RelayRides, a marketplace connecting car owners with car renters, is having a good trip, says CEO Andre Haddad.
Haddad describes 2014 as a breakthrough year for his company, which booked three times as much revenue as it did in 2013.
RelayRides has raised $52.5 million to date (including $35 million in the past year), outpacing its competitors FlightCar and GetAround by miles. The San Francisco startup has more users than any rival marketplace, too.
It says it has facilitated "hundreds of thousands" of transactions since its launch in March 2012.
It claims to have "tens of thousands of owners" renting out cars at 311 US airports (out of about 450 commercial airports in the US) and in 2,556 US cities.
While there's real liquidity in the markets at a few major airports, such as 200 cars today at San Francisco International, there's less elsewhere. Especially at the last-minute or during peak times, the platform can stumble. There's only 9 available tomorrow at Dallas/Ft. Worth Airport, for instance.
Haddad says the company has broad enough inventory now that it can justify spending on marketing and advertising nationwide to scale up.
Notable take rates
Unlike most travel startup entreprenuers, Haddad has a sophisticated grasp of ecommerce, having once overseen huge chunks of auction site eBay's business. He even ran and flipped a company, Shopping.com, to eBay.
Haddad sees an analogy between how eBay can have typical gross margins of more than 50% of GMV [the value of goods sold] from long-tail purchases and how RelayRides can enjoy a solid profit from its transactions in the long-tail.
RelayRides can turn a profit at a particular small-town location even if that location only completes, say, one transaction a week.
Yet he qualifies his comparison with eBay this way:
"The major difference is that eBay's take rate [or commission charged for goods and services sold on its platform] is around 15% of the GMV [gross merchandise volume], while ours is 42% of the GMV.
In effect, eBay's charges are covering salaries, a lead-generation fee, and a payment-processing fee.
In contrast, as part of our offer, we also include insurance costs to our customers."
Unlike a car-sharing company like Zipcar (which has to install equipment in each car, and sometimes has to pay for parking spaces), RelayRides' capital expenditures are few, meaning that its gross margins and net margins are "significantly superior" to traditional retail, or fleet, rental companies.
Avoiding phantom listings
A problem that peer-to-peer, rental economy platforms like RelayRides face is that some of its suppliers may be ambivalent. These slacker owners may list a vehicle, but then they fail to actually accept many rental requests. Says the CEO:
"I don't think we've eliminated that occasional hassle. But we've gotten a lot better by prioritizing the highest quality, most responsive, engaged owners at the top of search results.
We've also found that it helps to provide owners with transparency about their performance as benchmarked against the community's hallmarks.
Plus, the ride of native Android and Apple apps has helped owners be reactive on the go, which has boosted the participation rate."
In 2014, RelayRides enabled car delivery, where owners of vehicles may offer to drive their vehicle to a renter. This has been boosting demand from consumers, and many owners like being able to charge up to $50 in a fee, or an equivalent compensating hike in the daily rate in return for the service.
In 2014 the average active owner earned $3,480 renting their car on its platform, says the company.
From the perspective of consumers, RelayRides rates average about a third less than national car company costs, and "even more" against Zipcar, the startup claims.
To avoid crashes, RelayRides checks the driving record of prospective renters, via the databases of all 50 state driving motor vehicle records, which it describes as a unique vetting process.
"This helps us screen out drivers who may be problematic. We reject about one in five applicants. We apply a higher level of scrutiny than fleets or car sharing companies have."
In November, the company introduced a valet service at Los Angeles International, where staff drivers pick up a car and deliver it to the airport on behalf of an owner and customer.
RELATED: Key Canaan VC Brendan Dickinson, who has invested in RelayRides, talks travel startup investing