Connectivity in Sri Lanka has been steadily increasing over the past few years. The Central Bank records a 15.2% growth of information and communication activities in the first half of 2016, and a 21% total increase in telecommunications activities compared to a 10.9% growth during 2015.
Access to the internet is a big part of this growth, with an 11.4% increase in total internet connections recorded in June 2016. The increase in internet penetration leads to a whole host of new options for the Sri Lankan market ‒ an obvious one being the migration of businesses to online spaces, which Sri Lanka has taken to quite readily. A cursory search on Google will lead to a whole host of options.
But the explosion of e-commerce sites in Sri Lanka raises some questions: has the market become saturated, especially since the majority of them focus on Colombo? And what challenges do online retailers face when trying to do business in the Sri Lankan market?
To answer some of these questions, and get an inside look at the challenges facing the e-commerce industry, we spoke to Lahiru Pathmalal, the co-founder of Takas.lk. Takas has been around a long time, and perhaps understands more than most, the difficulties that companies face when doing business online. We quizzed Lahiru about his company, the state of the industry now, and what the future could bring, both for Takas and the industry in general.
All About The Product
Traditional wisdom for startups, especially new e-commerce ones competing in a world that has eBay and Amazon, is to find a niche and dig in. While some online stores have stuck to this, focusing on clothes or jewellery, the biggest online malls on the island have completely ignored it. They sell anything from washing machines to laptops to bicycles. Yes, you can actually buy bicycles online at wow.lk, another huge online platform run by Dialog Axiata.
Perhaps the reason that platforms like Daraz and Wow and Takas sell so many different categories of products, is to corner the market. If people can find everything they want in one place, they might not go looking elsewhere, thus keeping a customer hooked onto one site.
Takas started off selling electronics, and Lahiru tells us they still plan to keep their core business, while adding other types of products around it. According to him, it may be a bit harder not sticking to a niche, but they want to provide a complete solution for consumers in terms of online shopping. The other reason companies sell so many different types of products is that the Sri Lankan market is quite small, so for them to grow, they need to add more products.
Suppliers And Logistics
Logistics can be quite a challenge for an e-commerce platform. There are a lot of moving parts, and human factors that create complexity in the supply chain. Logistics for a B2B enterprise can be relatively straightforward, but when it comes to e-commerce, there are hundreds of suppliers whom they have to depend on when picking up products, and every delivery can be complicated when the customer is always on the move. To even out the process as much as possible, what Takas has done is to automate, making the supply chain data driven to cut through most of the human interaction that delays pick up and delivery.
It can also be hard to find suppliers, for e-commerce startups who typically don’t stock their own products. A startup has to filter between suppliers who provide only original products and those that sell knockoffs. While it’s hard to generalise, typically smaller suppliers are easier to work with since they are hungry for growth.
Scaling And Market Sentiment
According to Lahiru, one of the biggest challenges Takas, and by extension e-commerce in general, is facing, is market sentiment. Given what is happening in India, with Snapdeal and FlipKart laying off thousands of employees, sentiment is low for e-commerce, and the market appears to be on a downward spiral. But Lahiru believes this downturn is cyclical, and that they’ve seen it before in 2013. He says the most important thing to do at this time is to stay focused.
The problem that FlipKart and Snapdeal had was scaling too rapidly. They had bloated organisational structures and were losing focus on their core business. Scaling is important for an e-commerce startup, but Lahiru explained that scaling should not be the focus, whatever the cost. To scale, he said, a startup needs a solid foundation, which sometimes takes time, and large investment. In this industry, growth depends a lot on marketing, which involves significant investment. Takas does aim to scale, they say, but at a more sustainable level.
Part of that scaling may be expanding across the island. Online shopping tends to be focused in Colombo, but it is growing outside the city, too, which is interesting. Outside of the Western Province, Takas has seen the greatest traction in the Uva Province.
One of the biggest barriers to shopping online in Sri Lanka has always been payments. Sri Lanka has made some progress towards creating a better environment for buying and accepting payments online, but is still nowhere near where it should be. Takas processes large amounts of payments online, but according to them, the interfaces and features of these payment gateways are very outdated. Lahiru feels that regulations should allow PayPal to operate in the island, making for easier payment options.
But the stranglehold the Government is placing on the industry is making it hard for companies to do business.
The Future Of Takas And E-commerce
The large number of new e-commerce platforms and online retailers should have made things more difficult for Takas. But Lahiru says that the market was never very easy for Takas, with the first few years of their founding being the most difficult, as they were one of the first to launch an online store in Sri Lanka. Then, it was difficult to get people to purchase things online, but now consumers are more used to buying online, so they really welcome competition.
What Takas is focusing on, is improving what they already have, building on the foundation already laid out. Their core focus now is getting products delivered to customers quickly. They have developed their own solution that handles everything from the pick up process to the delivery and gives them a pretty big advantage in delivery times, which we found out for ourselves.
They are also investing heavily in technology that will make the customer experience ‒ including making payments ‒ easier, so that shopping becomes more of a seamless experience. They tell us that they are also working on a “new type of retail”, which we don’t have any more details on, but that sounds exciting.
A lot of the challenges Takas experiences is representative of what the industry as a whole faces. How they deal with those challenges is one way that e-commerce in Sri Lanka can adapt. The challenge with the e-commerce industry is that the market is small and cannot sustain expansion past a certain point. But it is also concentrated in the cities until internet penetration increases and other provinces get more comfortable purchasing goods online. Taking into consideration language, and a varied understanding of technology and culture, it all presents a unique challenge for e-commerce startups to work around.
Editor’s note: This article previously referred to Lahiru Pathmalal as ‘founder’ of Takas, and has now been amended to read ‘co-founder’ of Takas. We apologise for the error.
Featured image credit: Project Planning Pro