Lowe's is undergoing companywide renovations aimed at fixing its struggling bottom line. The home improvement retailer is downsizing in an attempt to increase profitability and efficiency. The lesson for small-business owners is that expanding too quickly can be a bad idea in the long run.
"Lowe's most definitely overbuilt to try to compete," said Stefania Pinton, partner at Dionco Inc., a retail consulting firm. "Sure enough, when the market shrank they ran into a problem. Ultimately, they were not making their numbers, so they really don't have a choice [now]."
Those problems led Lowe's to make changes that, according to a Reuters report, include the closing of 20 stores within the next month and the elimination of nearly 2,000 jobs. Lowe's, which operates 1,700 stores in the United States, is also cutting back on new store openings in 2012, lowering the number from 30 to between 10 and 15.
Pinton believes that by focusing on customer needs and not on expansion and growth, businesses can avoid suffering a fate similar to that of Lowe's.
"You have to be very focused," Pinton said. "A lot of small businesses think big is better, but that is not necessarily the case. There are a lot of independent retailers that are extremely successful even when times are not as good because they decided they wanted to be focused on their customers instead of opening another store."
At the end of the day, it is customers that keep small businesses going, she said. Pinton believes that remembering them and their needs is the best plan for success.
"You have to be very careful about opening new stores, carrying too much inventory and growth," Pinton said. "Ultimately, the end result in any small business is to cater to their customers and stay focused on their needs. It is very important that they pay attention to what the consumer really wants because they are not shopping as much as they used to in the past."