Why Carrefour has closed Kisumu Mega Store & Kenya's changing retail sector

Carrefour, operated by Majid Al Futtaim, has officially announced the closure of its Kisumu Mega Plaza Mall store, effective November 30, 2024. 

The decision was communicated through internal and external memos addressed to employees and partners. 

The company cited its strategic move toward sustainability and long-term growth.

In a memo signed by Maisa Galal, the Director of Sustainability and Human Capital for East Africa, the company reassured its commitment to supporting employees during this transition. 

Effect on employees

Carrefour said it aims to minimise disruptions to employees’ roles while maintaining its dedication to serving the local economy.

"We are working diligently to reassign all affected colleagues to other Carrefour stores within Kisumu and the region," the statement reads. 

A similar notice was issued to Carrefour's partners, underscoring that the closure does not signify a reduction in the retailer’s commitment to suppliers or its operations in Kenya. 

"We remain committed to growing in Kenya and contributing to the local economy," the company stated, highlighting its network of 25 stores across the country and plans for further expansion.

The company encouraged affected partners and stakeholders to reach out to relevant category managers for any concerns regarding the closure.

This closure is part of a strategic evaluation to ensure Carrefour's operations in Kenya remain "feasible and sustainable."

Carrefour Kenya has been an integral player in the country's retail sector, providing diverse products and services while boosting employment opportunities in various regions. 

The decision to close the Kisumu Mega Plaza Mall store marks a significant adjustment to its operations in Kisumu, one of the fastest-growing cities in Kenya.

Commitment to Customers and Expansion Plans

Despite this development, Carrefour has reassured its customers and stakeholders of its dedication to the Kenyan market. 

The retail giant confirmed its ongoing efforts to contribute to the growth and prosperity of the local economy and its customers' shopping experience.

While the closure might seem like a setback, the company reiterated its plans to explore future opportunities in Kenya as it adapts to evolving market needs.

Current Landscape of Kenya’s retail sector 

Kenya's retail sector has shown resilience, with the wholesale and retail trade contributing significantly to the economy. 

In the second quarter of 2024, this sector experienced a growth rate of 4.4%, an improvement from 2.1% in the same period of the previous year. 

Major retailers like Naivas, Quick Mart, and Carrefour have been at the forefront of this expansion, opening new stores across urban centres. 

New entrants such as China Square and Panda Mart are diversifying the competitive landscape, further intensifying the battle for market share among established players.

E-commerce Growth

The shift towards e-commerce is notable, driven by a tech-savvy consumer base seeking convenience. 

The sector is projected to grow at an annual rate of 16.4% until 2025, positioning Kenya as one of Africa's fastest-growing e-commerce markets. 

Retailers are increasingly adopting digital tools for online ordering, delivery services, and customer engagement through loyalty programs and mobile payments.

Challenges Facing Retailers

Oversupply of Retail Space

Despite the growth in some areas, the retail market faces challenges such as an oversupply of retail space in key regions like Nairobi, Kisumu, and Uasin Gishu. 

Current estimates indicate an oversupply of approximately 3.6 million square feet in Nairobi alone. 

This situation is expected to dampen demand for physical retail spaces as consumer preferences shift towards convenience shopping formats.

Economic Constraints

Declining consumer spending power amid economic pressures poses another challenge. 

This has contributed to reduced disposable income for many households, affecting overall retail performance.

Rental Yields and Occupancy Rates

According to the Kenya Retail Report 2024 by Cytonn, the average rental yield across the Kenyan retail sector was reported at 7.6% in 2024, reflecting a slight increase from previous years. 

However, occupancy rates remain a concern; while they improved to 81%, they still indicate that many retail spaces are not fully utilised due to market saturation and changing consumer habits.

Future Outlook

The outlook for Kenya's retail sector remains neutral but cautiously optimistic. 

While there are significant challenges related to oversupply and economic constraints, opportunities for growth exist in emerging markets outside major urban centres like Nairobi. 

Regions such as Kiambu, Mt. Kenya, Mombasa, and Kajiado are identified as potential growth areas due to lower competition levels compared to saturated urban markets.

In summary, while Kenya's retail landscape is evolving with robust growth in e-commerce and modern retail formats, it must navigate challenges related to market saturation and economic fluctuations to sustain this momentum in 2024 and beyond.