Edinburgh city centre is beautiful at any time of year, but it is in August during the annual arts festival that it really comes alive, and this is when Max Masood’s business starts cooking on gas.

He has invested heavily and in just three years his Paper Rack estate has expanded from one store to seven. The exceptional location of his shops makes it possible to take advantage of the tourist trade when the city’s population doubles for one month every summer.

A steady flow of customers pop in to pick up cigarettes, soft drinks and newspapers, but what you really notice – what you cannot help but see – are the tartan souvenirs that line every wall.

“The profit margins on the tourist items are much higher than on core lines – it can be as much as up to 300 per cent,” says Max.

“What’s unique about my business is it’s the only shop of its kind that caters for such a diverse group of people.”

There are cashmere scarves for £40 a-piece, crystal pipes for £80, and during the festival they even sell hardwood bagpipes at £300 a go. There are traditional Scottish items like sporrans, sgian-dubhs and claymore swords, all hugely popular with fans of the Mel Gibson blockbuster Braveheart. In fact, anything at all with a highland theme sells well – including cuddly toys in kilts.

“We are one of the biggest sellers of Walkers shortbread in Edinburgh – we sell it in bucket loads,” he says.

Although customers do pop in for their cigarettes and sweets, he makes a bold claim that you could remove all his tobacco, drinks and crisps without the blink of an eye.

“I’m very lucky – I can guarantee there’s not a single store that sells the same combination of products as I do, and as a result no one else works the hours I work, lives the lifestyle I live, drives the cars I drive.”

Among the fleet of cars he drives are a Bentley convertible and an Aston Martin Vanquish. And part of the reason he has reaped such rewards is down to the Paper Rack strategy of buying at the right prices. Max’s father, who started out as a businessman in Edinburgh 35 years ago, now has the job of patrolling wholesalers to make sure they get the very best deals.

“We buy at the right prices, because in this environment, and with Tesco and Sainsbury’s opening up whenever they get the chance, you have to. If you are savvy then you can succeed by saving money on your buying.”

This extends to the souvenirs – most are bought, but some are made to order because it works out cheaper.

He currently has quite a few of his core lines on promotion, but this is actually a first for the business. January was exceptionally quiet this year and in order to shift stock that was getting short on date Max dropped the prices.

“We have never done any promotions before because we don’t need to. It’s because of where we are – if people want something they will just come in and buy it.”

His biggest gripe is the cost of bills – including the “brutal” business rates, and worst of all, the water charges.

“It doesn’t cost this much in Europe or the US. Here my staff could wash themselves with mineral water off the shelf and it would be cheaper than what you pay on the bills.

“Shops are closing down left right and centre in this country and water rates just don’t help.”

He is not afraid to defy the current retail trends, and this extends to his attitude to price-marked products (PMPs).

He says: “These days people want PMPs but I don’t have a single price-marked item in my shop. My best-selling cigarette lines are non-price-marked and as soon as you price-mark them you lose your margins. Max Masood does not get out of bed for a 20 per cent margin – I don’t live a 20 per cent lifestyle.”