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The purpose of this study was to examine challenges facing major supermarkets; Nakumatt, Naivas, Tuskys and Uchumi that emanate from the changing environment. These included but were not limited to among others competition from new supermarkets, new entrants into the supermarkets sector like hawkers on the streets, small-micro traders operating in mini stalls, dukas and kiosks among other retail outlets; suppliers, customers, regulatory agencies and demographic, social and economic conditions in the largest cities in Kenya; Nairobi, Mombasa, Kisumu, Nakuru and Eldoret. Competition is one of the environmental influences to a business. It exerts pressure on firms to be proactive and to formulate successful strategies that facilitate proactive response to perceived and actual changes in the competitive environment. Primary data was collected using oral interview schedule and structured questionnaires targeting supermarket managers and Dukas operators within the supermarkets environment and from the review of existing literature. It was analysed with the aid of Statistical Package for Social Sciences to generate quantitative information. Out of the forty two respondents targeted to fill in the supermarkets managers’ questionnaire, 34 filled in and returned the questionnaire for analysis. This was a response rate of 81%. Nakumatt supermarket chain had the highest proportion of respondents at 26%, followed by Tusky’s’ at 24%, while Naivas and Uchumi took the 3rd and 4th position respectively with 17% and 14 % response rates. Out of the a hundred questionnaires administered to Duka owners, eighty six were completed and returned. A response rate of 86% was achieved. Out of the four supermarkets Head Quarters managers, three 75% out of the targeted four managers were interviewed. The response rate of the two data collection instruments was satisfactory. Mugenda, O., and Mugenda, A. (2003) advance that, 50% response rate is adequate, 60% of the response rate is good and a response rate of 70% is very good.  The findings were presented using multiple response statistical method of data analysis. The study findings revealed that the greatest challenge noted by the respondents was competition 22 (30.6 %) which was followed by customers and social economic conditions11 (15.3) respectively. The other challenges were low profits and sales volume 9 (12.5%), followed by regulatory agencies like the government 8 (11.1%), political conditions 6 (8.3%) and suppliers 5(6.9%) in that order. Supermarkets Head Quarter managers (75%) also cited competition as the greatest challenge they face from the external environment during the interviews. Literature reviewed indicated that competition was the greatest challenge that supermarkets encountered within the retail sector. The government of Kenya and relevant stakeholders should implement existing interventions to cope with competition to the latter for a neutral playing ground for all retailers in the supermarkets sector.
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