Business model of Zerodha

Introduction

Zerodha is a bootstrapped Bengaluru-based online discount brokerage firm founded in 2010 by two brothers, Nithin and Nikhil Kamath. It is India’s first stock brokerage firm to introduce a discount brokerage option for traders and investors. The Business model of Zerodha involves its business plan, revenue model, its competitors, SWOT Analysis and many more.

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Zerodha Is a Financial Services Company Providing Brokerage Facilities, Trading platforms, Mutual Funds, and Commodity Trading At Lower Rates. In India, Zerodha is the most well-known bargain broker. In just a few years since its beginning, they have shaken the entire business. Zerodha is a bootstrapped discount brokerage startup.

Business Plan

Zerodha Business Model works on the concept of discount broking. It charges a low commission on transactions which ultimately attracts traders and investors, especially beginners, to use this platform. Undoubtedly, this is the main reason it has a client base of more than 5+ million in just ten years. Making it the largest stockbroker In terms of clients. Zerodha charges a minimal amount for transactions held by traders and investors, which directly helps Zerodha and other discount brokerages to get very high volumes.

The broking limited company, Zerodha offers tons of key products to its customers. These products include Console for account management, Kite for trading platforms, Varsity for financial education, Quicko for the traders in Tax stems, Coin for Free Mutual Fund, Kite Connect API for the developers, Kill Switch for the risk management for retail traders, and Sentinel for the cloud-based market alert tool.

Revenue Model

On boarding traders who engage in high-volume intraday trading provides income for Zerodha. Zerodha launched the world’s cheapest brokerage on a broad scale. It rocked full-service brokers by offering even greater service for a fraction of the cost.

Zerodha minimizes its brokerage in comparison to full-service brokers who charge a percentage of the trade value. Regardless of the size of the transaction, they charge a maximum brokerage of Rs.20 per transaction.

AMC Zerodha’s first alternative investment fund was launched in 2019. The fund was created to help high-net-worth individuals (HNIs) with a minimum investment of $2 million deal with market volatility.

Kite Connect API also contributes to the revenues of the company by charging a flat fee of Rs.2000/month from the retail users. The optional add-ons offered on the app cost an additional Rs.2000/month.

Competitors

Zerodha faces some cut-throat competition in the market. It is competing with other discount brokers like:

  1. Upstox
  2. Angel Brokering
  3. HDFC Securities
  4. Kotak Securities
  5. Motilal Oswal
  6. Groww

SWOT Analysis

Strengths

  • Amazing and Interactive User experience: The user friendly interface provided to the users give an edge to the zerodha, which is different to its competitors. 
  • A large number of a younger audience: The upsurge of the users is of younger generation because the digital friendly interface is fond by every youngster. Due to the covid-19 pandemic, the trading industry is already facing its dream run and credit is going start to the trading applications, as the savings investment term is now actually differentiated.
  • Established Brand: Its been more than a decade since its inception, the company is enjoying the goodwill at its fullest, there is not any other app which is also going through the same dream run. It is one of the best startups in India in terms of funding and revenue.
  • A large number of active customers: The app is enjoying a good customer base. Since it is a trading application, the activeness is of the users is expected.

Weakness 

  • Lack of marketing strategy: The brand is not into marketing, zerodha doesn’t spend a penny on its marketing expenditure. Though, it doesn’t need marketing expense but there is still some market remaining which needs marketing to create the awareness.
  • Frequent technical glitches: The app is user friendly but face a lot of technical glitches and frequent maintenance.
  • Inefficient customer care support

Opportunities

  • Entering other Investments businesses like AMC, Mutual funds, etc: The business model of Zerodha doesn’t provide certain other services which are provided by the set of competitors. It should also focus on expanding its services base. The opportunities provided to the brand is quite handful making it possible for further expansion.
  • Improving customer care support: Though being the best in the industry, the brand can establish some better customer care support, removing a hindernace to its name.
  • By providing full trading services like HDFC, ICICI, Etc.

Threats

  • Heavy weighs competitors like ICICI, HDFC, Kotak, Groww, Angel Broking, and Upstox: The brand needs to establish a support base to compete with its contemapories like Groww, upstox, and angel broking.
  • Now comers like Paytm money, Groww, Etc: Th inevitable threat of new entrants cannot be stopped but only go on changing itself with the times.

Conclusion

Zerodha believes in promoting through its services, as the company hardly spends any money on advertising channels. The company holds a great reputation in the market because of its incredible services and customer interactions.