Troubled supermarket operator Somerfield yesterday confirmed it would halt its internet shopping division, 24-7, which has fallen victim to tough online competition from Tesco and Iceland.

Somerfield said customers would no longer be able to order groceries by telephone, fax, email or interactive television. However, home delivery would continue for shoppers at Somerfield and Kwik Save stores.

Analysts said the move would damage Somerfield's future sales growth. Mike Godliman of retail analyst Verdict Research predicted 5% of supermarket food sales- £4.96bn - would be done online by 2005. "That's a big chunk of the market to ignore."

Sainsbury recently announced it would invest more in developing internet shopping and Asda is concentrating on improving its market share in this area.

Somerfield's 24-7 is understood to have been accumulating losses since it began operating last September and last month estimated annual turnover at £4m.

Somerfield did not deny speculation that two of its three 24-7 fulfilment centres received as few as 15 orders a week.

The division employs 226 people but Somerfield said it hoped to redeploy some of them. The unit was established under former chief executive David Simons, who was recently replaced by executive chairman John von Spreckelsen, who said yesterday: "The decision will clearly come as a disappointment to the staff of 24-7.

"We may well have a fresh look at the role of e-commerce food retailing within Somerfield in the future. But the hard fact is that 24-7 has not been growing and represents a significant distraction to management at a time when its focus has to be on the core Somerfield and Kwik Save business."

Somerfield is expected to report full year results on July 5. Analysts still expect the company's profitability to be suffering from its poor investment in Kwik Save. Some have speculated that the group will be split up or sold within the next year and underlined this by pointing to weakness in the company's brand names.
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