How Zerodha Killed Stock Brokers ? | Business Case Study

Today Zerodha's valuation is 2 Billion Dollars. With 1000 Crs revenue, In 2020 Zeodha made a profit of 440 Crs. Interestingly they didn't raise any funds or invest in marketing.




Now the question arises, In the startup world, after raising funds also companies fail then how Zerodha do this without funding? And if Zerodha is not a broking company then what is Zerodha?

HOW ZERODHA WAS STARTED?

So the story starts in 2000 when Nithin Kamath - founder of Zerodha used to do a job in a call center. As his shift was of a night, he used to be free during the day. And this introduced him to TRADING. He used to trade during the day while working at night.


Till 2005, he was in the loop of trading and call centers. But then he met an NRI in a gym. When Nitin showed him his account then the NRI asked him to handle his account also. Nitin managed his account. Then time by time his 1 client turns into 10 clients. 

1st STRATEGY OF ZERODHA

The work was interesting but at that time something was going on the market which we all hate. That was Extreme Discrimination. It's like you go in a shop with tattered clothes and ask the shopkeeper How much for this shirt? Then the shopkeeper says 500 Rs only. But if a man wearing a suit and enters the shop and asks how much for this shirt? then the shopkeeper says 5000 Rs only.


You won't believe, in olden times this used to happen in the stock market. When people used to go to a broker to open a Demat account, he used to say some certain brokerage. But if someone says that I want to make this much turnover then brokerage was different. That means different brokerage to different people. And from here Zerodha started. So during the initial days,


Zerodha made a brokerage calculator in an excel sheet and gave it to their clients. So from this clients used to understand that if they buy a stock at a certain price and at another certain price sell then what brokerage do they have to give to Zerodha. So Zerodha made transparency possible for their clients.


Slowly people started liking this transparency. But the journey was long for Zerodha. Between 2010-2011, during the initial year, Zerodha only had 1000 customers. But now the question arises, after transparency also Why people were not showing interest in the stock market? And then Nithin realized nothing much is going to happen with low cost and transparency. 

2nd STRATEGY OF ZERODHA

 Zerodha shifted from Low-Cost Model to Flat Free Model. If you trade or invest, invest 1000 rupees or for 1 crore rupees, Zerodha will only charge 20 Rs/person. But then enters a competitor in the market. Like Zerodha it also provided low-cost and transparency to clients. And all of a sudden Zerodha lost its edge. At that time Nithin Kamath used to write a blog post, where Zerodha used to provide free finance and stock knowledge.


By this Nithin realized that 90% of people in the market are investors not traders. There is a lot of difference in the psychology of traders and investors. 90% of people in the market are those who invest in the stock market for the long term. But Zerodha was only focusing on the traders' community. And then Zerodha took a step that made a huge impact on the stock market industry.


Zerodha turns its 20 Rs flat fee to 0 Rs. Now Zerodha only used to charge 20 Rs on intraday and Futures and Options. This one move from Zerodha not only attracted investing community but also made many stockbrokers jobless. You won't believe people started calling brokers "Robbers".


Zerodha's this business strategy made a bragworthy proposition in the market and investors started recommending Zerodha to others.


But shockingly, after this impactful move, Zerodha's growth rate was not much till 2016. The reason behind this was Complex Procedure. 

3rd STRATEGY OF ZERODHA

let me tell you People don't make good decisions they make convenient decisions. It's a human tendency that people choose easy things. And this is why people were not showing interest in Zerodha and the stock market. If you open any old stock trading platform you will become dizzy. Things were so complex that people didn't even think about investing in the stock market. And due to this Zerodha made its Kite Platform. 

The people who have used Kite know that a person who doesn't know S of the stock market can easily use this. And after the launch of this platform Zerodha's growth was on the next level and today their profit is 440 Crs. But if Zerodha didn't notice these things then it won't be that successful.


CONSUMER DECISION-MAKING PROCESS


For every business, it is important to know how their consumers make decisions.  And Zerodha did it perfectly. They noticed how their consumers/clients make decisions on investing in the stock market. And is important for any business to make its consumer's decision-making easy and simple. And this creates a bragworthy proposition.


The bragworthy decision means to create that value in the market that your consumer recommends to others.


IDEA TO EXECUTION ROADMAP


The idea is not valuable if not properly executed. Many startups have amazing ideas but no execution roadmap. Due to this, their idea fails.


Zerodha is an example that was raised without any funding. But many of us fail because of not getting the right guidance. NO proper mentorship nor proper roadmap to execute ideas. 


Today Zerodha's valuation is 2 Billion Dollars. With 1000 Crs revenue, In 2020 Zeodha made a profit of 440 Crs. Interestingly they didn't raise any funds or invest in marketing.        Now the question arises, In the startup world, after raising funds also companies fail then how Zerodha do this without funding? And if Zerodha is not a broking company then what is Zerodha?  HOW ZERODHA WAS STARTED? So the story starts in 2000 when Nithin Kamath - founder of Zerodha used to do a job in a call center. As his shift was of a night, he used to be free during the day. And this introduced him to TRADING. He used to trade during the day while working at night.    Till 2005, he was in the loop of trading and call centers. But then he met an NRI in a gym. When Nitin showed him his account then the NRI asked him to handle his account also. Nitin managed his account. Then time by time his 1 client turns into 10 clients.   1st STRATEGY OF ZERODHA The work was interesting but at that time something was going on the market which we all hate. That was Extreme Discrimination. It's like you go in a shop with tattered clothes and ask the shopkeeper How much for this shirt? Then the shopkeeper says 500 Rs only. But if a man wearing a suit and enters the shop and asks how much for this shirt? then the shopkeeper says 5000 Rs only.    You won't believe, in olden times this used to happen in the stock market. When people used to go to a broker to open a Demat account, he used to say some certain brokerage. But if someone says that I want to make this much turnover then brokerage was different. That means different brokerage to different people. And from here Zerodha started. So during the initial days,    Zerodha made a brokerage calculator in an excel sheet and gave it to their clients. So from this clients used to understand that if they buy a stock at a certain price and at another certain price sell then what brokerage do they have to give to Zerodha. So Zerodha made transparency possible for their clients.    Slowly people started liking this transparency. But the journey was long for Zerodha. Between 2010-2011, during the initial year, Zerodha only had 1000 customers. But now the question arises, after transparency also Why people were not showing interest in the stock market? And then Nithin realized nothing much is going to happen with low cost and transparency.   2nd STRATEGY OF ZERODHA  Zerodha shifted from Low-Cost Model to Flat Free Model. If you trade or invest, invest 1000 rupees or for 1 crore rupees, Zerodha will only charge 20 Rs/person. But then enters a competitor in the market. Like Zerodha it also provided low-cost and transparency to clients. And all of a sudden Zerodha lost its edge. At that time Nithin Kamath used to write a blog post, where Zerodha used to provide free finance and stock knowledge.    By this Nithin realized that 90% of people in the market are investors not traders. There is a lot of difference in the psychology of traders and investors. 90% of people in the market are those who invest in the stock market for the long term. But Zerodha was only focusing on the traders' community. And then Zerodha took a step that made a huge impact on the stock market industry.    Zerodha turns its 20 Rs flat fee to 0 Rs. Now Zerodha only used to charge 20 Rs on intraday and Futures and Options. This one move from Zerodha not only attracted investing community but also made many stockbrokers jobless. You won't believe people started calling brokers "Robbers".    Zerodha's this business strategy made a bragworthy proposition in the market and investors started recommending Zerodha to others.    But shockingly, after this impactful move, Zerodha's growth rate was not much till 2016. The reason behind this was Complex Procedure.   3rd STRATEGY OF ZERODHA let me tell you People don't make good decisions they make convenient decisions. It's a human tendency that people choose easy things. And this is why people were not showing interest in Zerodha and the stock market. If you open any old stock trading platform you will become dizzy. Things were so complex that people didn't even think about investing in the stock market. And due to this Zerodha made its Kite Platform.   The people who have used Kite know that a person who doesn't know S of the stock market can easily use this. And after the launch of this platform Zerodha's growth was on the next level and today their profit is 440 Crs. But if Zerodha didn't notice these things then it won't be that successful.    CONSUMER DECISION-MAKING PROCESS   For every business, it is important to know how their consumers make decisions.  And Zerodha did it perfectly. They noticed how their consumers/clients make decisions on investing in the stock market. And is important for any business to make its consumer's decision-making easy and simple. And this creates a bragworthy proposition.    The bragworthy decision means to create that value in the market that your consumer recommends to others.    IDEA TO EXECUTION ROADMAP   The idea is not valuable if not properly executed. Many startups have amazing ideas but no execution roadmap. Due to this, their idea fails.    Zerodha is an example that was raised without any funding. But many of us fail because of not getting the right guidance. NO proper mentorship nor proper roadmap to execute ideas.     How Zerodha Killed Stock Brokers ?  | Business Case Study      BUILD AN IRREVERSIBLE CHANGE   If your product can change the behavior of customers then they will never go to old products. In older times, if you had a prepaid sim, to recharge it you need to go to the shop, pay him and then recharge your phone. Tell me how many of you still do it? Maybe someone only goes and recharges like this. Because our behavior is changed by companies like Paytm and PhonePe by making online recharge possible. And this change Zerodha brought in the stockbroking industry.    Zerodha is not a stock broking company then what is Zerodha? Well, Zerodha is a change-maker in the Indian Economy. If Zerodha was not there many people would not be investing in the stock market.  Credit - Aditya Saini



BUILD AN IRREVERSIBLE CHANGE


If your product can change the behavior of customers then they will never go to old products. In older times, if you had a prepaid sim, to recharge it you need to go to the shop, pay him and then recharge your phone. Tell me how many of you still do it? Maybe someone only goes and recharges like this. Because our behavior is changed by companies like Paytm and PhonePe by making online recharge possible. And this change Zerodha brought in the stockbroking industry.


Zerodha is not a stock broking company then what is Zerodha? Well, Zerodha is a change-maker in the Indian Economy. If Zerodha was not there many people would not be investing in the stock market.

Credit - Aditya Saini