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As a tech entrepreneur who has ventured in to e-commerce, a question that I frequently get asked is: When is e-commerce going to make an impact in Sri Lanka? The short answer to the question is anytime now, and here is why.
The number of internet users in Sri Lanka is growing in double digits. At present, four million Sri Lankans have online access. The growth in internet penetration has been impacted by mobile penetration and the access of relatively affordable data and smart phones in a big way.
Sri Lankans using the internet to purchase online is also on the increase thanks to increases in credit cars
circulation and systems such as cash on delivery (CoD) for goods purchased online being implemented (takas.lk was the first to introduce CoD in the SL market).
The current retail market in Sri Lanka stands at approximately US$ 7 billion (calculated with the household expenditure index), while the e-commerce market has a smaller share, at US$ 25 million. However, if we expect the same growth patterns e-commerce has experienced in India to transpire here, it most certainly will. Sri Lanka should expect phenomenal growth in this area of online commerce in the short to medium-term.
Looking at the Indian e-commerce growth story, what is to come will be very exciting. Indian e-commerce grew at 100% year on year from 2011 -12 largely fuelled by major players like Flipkart investing heavily in the area, coupled with internet penetration growing at a steady rate.
The industry is expected to grow at 60% for the next five years and be one of the fastest growing markets in Asia. We can expect the same here in Sri Lanka since the retail markets are quite similar. To add to this, the internet penetration in Sri Lanka is higher than in India. Furthermore, the average income of Sri Lankans is higher than that of India – this will help drive e-commerce at a stronger pace once critical mass is reached.
For instance, the average order value for an e-commerce company in India is approximately Rs. 4000, while from our experience at takas.lk, the order value is twice that amount, which shows that the Sri Lankan consumer is ready to spend more and has a higher degree of confidence in e-commerce delivering on products.
Furthermore, e-commerce just makes sense. Why? At takas.lk we have more than 3,000 products under one roof, but we don’t warehouse anything – and unlike many other ‘e-commerce’ companies in Sri Lanka, we don’t have a retail space. This means we save a lot of money on expensive real-estate.
With growing internet penetration, e-commerce companies will also have a much larger reach than traditional retail businesses. The price of real estate and the time frame required by traditional retail to set up an operation to service an area means e-commerce companies will have an added advantage over its competition; the saving of costs eventually being passed on to the end consumer. This will leave e-commerce as one of the most viable alternatives to keep costs low and reach a very large customer base.
For instance, we regularly deliver to places like Galle and Trincomalee where customers don’t have access to the same range of products as consumers in larger cities such as Colombo. Accessibility, competitive pricing, coupled with convenience will make an e-retailer a force to be reckoned with by the more traditional retailer.
To sum up, traditional retailers will have to start thinking about investing in e-commerce very soon, if they have not already, in order to survive in the retail sector in the future. The ones who master the e-commerce space will master the retail space in years to come.
(The writer is the CEO of takas.lk, the largest online electronics mall in Sri Lanka. He holds a Masters from the University of Queensland, and Bachelors from the University of Maryland, Baltimore County. He can be contacted on [email protected].)
