A study titled 'E-Commerce Rhetoric, Reality and Opportunity', conducted jointly by Indian Association for Mobile and Internet (IAMAI) and KPMG revealed that e- commerce may be gaining momentum in India, but an estimated 70-80 per cent of e-commerce companies are in dire need of funds, reported Live Mint.

Several e-commerce companies are struggling to raise capital and carry on with their day-to-day activities in what is universally accepted to be a money-burning business.

The findings further stated that over the past three years, 52 e-commerce companies have raised about $700 million in venture capital. A large portion of this funding has gone into one company i.e. Flipkart.com, which has almost raised $550 million since 2009.

Inventory carrying e-commerce companies such as Myntra.com, Flipkart.com and Jabong.com with large product spreads may require funding to the tune of $200 million to get to profitability, said the report.

As e-commerce businesses have gained traction and require larger investments for growth, the average deal size has almost doubled from $6 million in 2007 to $11 million in 2011.

The e-commerce market is growing at an average rate of 34 per cent since 2009 and is expected to reach $13 billion by the end of 2013, according to the KPMG-IAMAI report. The report further reveals that with 71 per cent online travel segment is the biggest contributor to the total consumer e-commerce transactions. E-retail on the other hand is the fastest growing segment contributing 16 per cent of the overall transactions as of 2012.

In the past year, some of the biggest investments have happened in the e-tail segment in companies such as Flipkart.com and Myntra.com. The e-tail sector is expected to grow at 59 per cent a year and will account for one in every two e-commerce transactions by 2016, said the report.

It added, e-commerce drivers include discounts, cheaper prices, convenience and accessibility. Nearly two-thirds of people buy online due to the cheaper prices and discounts. The report also said, servicing the smaller towns and rural areas is a challenge due to limited last-mile connectivity. Over 50 per cent of the logistics cost for e- commerce companies can be attributed to last-mile delivery. Moreover, only 10,000 out of more than 150,000 pin codes in India are covered by courier companies.