn't go well. At the time Revolution seemed keep Flexcar on hold for over a year while it got organized, losing valuable momentum while burning through lots of cash.

Flexcar never figured out consumer marketing and didn't seem to want to try very hard. To the end Flexcar's consumer brochures continued to be pretty uninspired. It seemed to be an uphill battle for Flexcar staff to be able to use recruit members with local events brewpubs and coffee shops, the proven way to get people through door, even when they were hitting new member targets set by "corporate".

Flexcar did do a number of things well: it was great at developing partnerships (and in the early days had a hard time saying no when it needed to), leading the way in high level partnerships with local governments and transit agencies. And Flexcar concentrated on business memberships (at times almost to the exclusion of marketing to individuals) giving them more balanced fleet utilization (sometimes even resulting in weekday usage peaks). Thanks to the persistence of Steve Gutmann, some very marketable business "products", for both companies and colleges and universities, were defined and took off in the marketplace.

So what's ahead? The press release extols these benefits for the merger (and my comments):

• Zipcar's technology (Quite true, their web reservation system and customer service experience is marvelous)

• Universal membership (Even after switching to Invers car technology, Flexcar never gave members instant access to cars in any city. Go figure?)

• "Industry leading" insurance (Although it doesn't specify it, presumably this is Flexcar's insurance with a limit of $300,000 per accident. If so, it is good news since now Zipcar able to offer coverage down to age 18, as Flexcar has been doing on many college campuses.)

• Combined fleets in San Francisco and Washington DC (This certainly sounds good, but suspect it will probably only last until they launch their next city and then they'll start drawing down the duplicate locations in order to get vehicle utilization up)

• Green options (for what it's worth Flexcar members will have access to more variety of vehicles and Zipcar members will have access to more hybrid vehicles.)

The new company has its work cut out for it. Getting the Flexcar systems merged into Zipcar's will take some time. Zipcar will need to create the same buzz and brand in Flexcar cities as they have elsewhere (I mean, when you see a Mini in a carsharing fleet who do you think of?) And it will be a challenge to maintain their generally high level of customer service in a much bigger company.

Overall, I think the move will be a good one for carsharing. Zipcar has demonstrated that there really are several carsharing market segments and they've been very good at getting the lifestyle-oriented demographic in the driver's seat of their cars. If they can integrate Flexcar's business-membership savvy they will have a powerful combination that can help make a dent in urban mobility patterns

Congratulations to everyone at Flexcar and Zipcar on getting commercial carsharing where it is today. I'm looking forward to the next 7 years.

If you're curious you can read all about the details of how the membership transition will be handled and watch a really stupid video about hyper New Yorkers driving a Zipcar here.