What is Zerodha?
Zerodha is a financial services company member of NSE, BSE, MCX, and MCX-SX that provides brokerage facilities, a trading platform, and commodity trading at low rates.
Founder of Zerodha
Nitin Kamath is the co-founder of Zerodha. Nitin Kamath started trading at the age of 18. Later he joined a call center so that he could work at night and do business during the day. He later quit his job and worked solely on building an online brokerage business. He started the business with 6 other people and now Zerodha has more than 1000 employees.
How does Zerodha work?
Zerodha works on the concept of discount broking i.e., it charges a low commission or low brokerage on transactions which attracts investors, especially beginners to use this platform. This is undoubtedly the main reason. it has a client base of over 1 million, making it the largest stockbroker in terms of clients.
Zerodha Website https://zerodha.com/
We can also say that the company got the first-mover advantage as Zerodha was the first discount broker in India. According to Mr. Nitin Kamath, Founder, and CEO of Zerodha, Zerodha was incorporated to make business barrier-free, hence the name Zerodha meaning no barrier. Another important reason for the rapid growth of Zerodha is that the company keeps coming up with new ideas and unique strategies that help the company gain an edge over its competitors.
What is the business model of Zerodha?
Zerodha operates on a ‘low-margin and high-volume model’. As already mentioned, Zerodha charges a minimum amount for transactions due to which the trading volume is high. Small quantity collection from a large number of customers yields good revenue. Also, the operational cost of Zerodha is quite low as compared to some of the top brokers. Its online structure enables it to maintain low operating costs.
Competition and challenges before Zerodha
Along with competition from other discount brokers like Upstox, Zerodha faces serious competition from full-service brokers like HDFC Securities, Kotak Securities, Motilal Oswal, etc.
Full-service brokers are traditional brokers who provide research and advisory facilities to their clients. Besides providing advisory facilities and all, full-service brokers have an advantage in their branding and credibility. We must also acknowledge the fact that the physical presence of full-service brokers enables a seamless customer experience.
Due to heavy trading, Zerodha has been facing frequent technical glitches, resulting in a loss of customer satisfaction. The customer support of Zerodha is not very efficient as compared to other top brokers. Daily reports, quarterly results analysis, news alerts, etc are not provided by Zerodha, unlike some other top brokers.
Despite some drawbacks, Zerodha continues to expand its customer base at an incredible rate. The CEO of the company says that they aim to take the customer base to 5-10 million in the coming years. He also added that Zerodha does not differentiate HNIs from others and also that they have never sold any product promising returns. (HNIs are those High Net Worth Individuals who have an investment bank balance of at least Rs 2 crore.) It is also noteworthy that the company hardly spends any amount on advertising, but still, its impeccable growth clearly shows Reflects a great market reputation.
So, Friends, this is the story of Zerodha. How you like this article do let us know in the comments section. Thanks for reading it.