Sri Lankan household consumption has recovered to a record real value of around Rs. 9 trillion, but consumers have undergone significant changes following years of economic uncertainty, according to a new report by Boston Consulting Group (BCG) and the Ceylon Chamber of Commerce.
Six years after BCG’s first assessment of the Sri Lankan market in 2020, the two organisations yesterday released their latest study, titled The Changing Path to Purchase in Sri Lanka.
The report identifies increased caution in household spending, changing geographic patterns of purchasing power and growing dependence on digital platforms and artificial intelligence as key characteristics of today’s Sri Lankan consumer.
While private consumption has regained its position as a major contributor to the country’s economic recovery, the report notes that businesses can no longer rely on strategies developed before the economic crisis.
Households are exercising greater caution as expected spending growth continues to exceed anticipated income growth. According to the study, 77% of consumers expect their expenditure to increase during the next six months, while only 38% expect their income to rise.
As a result, consumers are allocating a greater share of their budgets to essential goods and services while postponing or reducing spending on discretionary and high-value purchases.
BCG Managing Director and Senior Partner Nishant Gupta said the recovery in consumption masks significant differences in purchasing power and demand across income groups and regions.
The report identifies the middle class as the main driver of consumer spending, accounting for approximately 70% of national consumption. Rural areas account for 56% of all middle-class households.
Affluent households make up only around 4% of the population and are largely concentrated in the Urban-West region, but they account for approximately 11% of total consumption.
Digital platforms are also playing an increasingly important role in consumer decision-making. While word of mouth remains the most influential source of information, reaching 66% of consumers, digital influence has increased to 51%, compared with 32% in 2020.
The influence of digital platforms is particularly strong when consumers consider high-value purchases such as travel and leisure, with YouTube and social media emerging as key sources of information.
Generative artificial intelligence is also gaining ground in product discovery and research. The report found that 55% of consumers are aware of GenAI, while 18% have used such tools. Among those users, approximately one in three now uses GenAI to research brands and products.
Digital banking penetration currently stands at 25%, with users showing high engagement and frequently choosing digital payment methods for routine transactions.
The report further noted that consumers are considering a wider range of brands and products before making purchasing decisions, while fewer ultimately develop exclusive loyalty to a single brand.
BCG India Leader – Marketing, Sales & Pricing and Managing Director and Partner Parul Bajaj said brands and retail channels must increasingly earn consumer preference at every stage of the purchasing process, as social media, YouTube and GenAI play a growing role in determining which brands enter consumers’ consideration sets.
