Why Do E-Commerce Firms Need The Billions?

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Months after e-commerce major Flipkart raised $1.9 billion (about Rs 11,800 crore) in three rounds of funding in 2014, the Bengaluru-based company is again understood to be in talks to raise at least $500 million.

“I believe the profit margins of big e-commerce players are getting razor-thin due to rising competition in the e-commerce sector,” said Sanchit Vir Gogia, chief analyst and group chief executive officer at Greyhound Research. “As this sector thrives mostly on lower margins and higher volumes, there is a need for continuous investments in business models to improve on profits.”

Gogia of Greyhound Research added that he believes that fund raising by e-commerce players is fully justified and is the only viable option for them to tackle huge losses and stay in the competition.

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