Role of E-commerce in Driving International Trade

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The e-commerce wave has profoundly transformed the landscape of international trade, allowing businesses of all sizes access to global markets. This digital revolution has broken traditional barriers, facilitated seamless cross-border transactions, and introduced significant cost efficiencies. As digital technology continues to reshape global commerce, it drives e-commerce growth, enhancing global connectivity. Notably, e-commerce has become a beacon for Small and Medium Enterprises (SMEs), enabling them to tap into global markets, diversify their revenue streams, and focus on success in international trade. 

Sri Lanka is at the forefront of this transformation, boasting rising digital literacy and increasing smartphone penetration across urban and rural areas. With the right e-commerce policies, the nation has the potential to boost its exports significantly. The global e-commerce sphere is thriving, with projections estimating its value will reach $8.5 trillion by 2026 . Countries like Malaysia are already leading in this domain with strategic roadmaps, incorporating digital free trade zones, and launching e-commerce educational platforms.

As we navigate this digital era, it’s imperative to explore diverse business models, from B2B to B2C. The potential for e-commerce to lead economic recovery and boost sales is limitless, making it an essential tool in today’s world. The role of e-commerce in driving international trade was discussed at a webinar hosted by USAID PARTNER Activity in collaboration with the Ceylon Chamber of Commerce. This article delves into some of the webinar’s key insights.

Trailblazers of Sri Lanka's E-commerce Domain

In the dynamic e-commerce landscape, Sri Lanka is home to several pioneers who have revolutionized the digital marketplace. Kapruka, founded in 2004, is one of the nation’s leading e-commerce platforms. Daraz, with its influence extending beyond Sri Lanka to countries like Pakistan, Bangladesh, Nepal, and Myanmar, champions local empowerment, with 98% of its sellers being local. This platform also equips tools for sellers to access global marketplaces.

Kantala, established as a locally focused platform in 2013, soon recognized international trade’s vast potential. Despite initial challenges, Kantala’s global venture showcased resilience and innovation. Their commitment to digital expansion was highlighted in campaigns designed to boost online visibility. Similarly, Good Market has emerged as an innovation hub, seamlessly connecting small vendors with global buyers. Representing a vast network of 2,800 vendors across 98 countries, Good Market symbolizes e-commerce’s democratizing power, enabling vendors of all sizes to access international markets.

Challenges in Growing Cross-Border Trade

Sri Lanka’s cross-border e-commerce sector has witnessed substantial growth in recent years. Local government policies haven’t obstructed this expansion, and entrepreneurs have actively addressed associated challenges. Notably, the void created by the absence of platforms like PayPal is being bridged by new services. However, businesses grapple with high shipping costs, particularly due to the charging of products based on volumetric weight. Efforts to modernize logistics and expand Express Mail Services (EMS) centres are necessary to mitigate these issues. 

Brands have achieved notable success internationally, with Kapruka’s cross-border project growing by 700% year-on-year. Yet, the domestic market remains underexplored, as 61% of Sri Lankans aren’t engaged in e-commerce. Addressing this requires improved digital literacy, education, and trust-building initiatives. The sector faces challenges related to online payments, cybersecurity threats, and supply chain constraints, especially for small communities. Effective policymaking, international cooperation, and a value-chain approach are essential for overcoming these hurdles. 

For SMEs, starting local helps navigate challenges before scaling globally. Engaging in trade fairs and understanding consumer language are also pivotal. Reflecting the global e-commerce trend, countries like Malaysia invest heavily in their digital sectors, a strategy Sri Lanka should emulate.

Key Learnings from the Webinar

The recent webinar illuminated several critical e-commerce facets, emphasizing its role in propelling international trade. A primary takeaway was the significance of trade facilitation and the liberalization of trade policies, especially regarding tax improvements, to enhance cross-border e-commerce. The digital realm has seen an influx of non-traditional businesses entering international platforms, highlighting e-commerce’s vast potential for diverse enterprises. For businesses aspiring to widen their scope, networking is essential. Engaging with different institutions and participating in trade fairs have proven effective in connecting with new buyers. However, before targeting the global market, businesses should prioritize understanding their domestic market concerning supply chains, certifications, and regulations.

In marketing, the language used to communicate with potential customers is pivotal. Promoting products in a way that resonates with the target audience, through language translation and professional copywriting, can significantly amplify market reach. Another strategic tactic involves listing businesses on various platforms, ensuring alignment with different supply chain levels, and effectively catering to the target market. Rapidly responding to customer inquiries and a steadfast commitment to quality assurance, demonstrated through comprehensive return and refund policies, are fundamental to building trust. The webinar also emphasized the critical role of education and digital literacy in advancing e-commerce.

Recommendations for Moving Forward

As e-commerce continues its evolution, several recommendations surface to ensure its sustainable growth and expansion. Foremost is the need to bolster international cooperation and partnerships, promoting shared knowledge, resources, and market access. Logistically, expanding the number of EMS centers nationwide can significantly enhance distribution capabilities. Customized policies adopting a value chain approach will further optimize operations. For Small and Medium Enterprises (SMEs), understanding the utilization of Harmonized Commodity Description and Coding System (HS codes) can facilitate smoother international transactions.

Government agencies should stay agile, keeping abreast of contemporary business models to ensure policies remain relevant which CCC will consistently strive to foster an environment that promotes e-commerce in pursuit of this goal.

Addressing supply-side constraints is vital, focusing on encouraging local entrepreneurs to produce goods, thereby strengthening the nation’s supply chain. With cash-on-delivery being the predominant payment method in Sri Lanka, fostering awareness and offering incentives to promote digital payment adoption is crucial. Finally, for businesses to genuinely harness e-commerce’s potential, a shift in mindset is essential. Allocating more resources to e-commerce, recognizing its growing importance, and adopting a serious approach toward it, are keys to seizing international markets in this digital age.

This article is a part of the Business Tips for Trading Across Borders series — A collaborative effort of 
The Ceylon Chamber of Commerce and United States Agency for International Development (UASID) Partnership for
Accelerating Results in Trade, National Expenditure and Revenue (PARTNER) Activity

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