Zerodha; zero barrier?

Authored by Sneha Nayuni | President Marketing Club Crowdcore

Latest buzz on no brokerage stock firm, Zerodha has attracted eyes of many investors and commoners.

Zerodha, a ‘zero obstacle’ firm has emerged as the biggest fintech company leveraging its customers with lowest brokerage rates for commodity, trading, equity, and mutual funds. It has reached one-billion-dollar valuation without reaching out for one dollar in funding!

Is Zerodha a Blue Ocean strategy?

Blue Ocean strategy is basically when a company establishes itself to a niche and does not compete with anyone, rather it is in a league of their own. Operating model of Zerodha distinguishes from the already existing giants in the industry. Zerodha has a different value positioning and customer base.

This brings us to the three key pointers from Zerodha’s business model, which ensured their multi- billion-dollar valuation.

1. Not competing with traditional brokerage firms

Firstly, when you as an investor carry the transactions with the demat account of any conventional firm, for instance, big players like Motilal Oswal financial services still operate by charging a huge commission.

Zerodha is not trying to compete with the conventional brokerage firms. Zerodha’s core marketing plan was built on this idea of claiming themselves to be the safe space to trade with “no brokerage”.

It flipped the whole process of brokerage, by shifting away from the traditional practices. All equity delivery on Zerodha costs zero rupees, however there is a small amount charged for intraday and F&O which is Rs. 20.

In the above chart you can find the commissions charged by Motilal Oswal’s default plan in comparison with Zerodha.

It has an equity delivery brokerage fee of 0.50% whereas in Zerodha brokerage for equity delivery is free. Even the intraday and F&O charges of Zerodha are inexpensive compared to Motilal Oswal.

How does Zerodha maintain low prices?

Simple reason behind this is Zerodha does not spend any money on advertising. Instead, it relies on the word-of-mouth advertising, which proves to be effective when it comes to money and finances.

2. Zerodha’s new customer base:

Secondly, Zerodha draws attention to the new entries who are at the fence of whether to enter the stock market or not. It has built an ecosystem for its platform known as “The Zerodha Universe”. This attracts even the commoners to explore the world of trading.

For example, it has ‘Zerodha Varsity’, which has online stock market education book that has everything covered from basics to advanced trading modules. It also has ‘Trading Q&A’ which has active trading and investing community for all market related queries. ‘Coin by Zerodha’ helps people to explore the mutual funds space. Z-Connect conducts webinars for traders. This strategy of incorporating educational aspect has captured a lot of new customers.

One can read and understand the techniques from Varsity and can build their basic concepts before they use the platform for trading. This gives courage to the retail new investors with their freshly acquired finance knowledge. These are a few among many features that the unicorn company provides.

3. Strong tech Play:

Conveniences to the customers, starting from the easy setup of opening a new demat account to providing varsity tutorials for accessing financial knowledge has determined Zerodha’s strong tech play. It emerged itself by stating that it is more than just a finance company.

Zerodha’s target audience, the new retail customers experience the easy interface, execution of trade and, also can easily analyze their portfolio. This helps the traders keep a track of what is happening in their account and even could get P&L statements for review!! These options are not available in traditional brokerage firms.

The various tech features embedded in Zerodha’s platform makes it for the seamless navigation and maintenance of the account for the users.

An overall happy and fruitful user experience brought low-attrition rate for Zerodha i.e., once the customer starts using Zerodha it is unlikely that they shift to a different platform because of the ecosystem and technological conveniences it offers.

In summary, Zerodha has built a business model which was completely blue ocean, attracted new customers with its strong tech play. Do you think Zerodha can represent India in the blue ocean strategy? Comment below your views.