Is Groww On Its Path To Beat Zerodha?
A tale of the two biggest players of Indian stock market
Recently, the buzz about Groww surpassing Zerodha in user count, despite the latter being a 14-year-old empire, sparked a massive online debate. But the big question is who's going to be the long-term winner?
Analyzing the trend since September 2022, Groww has been steadily gaining ground. In September 2023, it officially overtook Zerodha in the number of active investors. The hard numbers speak volumes: Groww boasts 6.63 million active investors, surpassing Zerodha's 6.48 million.
While Groww might lead in user count, the question we should be asking that is it the right metric for a fair comparison? Let’s dive a little deeper into this.
Revenue and Profit: Beyond User Numbers
Zerodha, with its healthy annual growth, showcases robust numbers in both revenue and profits. In FY23, Zerodha's revenue was five times that of Groww, adding fuel to the ongoing debate.
History
Zerodha had long remained India’s poster boy for bootstrapped startups and is credited with revolutionising discount broking in India.
Groww, a younger player by seven years, stepped onto the stage later. Despite the time lag, Groww has managed to outpace the former’s user count.
Target Audience Approach
Zerodha pulls in serious investors, evident in higher revenues. On the flip side, Groww is in it for the long haul, targeting the mass market and focusing on education. They're like a funnel, bringing in many users, educating them, and expecting some to become serious investors over time.
Understanding the Mass Market - In India, the mass market tends to stick to safer investments like FDs and real estate, not actively trading stocks or mutual funds. Grow's challenge is to educate and convert these users into traders, which is a time-consuming process.
Language and Market Penetration - Zerodha caters to English-speaking users with content matching their serious investor audience. In contrast, Grow is venturing into tier 2 and tier 3 cities, focusing on vernacular languages to reach a broader audience across India. It's a comparison between Zerodha's current profitability and Grow's strategic investment for future gains.
Revenue Stream & Profitability Outlook
This brings us to the point of the revenue stream. Since Groww is targeting people from tier 2 and 3 cities as well, it has no account opening or maintenance fee, while Zerodha charges both and is making money, especially from serious investors in options and futures (about 70% of revenue).
In contrast, Groww is in a phase of heavy spending, focusing on education and providing a fee-free platform. Although Groww has achieved profitability, it still has a long way to go to challenge Zerodha's level of profitability and YoY growth.
Both platforms charge brokerage fees, but Groww is clearly on the path of acquiring users, while Zerodha has already established a loyal and financially stable user base.
Ease of use
Zerodha and Groww use different app strategies. Zerodha has several apps like Kite for stocks and Coin for mutual funds, which can prove to be a bit tricky especially for first time users.
On the flip side, Groww keeps it simple with one app for everything. But, because Groww is easy to use, it brings in users who might not know much about the stock market. Zerodha, with more serious users, has more people actively trading, giving them an edge in volume and trading activities.
Groww's user-friendly approach has its drawbacks. Its simplicity attracts users who may not be familiar with the stock market – they join because it's easy and free. However, this doesn't necessarily translate to active trading.
While Zerodha, with a more serious user base, boasts higher daily active users. This indicates that Groww's accessibility might bring in users, but Zerodha holds the upper hand in terms of trading volume.
The Bottom Line: Groww vs. Zerodha
In the showdown between Groww and Zerodha, here's the scoop.
Groww's aggressive growth mindset, fueled by venture capital, positions it well for rapid expansion and capturing the biggest market share in today's environment where new players are emerging every other day.
In contrast to this, Zerodha's emphasis on consistent profitability with a smaller user base could be more advantageous in the long run. Think about it: even if Groww has 3x or 4x of the market space compared to Zerodha, the latter, with a focus on steady revenue generation with fewer loyal users, might lead to better long-term success compared to Groww's pursuit of sheer numbers.
We can look at it in this way, Groww is the VC-funded newcomer, while Zerodha is the self-made, bootstrapped champ. It's a bit like comparing apples and oranges or, in finance terms, mutual funds to equity trading.
So, who will win in this face-off? While you ponder on this, don’t forget to keep investing!
Product Insight 🧠
The subscription model is becoming popular among many Indian startups. Initially inspired by traditional milk deliveries, it's now a major revenue source for OTT platforms like Netflix and Amazon Prime. Startups in various sectors, including cosmetics, wellness, and hospitality, are joining in.
Key players like Zomato, Licious, Cult.fit, and Urban Company are moving toward subscription-based services. Let's explore why this trend is catching on in the Indian startup scene.
Customer Insights
Continuous customer relationships provide businesses with valuable insights into consumer interactions. This first-party data allows companies to make informed decisions about product changes, marketing strategies, and new launches.
Positive Impact on Cashflow Management
Subscription income creates a consistent cash flow that determines the valuation and from which future revenue generation can be estimated. For a startup or any new business recurring revenue creates a safety net that helps in attracting investors as well.
Easy Personalization and Loyal Customers
Unlike regular models, subscription models allow a lot of personalization. This personalization offers the customers freedom, making them stick to your business for a long time improves customer loyalty, which, needless to say, is an asset for any business.
Effective Demand Forecasting
Subscription models enable businesses to understand customer buying patterns, aiding in effective demand forecasting. This insight helps in managing inventory and the supply chain efficiently.
The subscription-based economy in India is expected to experience even more exponential growth in the coming years. However, it's not just businesses that benefit from the subscription model. Share your thoughts on why the subscription model can be more advantageous from a consumer point of view as well in the comments.
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