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Sunday, July 01, 2012

Why a ZipCar when you can have a ZipTaxi?

[Update: January 2013]

After the recent announcement of AVIS acquiring ZipCar,  I have to assume that management thought that the best outcome for the company was to sell itself to a bigger company and not to continue to open cities around the world. Why is that?

[Originally Published: July 2012]


Need

Some developing countries are considering implementing the ZipCar model to improve mobility in big cities. I believe that in certain cities like Bogota, implementing a ZipCar model could be too complex and costly for the investor. Nevertheless there is still a need to move around the city for periods of time that can be more than just a ride in a taxi.

Description

What about if we create a subscription model for taxis? Instead of paying for a ride you pay a subscription a months for certain amount of time. There has to be some capabilities that the model needs to provide to be successful in a city like Bogota:

1. Security: the start-up has to provide secure rides for passengers. The model will need a system that provides this features (e.g. like a code or something)

2. Reliability: the start-up needs to make sure that taxis are always available even at peak hours. I believe you can achieve this if the system relies in technology to be more efficient in terms of number of taxis available in a specific zone and trying to match previous historical patterns. I believe that if you take a set of passengers and analyze their taxi usage you are going to find that the majority of their trip were to/from the same locations.

3. Simplicity:  the subscription model has to be pretty simple and you should be able to manage everything from your smartphone. The subscription model will probably have two parts to the equation: One that covers the "taxi base" (i.e. amount of money that you need to pay the taxi driver to have him/her participate in the program and connect to the system) and the other that covers the actual system (i.e. you probably need to develop an app and maintain some type of system or platform, that will cost you money).

Potential:

Let me just calculate the potential only for Bogota (then you can assume that there are X cities like Bogota and just get the overall world number for this idea). In Bogota there are 8M people. Lets assume that the same wealth distribution exist in Bogota than in the country. Following government data 1% of the population in Colombia makes between US$1000 and US$3500 a month. I believe this group will be our core group (plus students) given that they do not have enough money to purchase a second car (to avoid "pico y placa"). That means that there is a potential customer base of 80,000 people.

Lets assume that this people have to taxi every other day (because of the "pico y placa") and that they pay for a round trip. In average cab fares should be around US$5 per trip. That means that this people will spend around US$1,560 a year (52 wks x $30 -assuming that some weeks you have more than 2 days of "pico y placa")

80K x US$1.5K = US$120M a year



2 comments:

Kevin McLaughlin said...

Peak times need peak pricing, etc

Marcelo Burbano said...

Kevin, you are right. Peak pricing is needed in order to match supply with demand.

On another note, I have not figured it out if the Uber model could just work better than my ZipTaxi idea in Bogota