Thirty-seven people were made redundant yesterday as online retailer Ferrit, dubbed Telecom's answer to Trade Me, announced it had become too expensive to run and would be shut down.
The site, which is run like a shopping mall allowing customers to compare prices across stores and buy products over the internet, will stop taking orders tomorrow.
Ralph Brayham, general manager of Ferrit and director of Telecom Home, said the recession had made it difficult to sign up new retailers. Struggling retailers were reining in marketing spending and online shopping fell into that category for them.
Telecom retail chief executive Alan Gourdie said that although Ferrit had grown in the past three years, the current environment had "meant the break-even point has shifted out a number of years".
Telecom would concentrate on mobile, broadband and information communication technology. Industry insiders said the site had spent millions advertising but still struggled to attract and retain browsers.
At the start of last week Ferrit was logging around 8000 unique browsers daily compared with Trade Me's 466,000, according to data from NetRatings, but Brayham said it was not appropriate to compare traffic on Ferrit with the online auction site.
Ferrit was seen as a pet project of former Telecom chief executive Theresa Gattung and reportedly cost $15 million to set up. Mr Brayham said some of the best people in Telecom were moved to Ferrit to set it up in 2005. It now employed 24 full-time staff and 13 contractors.
Staff were told about the redundancies yesterday morning.
Head of Trade Me Mike O'Donnell said it was sad to see an online venture close, especially when so much energy had gone into it.