Move over Zipcar: The next public transportation innovation

Overview

Tired of using the same old bus or taxi to get from Point A to Point B? Don’t want to commit to the annual fees of a Zipcar membership? Looking for a fun, convenient way to get around town? As Ariel Schwartz writes in her article in Fast Company, look no further than Scoot Networks, a San Francisco based start-up aimed to provide rental scooters to users in convenient locations across the city. The arrangement, which is currently only being tested in San Francisco before being rolled out to other major US cities, is centered around the utilization of the user’s smartphone. Not only do customers locate and reserve nearby scooters with their phones, they also place their phones in the scooter’s center console upon arrival to unlock the vehicle. The phone then turns into a virtual dashboard for the duration of the trip, complete with map and speedometer applications. Scoot Networks’ vehicles reach top speeds of around 30 miles per hours and can travel roundtrip to any location in the city. Although currently scooters must be brought back to the location they were taken from, the company’s founders believe as the business grows out of its trial phase users will be able to drop off their scooter at any Scoot Network location.

What separates Scoot Network from Zipcar?

With losses every year from 2006 through 2009, the hourly vehicle rental business model has not proven profitable for Zipcar. One major source of market failure for the company is its inability to come up with an efficient logistical strategy to ensure the correct number of cars are available in every location. As Zipcar founder Robin Chase mentions in Zipcar, Inc., “It’s a brutal and complex business…you have to get the operations right.” However, Scoot Networks maintains a key advantage over Zipcar: the incredibly low cost of each scooter. Scoot utilizes cheap Chinese manufacturers who turn out about 10 million electric scooters per year. This allows the start-up to purchase scooters at a mere $1,000 per unit. As CEO Michael Keating explains, “We’re able to take advantage of a huge investment China has made in electric vehicles.” Due to significantly lower costs for its vehicles than Zipcar, Scoot does not have to maintain the same level of logistical perfection to survive in the industry. This is because the service can afford to stock some locations with more vehicles than it thinks necessary without unloading a major percentage of its earnings. This flexibility will ensure users are able to use a scooter when they want it, despite the occasional inaccurate market forecast.

Will the product succeed?

In short, yes. Scoot’s substantially lower vehicle cost is not the only benefit it enjoys over Zipcar. When evaluating both products in terms of Rogers’ criteria of new product success, it is clear Scoot Networks is in a more advantageous market position. In this case, the factors that stand out are relative advantage, trialability and observability. In his article Note on Sensing Opportunity, Robert J. Dolan defines relative advantage by saying, “The more compelling the customer value proposition, the more likely [the product] will be successful.” In my opinion, riding an electric scooter around town with your iPhone as the center console is the definition of compelling. Users are not paying simply for the transportation—they are paying for the experience. Whereas Zipcar offers nothing new in transportation (plus the added pain of parking a full-size car in an urban setting), Scoot Networks promises a hip alternative to get around. Thus, the company’s target customer is the car-less young adult,who is willing to give unconventional transportation a shot.

A high level of trialability is also a strongpoint for Scoot Networks. Unlike Zipcar in which customers pay a $25 one time application fee and $60 annual membership fee, first-time Scoot users pay only a single-ride fee. This minimal commitment gives incentive to potential customers to try the product out risk-free.

Finally is Scoot Networks’ easy observability. Watching a person walk up to a parked motorized scooter and unlock it with a cell phone is bound to grab attention, especially in crowded urban areas. Young people who see their peers getting around on motorized scooters will be inclined to inquire about the company themselves. Further, each scooter is fitted with the “Scoot” logo on the front and both sides as well as “scootnetworks.com”, making it easy for pedestrians to see the company name and website while walking by the vehicle. The more popular rentable scooters become around the city, the more exposure Scoot Networks will gain with the general public, triggering a growth in sales until Scoot catches on as a San Francisco mainstay among young adults.