Telecom is shutting down its loss-making online retail store Ferrit.

It says the decision to shut down Ferrit "reflects that there has been a range of changes in both the telecommunications landscape and the company's strategic priorities since Ferrit first launched in 2005."

Telecom retail CEO Alan Gourdie said in a statement that the company was directing its focus and resources to "core business areas" such as next generation broadband and mobile technology.

"Telecom's aim in launching Ferrit was to help develop New Zealand's online retail market. Since 2005 we've seen a growth in retail adoption of online with many retail players adopting e-commerce and web capabilities."

Ferrit never turned a profit and Telecom is not commenting on whether industry estimates of a $30 million investment in the venture are correct or not.

``We don't talk about the level of investment in any of our subsidiaries,' Ralph Brayham, director of Telecom Home, said.

``Investment in Ferrit is a small amount of money in the context of what Telecom spends,' he said.

He said the business was reviewed every six months and the company had continued to say yes until the last analysis.

Staff told today were surprised and disappointed. The company was working to find them other jobs at Telecom.

``You've got a group of very passionate entrepreneurial people who have been working on a business that they have been excited about for years and of course they are going to be gutted,' he said.

Ferrit was seen as a pet project of former Telecom chief executive Theresa Gattung, and as a bid by the telecommunications giant to be entrepreneurial in online business.

Brayham said it was not appropriate to compare traffic on Ferrit with online auction site Trade Me.

Industry observers say that New Zealanders have been slow to shop online at local sites other than Trade Me.

Brayham said he believed online retailing would be as successful in New Zealand as it was in the United Kingdom or United States but it would take time.

He said Ferrit depended on new large retailers coming on board to expand the product range and they were wary about making new investments in the current economic environment.