A Double-Edged Sword for Sri Lanka’s Market

By Duminda Pathirana, July 2025

In an era where trust is built through screens and social validation is algorithm-driven, the global rise of micro-influencers is not just a marketing phenomenon. It is part of a deeper socio-economic shift in how businesses form, scale, and challenge traditional market hierarchies. Nowhere is this disruption more apparent than in Sri Lanka, where a young, digitally fluent generation is redefining entrepreneurship. Armed with a laptop, Wi-Fi
connection, and sharp digital instincts, thousands of Sri Lankans are entering the market, often without traditional business plans or capital, and some are shaking entire industries.

This wave is fueled by the same shift in consumer trust that is altering global brand-consumer relationships. In this new model, small creators and niche voices have more power to move markets than million-dollar marketing campaigns. But with opportunity comes volatility, and Sri Lanka’s emerging digital business class presents both a chance and a challenge for economic stability and long-term growth.

Laptop-Driven Entrepreneurs, Crashing or Creating Markets?

Young Sri Lankans are increasingly choosing to bypass traditional employment structures in favor of self-employment in the creator economy. From home-based skincare lines promoted by TikTok influencers to personalized tourism services marketed through Instagram reels, the micro-business model is thriving.

On one hand, this signals a remarkable leap in entrepreneurial participation. Entry barriers have collapsed. Social media platforms double as storefronts, influencers act as sales agents, and payment gateways offer direct monetization. A 20-year-old in Galle can now compete with established brands in Colombo, simply by building a loyal audience and offering something perceived as authentic, ethical, or unique.

However, the same accessibility that enables innovation also triggers saturation. With no quality control mechanisms, the market is increasingly flooded with redundant products, unverified claims, and short-lived businesses that may burn out within a year. Traditional SMEs with formal compliance systems, tax burdens, and regulatory responsibilities are facing unfair competition from digital-only entrants who operate informally but scale virally.

This friction creates not only market confusion but also undermines consumer trust in the long term. When every other feed offers “homemade organic creams” or “ethical apparel brands,” consumers may find it harder to distinguish genuine value from savvy branding.

Digital Niche and Sophisticated Buyers

The new Sri Lankan consumer is not naive. Urban Gen Z buyers are highly informed, globally aware, and digitally literate. They no longer respond to big billboards or mass promotions. They seek brands that share their values, respond in real time, and feel culturally relevant. This is where micro-influencers and digital-first businesses excel.

But this sophistication is a double-edged sword. With increased knowledge comes higher expectations. A business may gain attention quickly through a viral video or influencer collaboration, but retaining customers in a saturated market requires operational excellence. Delivery delays, product inconsistencies, or ethical missteps can destroy trust overnight.

While micro-influencers drive discovery, they also influence scrutiny. A single negative review from a trusted creator can derail a business as fast as a positive mention can boost it. Hence, digital-first entrepreneurs must balance relatability with reliability.

Structural Risks- Informality, Tax Evasion, and Digital Fatigue

The surge of micro-businesses also risks creating an economic underclass of informal entrepreneurs. Many digital creators operate outside formal systems, no business registration, tax compliance, or employment practices. While this flexibility is liberating, it also means these businesses are ineligible for loans, insurance, or long-term scalability.

Moreover, with hundreds entering the same digital niches such as clothing, cosmetics, or drop-shipping, market fatigue is real. Consumers may engage out of curiosity, but loyalty is harder to sustain. And in the absence of standards, a few bad actors can tarnish the credibility of an entire product category.

Building Sustainable Digital Entrepreneurship in Sri Lanka

What is needed now is a balancing act. The state, private sector, and educational institutions must foster a digital economy that promotes innovation without sacrificing accountability.
Firstly, basic business literacy and digital ethics must be integrated into school and university curricula. Sri Lanka’s young creators need more than social media fluency — they need to understand pricing models, copyright laws, customer service, and environmental sustainability.

Secondly, regulatory frameworks must evolve to accommodate digital businesses without suffocating them. Instead of rigid crackdowns, the government can consider digital tax onboarding platforms, micro-registration systems, and simplified audit tools. This brings informal players into the fold and creates a level playing field.

Finally, micro-influencers themselves have a role to play. As de facto brand ambassadors, they can lead in advocating responsible advertising, transparent endorsements, and ethical entrepreneurship. Influencers who only chase paid promotions risk alienating their audience and damaging their credibility. But those who act as trusted curators of quality, especially for local and sustainable products, can become the backbone of a more resilient digital economy.

The Path Forward for Sri Lanka

The micro-influence model is not a trend, it is a paradigm shift. For Sri Lanka, the challenge is to harness its energy without letting it spiral into chaos. The country’s rich cultural narrative, artisanal skills, and youthful energy are unmatched. When combined with digital agility and strategic oversight, this moment presents a powerful opportunity.

Whether Sri Lanka’s micro-entrepreneurs will crash the market or recalibrate it depends on how quickly we transition from virality to value, from hustle to structure, and from individual ambition to collective growth.

This is not just the age of micro-influence. It is the age of accountable creativity. And if Sri Lanka can guide it wisely, it may very well be our economic renaissance.