While reviewing his monthly accounts, Sundaram realized that he was barely breaking even, primarily due to the substantial rent he was paying to the residents’ association. He realized that while his sales were stagnated, the rental costs were contractually scheduled to increase every three years. He was determined to do something to increase his profits.

Which of the following will be the MOST sustainable way to increase Sundaram’s profits?

Sundaram’s realization of barely breaking even highlights the need for a sustainable solution to improve profitability. Among the given options, Option C, removing all discounts and selling at the maximum retail price, is the most viable choice. By eliminating the 15% discount, Sundaram can immediately increase his profit margin without requiring additional investment or effort. His store already caters to residents’ daily essentials and urgent needs, where convenience outweighs pricing. Thus, customers are unlikely to stop shopping at his store despite the removal of discounts. This approach ensures a steady increase in revenue and profitability without jeopardizing his core customer base or incurring further costs.

Option A, negotiating a lower rent with the residents’ association, appears appealing but is unlikely to succeed. Sundaram voluntarily agreed to the high rent through a competitive bidding process, making it difficult for the association to justify reducing the rate. Furthermore, relying on renegotiation does not address the fundamental issue of improving sales or reducing dependency on discounts, and there’s no guarantee of a favourable outcome.

Option B, advertising via leaflets in the gated community, may increase visibility but comes with its own costs, such as printing and distribution. This would add financial strain without ensuring a significant uptick in sales. Given that residents are already aware of the store and still prefer large retail chains for major purchases, this strategy may not lead to a substantial increase in profits.

Option D, offering to procure items unavailable at his shop on demand, would introduce operational complexities and additional costs, such as transportation and logistics. This approach shifts focus from optimizing the store’s current operations and profitability. It may also set unrealistic expectations among customers, further straining Sundaram’s resources.

Option E, introducing "cheap Wednesdays" with 40% discounts, is counterproductive. While it might draw more customers temporarily, such steep discounts would drastically reduce profit margins. Customers may also delay their purchases to only shop on discount days, cannibalizing regular sales. Over time, this discount-driven model would be unsustainable and could further harm Sundaram’s financial stability.

Hence, Option C offers the most sustainable way for Sundaram to improve profits. By removing the discounts, he can enhance revenue from existing sales without additional costs or operational risks, aligning his strategy with the shopping habits of his customers.