The Booming E-Commerce Scene in Sri Lanka

E-commerce in Sri Lanka has witnessed tremendous growth due to the increased use of the internet and smart devices. The COVID-19 pandemic has further accelerated this trend, making online shopping a preferred choice for many. According to the Information and Communication Technology Agency (ICTA) of Sri Lanka and the United Nations Conference on Trade and Development, Sri Lanka’s Digital Economy accounted for 4.37 percent of GDP in 2022. This surge is attributed to the rise in e-payments, e-banking, online medical consultations, and e-sports.

The Changing Face of Online Shopping

Sri Lanka’s internet landscape has seen a significant transformation, with approximately 43 percent of the country’s estimated 11 million internet users making online purchases. The Western Province emerges as the largest e-commerce market, accounting for around 50 percent of total orders. The most frequently bought products online include electronics, apparel, and personal care items. Surprisingly, 56 percent of internet users claim to have made a purchase after seeing an online advertisement.

To cater to this growing demand, major commercial banks in Sri Lanka have introduced online banking services, while travel companies, hotels, and large retailers have begun offering online trading options. Domestic e-commerce companies have also stepped up, providing Sri Lankan customers access to millions of global products. Additionally, the government is committed to enhancing online services by encouraging the use of online applications and payments for government services.

Limitations and Regulations

While Sri Lanka offers access to global e-commerce platforms like PayPal, limitations regarding refunds and inward receipts still exist. Transactions made using credit cards issued by Sri Lankan banks, which are converted into foreign currency, attract a 2.5 percent stamp duty. However, transactions in the local currency are exempt from this duty. To streamline government services, the government has implemented an e-service gateway and introduced web portals for filing tax returns, paying taxes, and renewing revenue licenses.

In terms of buyer behavior, domestic B2C e-commerce sites have experienced significant growth over the past few years. Consumers can now easily purchase a wide array of products, including groceries, apparel, and electronics, through platforms such as Kapruka, Daraz, Takas, and Keells Super. In addition, small and medium enterprises are increasingly leveraging social media sites to advertise products, accept orders, and receive payments.

While cross-border e-commerce is limited to popular overseas sites like eBay and Amazon, local e-commerce companies have started selling imported goods. The Electronic Transactions Act No.19 of 2006, along with several other laws such as the Evidence Act No. 14 of 1995 and the Payment and Settlement Systems Act No. 28 of 2005, support and facilitate e-commerce in Sri Lanka. However, the country currently lacks a local regulatory body to oversee e-commerce businesses.

The Ecosystem Supporting Sri Lanka’s E-commerce Market

Sri Lanka’s internet access is rapidly expanding, with the International Telecommunication Union (ITU) reporting that 58.8 percent of the population has mobile-broadband access, and 34.1 percent regularly use the internet. Additionally, the country boasts high mobile phone penetration, reaching 115.1 per 100 inhabitants. Private telecommunications companies have played a pivotal role in expanding 3G, 4G, and even embarking on pilot applications for 5G technology. Financial institutions are also stepping up, developing payment gateways to provide secure online payment services and further bolster the growth of e-commerce.

Despite the thriving e-commerce scene, Sri Lanka currently lacks in-country events specifically focused on e-commerce.

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