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In an era increasingly dominated by digital innovation and transformation, e-commerce platforms have emerged as vital tools for businesses worldwide, including small and medium-sized enterprises (SMEs) in Sri Lanka.
While Sri Lanka's e-commerce sector is still relatively small in terms of its contribution to the overall GDP, it holds immense potential for growth for both business-to-consumers (B2C) and business-to-business (B2B) SMEs.
Understanding the industry is vital for SMEs looking to venture into e-commerce. This sector in Sri Lanka shows promising growth and potential, underpinned by rising revenue per user, and robust annual growth rates, according to Statista. Revenue is expected to grow at an annual rate of 15.6% from 2023 to 2027. This suggests a flourishing market, poised to reach a projected market volume of US$4,887 million by 2027.
Another key factor contributing to the booming e-commerce industry in Sri Lanka is the rising number of internet users. By 2027, the number of users in the e-commerce market is predicted to swell to 10.19 million, nearly half the country's population. This is accompanied by a surge in user penetration, which stands at 37.8% in 2023 and is forecasted to further rise to 46.1% by 2027.
However, it's not just the number of users that's increasing but also the revenue per user. The average revenue per user (ARPU) is expected to amount to US$331.20, indicating the considerable purchasing power these users bring to the platform.
Both B2C and B2B SMEs in Sri Lanka often face various challenges, such as limited resources, high overhead costs, and restricted target markets.
E-commerce platforms provide a solution to these hurdles by offering cost-effective ways to establish an online presence. Adding to that, the growing industry also offers immense growth potential.
One of the most significant advantages e-commerce platforms offer Sri Lankan SMEs is the ability to expand their market reach. Traditional brick-and-mortar stores are confined by geographical boundaries, reaching only a limited number of customers.
E-commerce platforms, however, allow businesses to transcend these boundaries, selling their products or services to customers across the country or even globally. This wider reach can significantly increase sales and brand awareness.
With an online presence, SMEs can also compete on a more level playing field with larger businesses, greatly boosting their competitiveness. They can also adapt more quickly to market changes, keep up with industry trends, and cater to evolving customer expectations .
Running an e-commerce platform can be less expensive than managing a physical store. Businesses can save on costs associated with rent, utilities, and hiring staff, which is important for Sri Lankan SMEs that often have lesser funds than bigger multinational corporations (MNCs).
Moreover, many processes can be automated on e-commerce platforms, leading to increased efficiency and decreased inventory management and order processing costs.
Other than increasing revenue through market expansion and reducing costs through greater efficiency, e-commerce platforms are also rich sources of data. They can provide B2C and B2B SMEs in Sri Lanka with valuable insights into customer behaviour, preferences, and purchasing patterns.
This information can then be used to customise marketing strategies , enhance customer service, and develop products or services that better meet customer needs.