OPERATIONAL REVIEW

Musica

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 CDs, DVDs, gaming software and consoles, airtime and lifestyle products.

Review of the year

Musica capitalised on its position as the leading entertainment retailer to gain market share in the current economic climate, while management continued to focus on de-risking the business model to improve returns.

Musica is now a broad-based entertainment business with non-music products such as DVD and gaming accounting for 47% of total turnover. The resilience of CD sales in the current environment leaves 53% of turnover still in music.

DVD and gaming sales continued to soften but still showed positive growth for the year. CD sales were down marginally but were sustained through the strong performance of Afrikaans music which increased by 19% for the year.

Musica continues to review its property profile to optimise trading locations for its entertainment offering. During the year seven new stores were opened and nine closed, bringing the store base to 156 at year-end. A new megastore was opened in Canal Walk (Cape Town) late in the reporting period.

Musica won the Xbox Retailer of the Year award, highlighting the brand’s positioning as a gaming specialist. The brand was also voted the best CD retailer in the Readers’ Choice Awards 2009.

Focus for 2010

While the trading environment is likely to remain challenging in the short term, the gaming and DVD markets will grow as the economy recovers. This growth is expected to be aided by new formats such as Blu-ray DVD, and declining prices, notably in gaming consoles.

The CD market will decline steadily in the medium term, although at a slower rate than being experienced in overseas markets. This slower decline will mainly be due to the strength of the local music sector and lower broadband penetration in South Africa which is a limiting factor for digital music downloading. Musica aims to continue to drive market share growth in music in the year ahead.

Musica is focused on opening stores in destination locations. Five new stores are planned for 2010 although no net growth is expected in the store portfolio owing to further planned closures. An additional 20 stores will be refurbished in the new brand identity, bringing to 43 the number of stores in the new design.

Shortly after year-end the Clicks ClubCard loyalty programme was launched into all Musica stores nationally. This follows a successful pilot in Musica stores in the Western Cape. This will enable Musica to engender brand loyalty through exclusive offers to ClubCard members.

Market share (%)	2009	2008
CD	44	41
DVD	23	22
Gaming software	9	9
Per RISA/supplier data/GfK