In Venezuela, profit margins for businesses have fallen sharply, reaching between 5 % and 22 %, according to estimates by economist Leonardo Soto.

In an interview with Fedecámaras Radio, Soto stated: “In the context of an economy marked by exchange rate uncertainty, tax pressure, and price-sensitive demand, profit margins for businesses and services in Venezuela have fallen to historically low levels.”

He emphasized that currently, net profits in some sectors range between 5 % and 22 %, “well below the levels observed years ago, when margins commonly exceeded 60 % and even 100 % in sectors with high turnover or low competition.”

In this dynamic, he emphasizes that the price of goods and services determines consumption. In other words, in the country, consumers prioritize the value of what interests them as the main attribute for purchasing it.

According to Soto, the negotiation model has changed. Faced with a real profit margin estimated at 8 %, “we must recalibrate the business model or look for another sector.” He also mentioned factors that restrict current profitability, such as: “the end of the hyperinflationary cycle, which previously generated nominal profits due to simple price inertia; the cooling of domestic demand after several quarters of stagnant consumption; the high tax burden and irregular oversight, which increases compliance costs; and the absence of effective formal financing mechanisms, which forces businesses to work with their own capital or face uncompetitive conditions.”

The specialist emphasized the importance of businesses working on their pricing processes to incorporate detailed cost analysis, target audience segmentation, and market intelligence tools. Added to this is the need to invest in sophisticated marketing strategies, focusing on effective segmentation and customer loyalty, especially in saturated or price-sensitive markets.

M.Pino

Source: finanzasdigital

(Reference image source: Nicholas Cappello on Unsplash)

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