E-commerce here in Sri Lanka is still a relatively nascent sector; it accounts for around one percent of the retail landscape as a whole. Yet, according to the Managing Director of Daraz Sri Lanka Rakhil Fernando, there’s a lot of room for it to grow and opportunities for people to enter the fledgling segment.
Once dominant in urban areas, e-commerce is spreading outside the Western Province. “Mobile penetration and the sophistication of the consumer is quite developed outside the Western Province,” he said on a recent edition of LMDtv.
While COVID-19 helped online businesses and drove adoption, the economic crisis has dampened e-commerce. Fernando noted: “The economic crisis has been negative; it’s really affected consumers’ spending power and sellers’ ability to maintain stocks. The entire ecosystem has been impacted and marketplaces have suffered.”
And he elaborated: “Customers have moved down the value chain. For example, people who bought 43-inch TVs are now buying 32-inch TVs. This is probably due to the current hyperinflation situation since we haven’t seen salaries increasing at the same pace; so people simply don’t have the affordability; and this is affecting the size and value of their [spending] basket.”
Nevertheless, the Managing Director of Daraz Sri Lanka is still “very optimistic and positive about where e-commerce can go,” and looks forward to prospects for the next financial year when things will get better – and hopefully, usher in stability and predictability.
In terms of the prevailing import bans and restrictions, he explained how sellers are constrained with supply issues and maintaining stock levels: “We’ve seen a lot of sellers moving to locally manufactured brands and products, which is very encouraging and helps the local economy.”
Nevertheless, given that the local market is very much a foreign brand import-based space, he predicts that until imports are normalised, Sri Lanka will witness supply chain constraints that will in turn affect consumers’ choice.
With change becoming an undeniable constant – especially in terms of e-commerce – he urged local e-commerce companies “to focus on specific areas” to ensure business sustainability.
He asserted that for those venturing into the e-commerce space, “it’s not practical to try and do everything, since that will require a lot of funding, bandwidth and knowledge. There’s a lot of room for brands to focus on a niche and invest it in.”
And he noted that for example, “there are many e-commerce clothing brands in Sri Lanka that offer amazing clothes at the right price points – there’s no need to build brick and mortar shops anymore.”
Fernando is also a fervent believer in getting the basics right, even when it comes to technological infrastructure in the local e-commerce ecosystem.
He averred: “We have to look at how to get the fundamentals right – things that seem very simple but are incredibly important to make the entire ecosystem of e-commerce work and provide customers with a seamless service.”
“For example, [take] payments. The majority of transactions in Sri Lanka are still very much cash-based even in e-commerce. So it’s an area that should be looked at and invested in, to make the entire value chain seamless, easy and transparent,” he added.
For the Managing Director of Daraz Sri Lanka, e-commerce is a great equaliser: “When using platforms, you have the potential to support any small business or entrepreneur wherever they are in Sri Lanka.
He continued: “You don’t need to be a giant brand or deep pocketed conglomerate to be able to target [affluent] customers in Colombo anymore; you can list your products and stand with big brands and conglomerates who also sell on the platform.”
E-commerce “really enables people and empowers them in a way they wouldn’t have ever been before’ and that alone provides and creates a far more equitable society,” he concluded.
