In last 10 years, we saw a big surge in number of discount brokers. The broad stock brokers community got divided into Traditional Full service brokers, Discount brokers and bank brokers.
With Discount broking coming into picture, traditional brokers started losing their bigtime trading clients. Though people kept talking about the discounted rates responsible for this, but their are other factors also that were playing a big role in this.
I still remember the offer form Reliance Money in Jan-Feb 2010 where they offered 15/trade for 90 days with upfront charge of Rs.6000/-.
Fortunately, I found a picture of that scheme advt on the internet.
That was the first time when I saw the face of discount broking in India. I clearly recall traders insisting on these prices or switching their broker to Reliance even if it was for limited period, as the cost advantage was huge.
Zerodha started its journey in August 2010. From the beginning itself, it started attracting traders with discounted pricing (Rs.20/trade). However, to the extent I could understand their strategy, discounting was not the only thing that lead to their success. So today I am going to share few other factors, I observed as an outsider, that played its role in the success story of Zerodha.
Post 2008 fall and uprise in 2009, traditional brokers were finding it hard to increase their revenues. The overall scenario was looking pessimistic and broking entities were trying to find other avenues of growing business like real estate, wealth management etc. Zerodha identified the opportunity and make an entry into the business targeting the most appropriate audience i.e. traders. In the midst of pessimism, many other players were not taking it seriously and given them a space to spread its wings.
When Zerodha entered the market, most of the stock brokers were offering variable and non transparent pricing leading to one on one negotiation with clients. Few brokers were insisting of contract notes or turnover commitments for lowering the brokerage rate. Zerodha offered a standard brokerage rate with standard proposition without any commitments. The transparency in the proposition actually played well in that given scenario. Even today Zerodha is quite transparent in their proposition with almost each and every details available on their website. You may refer to this question on their support portal..
Query on Zerodha Support desk
Q. “I trade in high volumes, will Zerodha reduce my brokerage?
Ans. No, we charge the same fixed rates for all our clients. We do not offer different plans to clients based on their trading volumes/funds in their trading account.”
Zerodha never had any Relationship Managers or Dealer pushing for turnover or brokerage from their clients. All their focus remained on increasing the number of clients. With increase in number of clients, today they are catering to more than 2.3 million clients. In the process, they didn’t mind loosing on delivery brokerages also. Today also, Zerodha offers Free Equity Investments and Direct Mutual funds. Refer to a small abstrat that I have picked from their website
Abstract from Zerodha.com
“We do not have relationship managers and not a single person on our 1200 member team has revenue targets. This ensures that no one is under pressure to generate brokerage by inducing clients to trade.”
See links for more details: https://zerodha.com/z-connect/zerodha/how-safe-is-it-to-trade-with-zerodha-recap
Zerodha focused on Online self service platform as such they never require any full service franchisee however they explored into the uncharted territory of online bloggers. They offered attractive referral commissions and build a large workforce of affiliates. This affiliate workforce helped Zerodha to get huge number of leads at no upfront cost. Whereas, most of these last 10 years, traditional brokers were more focused on revenue generating full service franchisee. As such, the competition for Zerodha in this segment remained low for quite sometime.
Link to Zerodha Partner program https://zerodha.com/z-connect/zerodha/zerodha-associate-program/inviting-partners
It remained the major and constant focus in the overall strategy. The platform initially was very raw, but evolving. The traders though started with basic platform but keep getting newer ones like Pi and then Kite, API integrations and many other features. The constant addition of features keeps them ahead of competition, even within discount brokers, and also helped them to keep their customers loyal.
Today also the connection to third party decision making and other tools as provided by Zerodha like small case, streak, sensibull, Golden Pi etc are still not available with most of the stock brokers. On and Off, I kept reading about a lot of issues on their trading platform on social media but we can still realize the gravity of all these by seeing their active number of clients, which is 1.2 million, highest in the industry.
Zerodha never underestimated the power of online engagement. Their blogs and varsity attracted many readers and helped Zerodha in active engagement. Currently Finshots, Varsity and many other such content are on their job to pull online traffic.
I remember an article stating almost each and every aspect of Income tax filing for stock market transactions , that I need to refer many a times for my own and family members’ returns.
Such engagements not only helps in building a subscriber base but also establishes your domain superiority among others. Readers feel obliged and build a intangible trust which leads to a long term relationship.
Please note that I am not an employee, or ex employee of Zerodha. However, witnessed all these points as an outsider in all these 10 years and I feel good efforts should be praised and should be taken as inspiration.
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