ARTICLES/LOGISTICS

SRI LANKA: SET AND READY FOR E-COMMERCE

PAVING THE WAY FOR DIGITAL TRANSFORMATION

As a fast-growing industry, e-commerce will continue to mature and play more prominent roles in Sri Lankan lives. It currently provides an emerging and profitable market for businesses, with substantial investment opportunities.
This article gives an overview of current situations and promising potentials of Sri Lanka’s e-commerce ecosystem. It includes many aspects that will contribute to Sri Lanka becoming a region of e-commerce success, which will also help its ongoing social and economic progress.

1. TECHNOLOGY USE WITHIN THE CONSUMER MARKET

Sri Lanka at a glance

>33.5 million cellular mobile connections

>12.5 million internet connections

>6.1 million internet users

51% internet penetration

Affordable mobile connection prices: <0.57% of gross national income

Numerous mobile providers: Dialog Axiata, Mobitel, Etisalat, Airtel, Hutch

Consumers’ readiness for e-commerce depends on their awareness, skills, and trust in digital technologies. Sri Lankan consumers have begun to buy online, and will be doing more so as internet coverage becomes widespread and digital literacy improves. The government's proactive digital policies also encourage the public and businesses to transact online.

2. NATIONAL DIGITALIZATION STRATEGY TO PROMOTE INFRASTRUCTURE AND ACCESSIBILITY

Most Sri Lankan businesses look for security, easy integration and management, and effective SEO when adopting or transforming into e-commerce. On average, most companies have at least the basic necessities in technological skills and infrastructure, which is a promising start to adopting e-commerce more seriously.
Under the Ministry of Digital Infrastructure and Information Technology, the Information and Communication Technology Agency (ICTA) aims to establish 1,000 tech startups and turn the IT sector into a USD 3 billion industry by 2024.
The Sri Lanka Software and Services Company Association (Slasscom), now with over 200 member companies, also expects to make the Sri Lankan software industry a USD 5 billion enterprise while creating 200,000 new jobs and 1,000 startups by 2022.
Since 2022, The Sri Lankan government has also decided to speed up the implementation of a Unitary Digital Identity framework in the country, which provides personal identity verifications via biometric data and digital wallets. With the system, individuals can prove their identity easily when accessing online services.
The Central Bank of Sri Lanka (CBSL) has also developed LANKAQR, a digital payment solution that lets consumers pay to merchants by scanning a QR code with their phone. The project targets small and medium enterprises (SMEs) and is being rolled out nationally. As of November 2021, 24 payments apps provided by 21 financial institutions have been certified to use LANKAQR.
Sri Lanka is one of the first Asian countries to roll out mobile broadband and a leading country in mobile phone prevalence. Internet is available even in rural and remote areas. It is essential for the country’s e-commerce success that service providers continue to ensure fast, secure, reliable, and affordable digital communication systems.

3. TECHNOLOGY USE AMONG BUSINESSES

Most Sri Lankan businesses look for security, easy integration and management, and effective SEO when adopting or transforming into e-commerce. On average, most companies have at least the basic necessities in technological skills and infrastructure, which is a promising start to adopting e-commerce more seriously.
  • USD 2682 million e-commerce revenue projected in 2022
  • 58% of businesses have digital adoptions for sales and marketing
  • 49% have digital adoptions for procurement of goods and services
  • 30% have e-payment options, either by internet banking or card
  • 30% have a web presence
  • 25% have their own IT departments
  • Nearly all major banks offer internet banking: Citibank, HSBC, State Bank of India, Seylan Bank, National Savings, Hatton N. Bank, Commercial Bank
  • Bank-operated mobile payment applications: eZ Cash and Genie by Dialog Axiata, FriMi by Nation Trust Bank, ComBank by Commercial Bank, Wepay by Sampath Bank
  • Fastest growing e-commerce firms:
    • Kapruka.com – Sri Lanka’s first and largest e-commerce enterprise
    • Daraz.lk – Under Alibaba Group, one of the world’s largest retailers, e-commerce, and artificial intelligence (AI) companies
    • Daraz.lk – Takas.lk – Ranked #1 best start-up in 2015 by Daily Mirror
  • Largest 3rd party e-commerce marketing platforms: Amazon, Magneto, eBay
  • Contributing industries: services, agriculture, textile and clothing, IT, chemicals, construction, etc.
The current e-commerce market in Sri Lanka predominantly revolves around consumer electrics and electronics, and fashion and lifestyle products for the educated urban population. However, as the ICTA continues to implement its plans, there is anticipation that the range of products and services will expand to form a more inclusive and diverse e-commerce environment.

4. LOGISTICS

Sri Lanka at a glance

>500 web-listed logistics firms

USD 2 billion of gross domestic product contributed by the logistics industry per year

80% of logistics firms focus on international and nationwide services

40% of products covered are agricultural, coffee, and tea

The physical infrastructure, i.e., road, airway, and waterway connectivities in Sri Lanka is well-developed. However, to adequately support e-commerce growth, a logistics firm needs an integrated and constantly evolving IT system to automate the entire delivery chain.
Logistics firms designed and developed specifically for e-commerce will have the necessary warehousing, distributing, and sorting systems that suitably cater to e-commerce delivery.

5. POLICIES, LAWS, AND REGULATIONS

Sri Lanka at a glance
IMPORTANT E-COMMERCE-RELATED LAWS
Electronic Transactions Act 19 2006
Provides legal and international validity for e-contracts
Computer Crimes Act 24 of 2007
Protects against digital crimes
Information and Communication Technology Act of 2003
Protects against misuse of personal data
Consumer Affairs Authority Act 9 of 2003
Protects consumers from unfair trade practices
Intellectual Property Act 36 of 2003
Protects copyrights, patents, and trademarks
Enacting regulatory instruments helps to ensure a secure digital environment that consumers can trust. Sri Lanka’s digital laws are in place, with new cybersecurity legislation underway in 2021. In addition, regulations and policies are drafted to conform with UN guidelines to offer greater validity as e-commerce transactions increasingly occur globally.
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