What Factors Contributed to Zerodha’s Success Compared to Upstox?
In India, online trading has grown tremendously in recent years. When it comes to online trading, everyone remembers the two online players: Zerodha and Upstox.
Zerodha
Zerodha was founded in 2010. It offers various investment and trading services, including equities, derivatives, commodities, currencies, and direct mutual fund investments. Zerodha is known for its user-friendly “ Kite “ trading platform and its emphasis on transparency, low-cost pricing, and investor education.
Upstox
Upstox was established in 2011. It provides investment and trading services in equities, derivatives, commodities, and currencies. Upstox offers the “Upstox Pro” trading platform, which is known for its user-friendly interface and advanced features. The company focuses on competitive pricing, technological advancements, and empowering retail investors through educational resources.
Comparison of Xerodha Vs. Upstox
Upstox Strategy
Through their system of brokerage fees, these stock broking firms generate revenue. Upstox pays once to gain the user, and users pay Upstox a regular cost.
However, Upstox only makes money when a trade is completed. Therefore, the objective is to increase these users’ stock trading. Here in lies the weakness of Upstox’s plan.
There are three types of traders. They are
· Group A — 1% of overall transaction activity is made up of Group A equity investors, who acquire and hold equities and sell them when their value increases.
· Group B — They are Intraday traders. They represent 9% of the total trade volume.
· Group C — They are futures and options traders. They make up 90% of the remaining trade volume.
New investors from Tier 2 and Tier 3 cities make up about 70% of Upstox’s user base. Therefore, Upstox is essentially spending crores to enroll Group A members who only participate in 1% of the transactions.
The Zerodha Strategy
When Zerodha tried to capture Group A and Group B traders, their ultimate goal was to provide the BEST platform for Group C, or serious futures and options traders.
They had to stand out as other stock broking services started to appear using the identical Zerodha strategy. These professional traders, therefore, concentrated on creating the best trading platform. And these people were the target audience for all of their free and natural marketing efforts.
User Base
Upstox’s active user base was 5 million, while Zerodha’s was 6.2 million of its 9 million users. Upstox’s user base had surpassed 10 million, more than tripling from 5 million six months ago and surpassing rival Zerodha’s 9 million. Half of Upstox’s user base, or 5 million, were active users, while Zerodha had over 6.2 million active users.
From the above image, it can be said that Zerodha has more active customers, which is 19.1%, as compared to other brokerage companies.
From this graph, it can be said that from the financial year 2017 to the financial year 2022, the number of Zerodha’s active customers has been growing.
Market share of
Zerodha ➝ ~17%
Upstox ➝ ~14%
Revenue in FY21
Zerodha ➝ INR 2729 Cr
Upstox ➝ INR 386 Cr
Profit & Loss Numbers in FY21
Zerodha ➝ (+) INR 1122 Cr Profits
Upstox ➝ (-) INR 72 Cr Loss
Where does Upstock use their money
The biggest and most significant sums go in
· Upstox lavished INR 145 Cr on IPL advertisements,
· 65% of its users join via recommendations.
Upstox compensates the referral INR 1200 for each person they refer. A net loss of INR 1000 results from that. They occasionally guarantee INR 300 to 500 to both the referral source and the new user.
They would deposit free stocks into each user’s Demat account to encourage trading.
While spending a lot of money, Upstox’s extremely aggressive marketing efforts have brought in 10 million new users. Upstox spent 47 crores on advertising and promotions in FY20 alone, a trend that has continued over time.
Technology that made Zerodha catch the strong market that Upstox
The three technology that Zerodha has in its Kite platform made them a pioneer in the online stock broker industry
· Goods Till Trigger (GTT)
· Nudge
· Console
Goods Till Trigger (GTT)
It enables users to place market orders with conditions. It allows investors to create predetermined conditions or triggers for purchasing or selling stocks, which are carried out automatically when the requirements are satisfied. With this feature’s flexibility and automation, traders may more successfully implement their ideas. At a time, an investor can make 50 active GTT.
Example
With GTT, a trader can specify a trigger condition, such as “Buy XYZ stock when its price reaches Rs. 150,” and once the stock price reaches that level, the GTT feature automatically executes the buy order.
This removes the need for constant monitoring and manual trade execution, allowing traders to profit from price movements even when they are not actively trading.
Nudge
This platform includes the behavioral finance function Nudge. By offering timely notifications, reminders, and educational prods, it seeks to encourage investors to make informed decisions. These reminders assist investors in staying current with market trends, remind them of impending occasions, and offer educational materials to help them better comprehend investing ideas. The Nudge function encourages better judgment and arms investors with information.
Example
Imagine a stockholder with a diverse portfolio who does not actively follow market developments. The Nudge tool alerts the investor about impending corporate events for the companies in their portfolio, such as dividend announcements or quarterly earnings releases. These prompts work as reminders, ensuring the investor is aware of significant occurrences that could impact their investment choices.
It also informs the investor that the company in their portfolio will be releasing its yearly financial results may serve as a nudge, encouraging them to study the data and make any required changes to their portfolio.
Console
The console provides clients with thorough portfolio tracking, reports, and analytics. Users can access data about their assets, profit/loss statements, transaction histories, and other pertinent information on a centralized platform that is made available by the company. Console streamlines portfolio management by providing information and tools that enable investors to monitor their investments, assess performance, and make wise decisions.
Conclusion
Zerodha and Upstox are prominent players in India’s online trading industry. Zerodha’s user-friendly platform, transparency, and focus on low-cost pricing and investor education have made it a pioneer in the online trading platform industry.
References
https://www.businessoutreach.in/upstox-surpass-zerodha-user-base-now-10-million/
https://buildd.co/marketing/zerodha-vs-upstox
https://www.fortuneindia.com/long-reads/how-zerodha-went-from-zero-tohero/111627
