Turo Business Model: Generating Revenue in Action

Turo, headquartered in San Francisco, California, is a renowned peer-to-peer (P2P) car-sharing platform that facilitates the temporary rental of vehicles between its members. By exploring the Turo business model, we can gain insights into how the company generates revenue and sustains its operations.

A Brief Retrospective on its Evolution

Turo, originally known as RelayRides, was founded in 2010 by Shelby Clark, a Harvard Business School student. Alongside classmates Nabeel Al-Kady and Tara Reeves, Clark conceptualized Turo as the “Airbnb for cars,” allowing users to rent out their vehicles for short periods to fellow platform members. With backing from notable venture capitalists including Shasta Ventures, Canaan Partners, Google Ventures, August Capital, and Trinity Ventures, Turo underwent a rebranding in 2015.

The rebranding signaled a shift towards facilitating long-term car-rental arrangements rather than solely focusing on short-term car sharing. In 2017, Turo expanded its services to include various provinces in Canada. As of 2021, Turo boasted over 14 million users and a fleet of 450,000 vehicles operating in 56 countries worldwide.

Turo’s Ownership

Turo is currently owned by InterActiveCorp (IAC), with the majority of shares held by the company. However, there are plans to transition Turo into a publicly traded firm in 2022. Once this transition occurs, the ownership of the company will shift to the public shareholders who hold its stock.

Turo’s Mission

Turo’s mission is focused on revolutionizing the car-rental experience and maximizing the utilization of the world’s one billion cars. With a commitment to innovation and efficiency, Turo aims to transform the way people access and utilize vehicles. By offering a peer-to-peer car-sharing platform, Turo empowers car owners to share their vehicles with others, enabling more sustainable and efficient use of resources. Through this mission, Turo aspires to create a positive impact by reimagining car rentals and contributing to a better world.

How Turo Makes Money

Turo plays a prominent role in the sharing and tourism community by enabling vehicle owners, known as hosts, to rent out their cars to interested renters through their platform. In exchange for providing various services such as insurance coverage, background checks, and GPS tracking, the company charges a commission based on a percentage of the estimated trip cost. The commission rate typically falls between 15 to 45 percent, with 25 percent being the common range. This commission structure allows Turo to sustain its operations while facilitating seamless car-rental experiences for both hosts and renters.

Turo Success Story

The story of Turo’s success dates back to 2009 when Jonathan Tilmann and Shelby Clark had an idea while searching for a convenient way to share a car for a weekend getaway. Recognizing the absence of a suitable service for this purpose, they decided to create their own platform.

Turo emerged as a pioneering peer-to-peer car-sharing platform, offering a unique solution for users to rent out their vehicles to others. This innovative approach allowed individuals to generate additional income by making their idle cars available for rent, while also providing people with the opportunity to experience different cars during vacations or business trips. Originally known as RelayRides, the company underwent a transformation and rebranded as Turo in 2012, expanding its services to include car rentals from businesses alongside individual car owners.

Turo’s success lies in its ability to fulfill a need in the market, empowering car owners to leverage their idle vehicles and creating a platform that facilitates seamless car-sharing experiences for individuals and businesses alike. With a combination of ingenuity and adaptability, Turo has become a trusted name in the car-sharing industry, redefining how people access and utilize cars.

How Does Turo Work

With the rapid technological advancements in the 21st century, the online peer-to-peer (P2P) car-sharing industry has experienced significant growth. However, recognizing the diverse needs of its wide range of target audiences, Turo understood the importance of adjusting and expanding its business model. In addition to providing a car-sharing service, Turo incorporated payment management solutions, making its business model compatible with the demands of today’s digital world and ensuring its success.

Here’s how Turo works: Users register on the platform using their email address or contact number, and they can then list their vehicles, including essential details such as brand, type, and color. Customers browse through these listings and rent the vehicle that best suits their requirements for a specified period. This innovative concept presents a fantastic opportunity for individuals to earn money by renting out their vehicles, appealing to a broad market of enthusiastic participants. This widespread interest underscores the immense potential for starting your own car-sharing business within the industry.

Turo’s Business Model

Turo generates revenue through a fee-based model, capitalizing on its role as an online marketplace. In the case of Turo, the platform serves as a connection between car owners (hosts) and individuals seeking to rent vehicles for a specific duration (customers or members). A crucial aspect of running a successful marketplace is ensuring sufficient liquidity, which means meeting demand with an appropriate supply of vehicles.

Therefore, Turo aims to ensure an ample number of options in each city it operates in. This diverse selection enhances customer satisfaction by providing greater choice and immediate availability, all at reasonable prices. To maintain its appeal to car owners willing to lend their vehicles to strangers, Turo not only helps hosts earn extra income but also provides consultation on optimizing their rental operations. Some hosts have even established businesses renting out multiple cars through the platform.

In order to maximize host success, Turo prioritizes increasing trust and safety among all participants in the network. This includes offering adequate insurance packages to protect both customers and hosts from unforeseen expenses. Additionally, the company conducts background checks on customers to verify their driving records. However, despite precautions, isolated incidents involving the misuse of rented cars for illegal activities have occurred on the Turo platform.

Despite such challenges, Turo possesses the potential to emerge as a leading rental company, potentially surpassing established players like Enterprise Rent-A-Car. Its asset-light business model allows for cost-effective expansion into new markets since Turo does not own any of the vehicles on its platform.

Similar to other popular marketplaces like Airbnb or TaskRabbit, Turo derives revenue from various fees charged when a booking is completed.

Both customers and hosts pay fees, dynamically calculated based on the expected cost of the trip. Turo typically retains around 25 percent of each booking as its take rate.

Turo’s Customer Segments:

• Hosts: These are car owners who rent out their vehicles through Turo, generating revenue by utilizing their idle vehicles;
• Renters: This segment includes individuals on business trips, holiday travelers, and those in need of vehicles for specific purposes, such as moving vans. Turo offers them convenience, safety, variety, and cost-effectiveness compared to traditional rental services.

Turo’s Value Propositions:

• Cost Savings: Turo asserts that its services are up to 35% cheaper than regular rental services;
• Vehicle Variety: Turo provides a wider range of vehicles, including unconventional options like trucks, moving vans, and sports cars;
• Convenience: Turo offers online vehicle selection, flexible agreements on price, period, and mileage, and convenient pick-up locations;
• Control for Hosts: Turo gives hosts greater control over their vehicles and usage, allowing them to advertise their vehicles for a fee;
• Insurance Coverage: Turo provides insurance coverage up to $750,000 for both hosts and renters.

Turo’s Channels:

• Online Website;
• Mobile Application (iOS and Android);
• Direct Interaction with Vehicle Owners;
• Social Media Platforms;
• Customer Support;
• Advertising.

Turo’s Customer Relationships:

• Peer-to-peer car-sharing service;
• Background checks and screening for security;
• Facilitating negotiations and payment between renters and hosts;
• Ensuring a smooth vehicle handover process.

Turo’s Revenue Streams:

• Commission from rental fees.

Turo’s Key Resources:

• Wide Range of Vehicles from Hosts;
• Large Ecosystem with 14 million users and over 450,000 vehicles in 56 countries;
• IT Staff;
• Strong Brand Image as a Pioneer in the Sharing and Tourism Industry;
• Investor Support.

Turo’s Key Activities:

• Platform Development and IT Systems Maintenance;
• Research and Development;
• Marketing and Advertising;
• Legal Services;
• Customer Support.

Turo’s Key Partners:

• Car Owners;
• IT Support Staff;
• Investors;
• Insurance Partners.

Turo’s Cost Structure:

• IT Infrastructure Maintenance and Operations;
• Marketing and Branding;
• Insurance Coverage and Payments;
• Research and Development;
• Administrative Expenses;
• Operating Costs (Rent, Utilities, Wages, Legal Fees, etc.).

7 Key Lessons from Turo’s Triumph

Discover Your Unique Value Proposition

Initiating a well-defined value proposition is crucial when showcasing your company. Turo excels at highlighting the distinctiveness of its service and its potential for saving car owners money.

Focus on the Core Issue

One common mistake businesses make is fixating too much on their product instead of addressing the underlying problem. Turo effectively communicates the issue they aim to solve (costly car ownership and maintenance) and how their service provides a solution.

Showcase Your Solution’s Superiority

To attract investor interest, it’s essential to articulate why your solution outshines the alternatives. Turo demonstrates how their service is more affordable, convenient, and environmentally friendly compared to traditional car rentals.

Validate Your Product’s Market Demand

Demonstrating the existence of a market for your product is critical. Turo achieves this by emphasizing the vast potential market for their service and showcasing its versatility.

Highlight Your Team’s Expertise and Experience

When launching your business, emphasizing your team’s expertise and experience is a no-brainer. Turo effectively showcases their team’s backgrounds and extensive knowledge in the car-rental industry through a well-designed team slide.

Paint a Clear Vision for the Future

To secure investor confidence, you need to present a well-defined plan for the future. Turo achieves this by outlining its five-year strategy and illustrating how they intend to expand their company.

Address and Overcome Potential Concerns

Investors often harbor reservations about new ventures, so being prepared to address objections is crucial. Turo anticipates and resolves common concerns, such as lack of experience and high ownership costs, to instill confidence.

Turo’s Competitors

• Uber Rentals: Uber Rentals is a car-sharing service provided by the renowned ride-hailing company Uber. Established in 2019, it functions as a third-party platform, connecting users to various rental services instead of operating a peer-to-peer (P2P) system;
• Getaround: Getaround is an American car-sharing company that operates a P2P car-sharing service, closely resembling Turo. Founded in 2009, it is often considered one of Turo’s direct competitors;
• Zipcar: Zipcar, launched in 2000, is a car-rental service that offers users access to a diverse fleet of over 12,000 cars. Users can choose from this extensive selection maintained by the company;
• The Hertz Corporation: The Hertz Corporation, an esteemed car rental service, holds the distinction of being one of the oldest and largest in the world. With over 12,000 vehicles available, they function as a traditional rental service, granting customers access to vehicles in exchange for a fee.

Turo’s SWOT Analysis

Turo’s Strengths:

• Extensive ecosystem supporting its operations;
• Strong brand image and a significant market share;
• Backed by confident investors;
• Offers a diverse range of vehicles;
• A platform that appeals to both hosts and renters;
• Adopts an asset-light business model;
• Provides more affordable pricing compared to traditional rental services.

Turo’s Weaknesses:

• Profitability is yet to be achieved;
• Considered to have expensive insurance rates;
• Lack of transparency and frequent regulatory issues.

Turo’s Opportunities:

• Expansion potential into emerging markets;
• Potential for strategic partnerships with companies in related industries.

Turo’s Threats:

• Growing dissatisfaction among customers due to hidden charges, regulatory issues, and poor customer service;
• Competition from other companies in the car-rental industry;
• Challenges posed by regulatory requirements.

Conclusion

Turo’s business model operates as a successful online marketplace connecting car owners and renters. By ensuring liquidity, offering diverse vehicle options, and prioritizing trust and safety, Turo has carved out a prominent position in the car-rental industry. While facing challenges, such as insurance rates and occasional misuse of rented vehicles, Turo’s asset-light approach and revenue generation through fees have positioned it for continued growth. As Turo expands into new markets, its unique business model has the potential to disrupt and surpass traditional rental companies, making it an intriguing player in the evolving landscape of car sharing.