Play.com is to close its direct retail business and stop selling CDs, DVDs and more from March 2013.
The company will remain solely as an eBay-style marketplace site, only allowing users to buy and sell from other individual retailers.
The company, which is based in Jersey, blames the ending of Low Value Consignment Relief, which allowed items less than £15 to be sold to the UK VAT-free, reports the BBC.
All 147 staff in Jersey are to be made redundant, plus a further 67 permanent and temporary staff based in Bristol and Cambridge.
More after the break
The move comes after the company was bought by Japanese company Rakuten for £25 million last year.
A statement from Play.com reads: "Following a strategic review of our business operations we have today announced a company restructure.
"Moving forward we are intending to focus exclusively on our successful Marketplace, which is our main business area, and to phase out the direct retail part of our business...
"We would like to reassure our customers that they can continue to shop with us, purchase from an expanding range of products, and still receive the great quality of service they have come to expect."