Pauline Harwood, owner of Lavender Magic on Lincoln Rd, said her business would shut on June 29 after opening 18 months ago in the Star Block.
She said a decline in sales was the primary reason for the closure, although also to blame were a lack of foot traffic in Lincoln Rd and the installation of parking meters on that stretch of the CBD.
Since 2006, Mrs Harwood has harvested and produced her own lavender oil as owner-operator of a Mt Holdsworth farm.
Her essential oils won four national awards before she opened her shop early last year and in August won silver and gold at the New Zealand Lavender Growers Association annual meeting, as well as the overall Dennis Matthews Memorial Trophy for the best oil in New Zealand.
"But when it comes down to it, there's just not enough sales to keep the shop open.
"I don't believe locals shop as much in Masterton as they do elsewhere - they tend to shop in Palmerston North or Lower Hutt."
Ms Harwood said she was grateful to her loyal customers and would continue to manufacture oils and retail online.
As well, she was negotiating the sale of her product range through other Masterton outlets, and would wholesale nationwide.
Neighbouring business owner Linda Neal, of Esaus Florist, said she had started a "one-woman campaign" to encourage shoppers' support for small retailers.
Mrs Neal bought the florist business about two years ago.
"It's the first time I've had a shop.
"I jumped in at the deep end without any experience and created my own style. I work long hours and put my heart and soul into my business," she said.
Mrs Neal employs a part-time worker, who started as a volunteer, and also has a Makoura College student completing work experience at the shop.
"Things are difficult for small businesses and we're all struggling right now. But winter for florists is a very tough time. I don't want to be next to close and I'll fight hard to make sure that doesn't happen. I really love my job. I'd be lost without it."