OPERATIONAL REVIEW

Ralph Lorenz Ralph Lorenz
Managig director
Musica is the largest retailer of entertainment-related merchandise in the country, targeting consumers in the middle and upper income groups. The merchandise range includes gaming, DVDs, CDs, cellular and lifestyle products.

Review of the year

Musica has continued its successful transition from music to entertainment, with sales of non-music products (mainly gaming and DVD) increasing from 41% to 46% of total turnover for the year.

The focus on broader entertainment products is reflected in the 19.7% increase in DVDs and 26.2% in gaming.

DVD sales growth was aided by good-quality releases in the first half and strong promotions in the second half. Gaming sales were boosted by the introduction of Nintendo Wii and Nintendo DS during the year, as well as the launch of the Wii Fit balance board. Additional trading space was allocated to the DVD and gaming categories in 63 stores during the year.

CD sales declined 3.0%, although this is better than the trend experienced in most developed markets. Sales were further impacted by a lack of new releases, particularly by local artists. However, Musica still increased its share of the CD market over the period to 41%.

Musica was voted the Coolest CD Store for the third consecutive year in the Sunday Times Generation Next survey. This survey reflects the views of customers in the youth market and indicates the power of the Musica brand.

The store footprint was increased to 158 with the opening of 15 stores, while six were relocated to improved quality trading space in similar areas. A new megastore was opened in Cavendish Connect in Cape Town.

Focus for 2009

Management is targeting to achieve more than 50% of sales from non-music products in the 2009 financial year. A new brand identity and positioning statement, “A World Awaits”, has been introduced to reflect the shift away from music to an entertainment offering.

Musica continues to be positioned as a gaming software specialist and gaming ranges and space will be expanded in all stores. Gaming has an estimated 44% share of the local entertainment market and presents a real growth opportunity for the brand.

The economic environment will remain challenging for Musica, with the pressure on discretionary spending expected to extend well into the new year. Recognising this, Musica will be adopting a more conservative approach to store expansion and plans to open six new stores.

Market share (%) 2008 2007
CD 41 38
DVD 22 20
Gaming software  9 9
Per RISA/GfK/supplier data