LeShop, Switzerland's first Internet supermarket, is to close its doors at the end of the year after failing to meet projected turnover targets. Around 70 jobs will be lost.
In five years the company has grown to become a leader in the Swiss online shopping sector, but has never managed to break even.
In a statement on Tuesday, the Bon appétit Group, which holds a majority share in LeShop, said the closure of its subsidiary would take effect on December 31 and entail costs of around SFr12 million.
It said it would in future be concentrating on its core supermarket businesses after running up losses this year of SFr40 million.
The group blamed economic stagnation and increased competition for the poor result, and said the closure of LeShop was just the first step in a strategic rethink.
LeShop itself said it believed the Swiss market was not yet ready for the kind of service it offered, "but we are convinced that shopping will never be the same again for the 40,000 households who tried our service at least once".
LeShop was launched in 1997 with seven staff. By 2002 the shopping portal had 69 workers serving 16,000 regular customers.
Bon appétit, which acquired a 31 per cent stake in LeShop last year, had hoped the online store would turn a profit by 2004. But with annual growth this year estimated at just 20 per cent compared to180 per cent in 2001, the group said it would be several years before LeShop was profitable.
E-commerce expert Thomas Rudolph from the University of St Gallen said there were several reasons for LeShop's collapse. Profit margins on the products were not high enough, there were distribution problems and the costs of delivery were not adequately covered by the SFr12 flat charge.
"[The business] should concentrate on targeting the rich, the old and those with too little time," Rudolph told swissinfo. "These groups would be prepared to pay more for the service."
But Urs Peter Naef, spokesman for Migros, which also has an online shop, said Switzerland's biggest retail chain would not consider raising its delivery charges because that could chase away customers.
"The Internet food business will remain difficult," Naef told swissinfo. "The costs are simply too high."
Not a priority
He conceded that the online shop was not a top priority for Migros: "The online ship is an addition sales branch for Migros. We've got 600 shops and none of them carries any advertising for the online shop."
For Matthias Nast of the Swiss Consumer Protection Foundation, the problems encountered by Le Shop are the same as those experienced by other Internet retailers. "It's the same as shopping on the Internet for books or other things. People like to go into the shops."
A view shared by Urs Peter Naef. "People want to pick up tomatoes before they buy them," he told swissinfo.
Nast says the Swiss are adapting to the idea of shopping for food on the Internet, but couldn't be expected to embrace the idea straight away. "Who are the users of the Internet? Mainly young people, business people. Older people are starting to get used to the Internet, but there's still a lot of fear."
Nast is not concerned that with the demise of Le Shop the Swiss will have less choice when it comes to food shopping: "The most important thing for us is that you have the possibility to shop and to choose good food. And if that's online or in real life, that doesn't matter so much."
LeShop was set up in 1997 to make shopping easier for working people.
By 2002 it was the leader in online food shopping in Switzerland.
Total sales in 2001 reached SFr11.5 million.
Over 5,000 products are included in LeShop's range.