It would seem that experts predictions of weaker companies folding under the pressure of the economic downturn haven’t been all hot air.

First it was movie retailer EzyDVD folding before Christmas and now Telecom New Zealand has ended its NZ$35 million experiment into online retailing, abruptly shutting down its Ferrit website.

The site was launched by the telco in 2005, pouring millions of dollars into prolific online marketing and TVC brand awareness campaigns courtesy of long time agency Saatchi Interactive, says a report from Digital Media Australia.

Ferrit’s model involved selling new retail products and taking a commission on online transactions while not charging retailer for advertising in the site differing from the Fairfax owned dominant online shopping site Trade Me which sells a mix of second-hand goods from retailers and individuals.

Ferrit started with over 150 retailers in 2005 but that dwindled to 90.

Tony Boyte, senior analyst for Nielsen Online, believes that while there was stiff competition in the online retail sector from Trade Me, Torpedo 7, Easy Buy and strong individual retailer offerings, consumer awareness of the site had always tracked highly.

“Our Retail Monitor Awareness surveys of the reveal a consistently high rate bolstered by a very large marketing budget and heavy rotation TVCs. They haven’t been making profits but we didn’t see it coming, it’s an interesting development.”

Launched by former Telecom New Zealand CEO Theresa Gattung, it was hailed as the telco’s first competitive commercial digital effort. After three years and consistently strong traffic, the site had yet to reach profitability.

Ferrit had actually been growing in visitation numbers – in December 07 it had 268,461 browsers consisting purely of domestic traffic growing to 334,588 for the same period in 2008 – but it couldn’t these statistics to hard sales, suggests Boyte.

The carrier says that that the break-even point for Ferrit had been blown out by a number of years due to the ‘current tough retail environment’.

“Since 2005 weve seen a growth in retail adoption of online with many retail players adopting ecommerce and web capabilities,” Telecom NZ’s retail chief executive Alan Gourdie revealed in a statement.