New Zealand's music retail market leader the Warehouse expects to start selling music online later this year - although digital downloads are not yet part of the equation.

The 80-plus store mass merchant recently announced a 23% drop in net profit to $49 million New Zealand ($26 million) for the six months ending Jan. 25. However, part of that was down to one-off costs relating to its exit from the grocery business and sales overall were down just 2%.

Chief executive Ian Morrice tells that music sales have continued to retract year on year. However, he sees music and other home entertainment products as being a key part of the chain's new online shopping service, which he expects to become fully transactional in the second half of the financial year.

"Initially, we will be picking out the key lines, but not necessarily everything that you would find in every outlet," he says. "Ultimately we would like to be in the position to extend the catalog, but that will be for the second stage."

Morrice adds that no decision has been made on whether digital downloads will be part of the offer. "We haven't concluded on what we are going to do that in area, but we having a very interested look at that space," he says.

As far as bricks and mortar music sales are concerned, he sees a challenging year ahead for the music business. With digital continuing to grow in popularity, he says it is a vital for the industry to get consumers back in the habit of regularly buying CDs.

"Between ourselves and the music companies, we've got to continue to find new ways of getting people back into buying the whole album rather than just cherry-picking tracks online," Morrice continues. "It's about creating an interesting series of events and promotions outside of the key Christmas period to get music back on people's shopping agenda."