Strategies For Emerging Market

STRATEGIES FOR EMERGING MARKET
ZERODHA
5 Slides:
1. Introduction
2. Zerodha – A Case Study
3. Zerodha Success Blueprint (Strategies employed by Zerodha)
4. Key Takeaways for Entrepreneurs
5. Conclusion and Action Steps
1.Introduction
- Founded on 15th August 2010 by Bangalore-based siblings Nithin and Nikhil Kamath.
Aged just 31 and 24 at that time, both had capital market experience – from being traders
themselves and, later, sub-brokers of Reliance Money.
- They identified the Institutional Void and the problem statement that no one in the
industry tailored their offering for traders. High brokerage and suboptimal customer
experience were quite common in those days.
- Institutional void:
a) Lack of knowledge and awareness (By Zerodha Varsity)
b) Brokerage fees (INR 0 or INR 20 for intraday sales and zero fees)
c) Process of investment
- Zerodha word comes from Zero plus Rodha (Sanskrit for barrier), meaning zero
barriers to trading.
- It became a startup that revolutionized the Indian Broking Industry
- Zerodha is a financial services company offering discount brokerage services to retail
Indian investors and traders. They offer investing and trading services in the stock
market, cryptocurrency and commodities markets, and mutual funds.
- Zerodha Kite app (Zerodha App for mobile users) is a smart investment and trading
platform made for modern spans. It is an outstanding ground-breaking innovation
delivered with superior usability.
- And you won’t believe this, Zerodha is India’s largest brokerage firm in terms of active
customers, and clients place millions of orders daily.
- It has around 1100 employees who work in hybrid mode, and recently, co-founders stated
that around 80-90% will work from home regularly, saving their office costs.
- Their mission is to create a brokerage-free world by leveraging technology, invention,
and best premium customer support.
- Currently, the valuation of Zerodha is USD 3.3 Billion.
Wow! Right…A bootstrapped startup without spending a penny on advertising has over 1
crore customers with 62 lakhs+ active customers. So, how did this happen?
Well, let’s get the ball rolling and know more about it.
During his working tenure, Nithin realized and found a gap between the commissions
charged by the brokers and the actual amount clients got after the transaction and realized
the increasing demand for stock trading among young people. But the issue was simple-
high brokerage charges and a complex trading process.
2.Zerodha - A Case study

- Let’s title it “Zerodha: Disrupting the Indian Stock Market.”
- It’s a USD 2+ billion unicorn company in India because it’s entirely self-funded.
- The reason for starting Zerodha was to empower traders by providing a simple-to-use,
using the latest technology and affordable trading platform and remove all their
hurdles.
- Zerodha operations began on August 15, 2010. This made them India’s first discount
brokerage firm.
- On top of that, they only charge a flat fee of Rs 20 on every trade, irrespective of its
size, with zero brokerage fees and an annual maintenance fee of Rs 300. Zerodha did
something that other traditional brokers didn’t do.
- Even the co-founder writes articles and posts informative posts on LinkedIn and he also
shares amazing podcasts on YouTube.
- Things changed in 2015, and the founders decided to make the delivery of equity
investment free of charge, from a fee of Rs 20 per order to ZERO fee. And this resulted in
the first wave of Zerodha growth as in just five years, the customer base went from
30,000 accounts (2015) to 14 lakhs accounts (2020).
It's amazing, right?
In between all this, in 2019, Zerodha became the market leader by toppling ICICI
Securities. But this was just the beginning.
Two things happened in 2020:

a) This surge in interest led to massive growth as many new customers opened Demat
accounts through Zerodha, and their user base surpassed one crore, with over 62 lakh
active customers placing millions of orders per day.
b) Second, after 10 years of operations, Zerodha became a profitable unicorn startup.
One of the few profitable unicorns!
In FY2022, Zerodha reported a nearly 86% profit growth to INR 2094 crore, and the revenue
was INR 4964 crore. And they achieved all this without Venture Capital funding and advertising.
They still haven’t done it.
3.Zerodha Success Blueprint (Strategies

employed by Zerodha)
Business Model:
 Low margin and High volume (which was coupled with ZERO brokerage)
 Flat fee model (challenging the percentage brokerage fee model)
Let me explain this with an example.
Back in the day, traditional brokers would charge brokerage based on your trading value.
Let’s say a broker charged 1% per trade.
So, if your traded value is ₹1,000, your brokerage fee would be ₹10. Now, imagine your
trade value is ₹1 lakh, so your brokerage fee would be ₹1,000.
But Zerodha played a masterstroke by charging only 20 rupees. This was possible
because the trade size didn’t affect the operational cost.
And they also showed all the charges transparently by adding a brokerage calculator to
their website. This enabled traders and investors to know all the charges with a click.
This resulted in them earning a reputation among the trading community and gaining a
market share of approximately 17%, closely followed by another discount broker, Upstox
(14%).
Revenue Model:
 Minimal fee charge from clients leads to good revenue (INR 20 brokerage fee and other
services like mutual funds, bonds, IPO, etc., and also annual maintenance charges INR
300)
 It’s operational costs as it’s an online business.
 Multiple online services.
Marketing Strategy:
- Educate youngsters about finance and then bring transparent pricing models.
- Word-of-mouth, brand credibility, and client loyalty
Challenges and competition:

a) Technical glitches
(Due to the huge number of transactions, the platform experiences technical glitches that
disrupt the trading and investing experience of the users.)
b) Customer support
(Having no offline space, which sometimes leads to delays in resolving customer
complaints)
Zerodha faces stiff competition from both traditional brokers as well as discount brokers.
- Traditional brokers like ICICI Direct, HDFC Securities
- Discount brokers like Upstox and Groww.
ISSUES:
There were a few issues they faced in the initial stage.
- Onboard traders on the Zerodha platform
- The second issue was less credibility.
Zerodha a Leader or a Challenger
It’s both a leader and a challenger in the Indian Investment and trading landscape.
 On the one hand, it’s the largest discount broker and has been profitable for several years,
which makes it a leader.
 On the other hand, it is still a new company facing stiff competition from other
companies.
So, overall, it’s more of a challenger as we have discussed its offerings and services.
Local Dynamos
Zerodha is a local dynamo.
- focus on its home Indian market.
- Digitally savvy
- Disruptor
- Adaptable
Positioning- Asset & industry (Dodgers, contenders, defenders, extender)

Zerodha is a contender in the Indian investment and trading landscape.
It is a challenger company trying to disrupt the status quo by offering low-cost and innovative
products and services while expanding its market share.
4. Key Takeaways for Entrepreneurs
1. Counter Positioning
 They used the First-mover advantage at their best.
 They welcomed retail investors by offering equity transactions at zero brokerage.
Even there are other companies with successful counter-positioning, like Netflix over
DVD rentals and Apple over Blackberry.
2. Doing the right thing

 Focused on building a superior digital-first experience.
 The problem statement was clearly understood.
 They offered free Varsity, free for all, a financial education repository.
 Removed various layers of hurdles from the customer experience.
 They’re following the path of staying low-cost, digital-first, and customer-focused.
Different products and services offered by Zerodha:

 Console- Zerodha user’s central dashboard
 Tickertape - Screener for stocks, Mutual funds
 Coin – offer direct mutual funds.
 Small case - Investors can access a basket of stocks curated by certain analysts for a fee.
This empowers advisors to sell their strategies to a large investor community without all
heavy compliance.
Also, Pulse, Streak, TradingQnA and GoldenPi
3. Building the Moat

 Scale Economies
 Network Effects
 Switching Costs
 Branding
 Process Power
4. Leadership
 Added a nudge feature to inform clients about online nominations, right entitlements,
bonus issues, and share splits.
 Adopted the strategy of no advertising; instead, made the product so good that users
evangelized it.
 Refrains from hyperbole in public discourse.
 Didn't raise capital and chose to stay nimble.
5.Conclusion:
1. Unique brand proposition
2. Irreversible behavior change
3. High consumer tolerance
In short, one can say Zerodha has outpaced its competitors because of its at-par customer
service, low-cost model, and visionary technology.
What he can do more:

 Expand its product offerings like crypto, investment in foreign stock
(within rbi limits)etc.
 Resolve technical glitch.
 Offer more educational resources like more in-depths courses, webinars etc from time-to-
time.

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2.Zerodha - A Case study

It's amazing, right?

Two things happened in 2020:

3.Zerodha Success Blueprint (Strategies

Let me explain this with an example.

Challenges and competition:

Positioning- Asset & industry (Dodgers, contenders, defenders, extender)

4. Key Takeaways for Entrepreneurs

2. Doing the right thing

Different products and services offered by Zerodha:

3. Building the Moat

What he can do more:

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