WHY NOT TO MAKE ASSUMPTIONS ABOUT DELIVERY IN MEGACITIES

Adapting existing distribution models is not enough and can be a costly mistake.

13.10.2016

NirmalThakkar, SCM.dk

In many developing countries, economic growth has created a sizeable middle class with money to spend on items beyond the first necessities of living. For brands that have proved successful in mature markets, the urban areas of these countries in particular are attractive targets for expansion and growth. But one would be wrong to think that logistical solutions for megacities can be found by upscaling existing models. Mumbai is not the Indian version of New York City.

Attractive potential markets for global brands

The global trend of urbanisation is reflected in the growing number of megacities (usually defined as urban areas with a population over 10 million). In 2015 the world counted 34 megacities, and 26 of them were to be found in developing countries.

While the average income in emerging market countries is still much lower than in mature markets, there also is a segment of the population benefiting from the economic development and eager to show it by buying luxury goods from global brands. In a city of many millions, even a few percent of the population represents a large number of potential customers. It is no wonder, then, that Western brands are eager to gain a foothold in this environment.

Adapting existing distribution models is not enough

For marketeers entering a new market it is routine to develop a marketing strategy adapted to the situation, even for an existing, unmodified product. Supply chain managers may be tempted to take an easy approach by starting from existing distribution models and tweaking them a bit to fit the characteristics of the particular location. After all, delivery remains delivery and a distribution centre is a distribution centre.

Unfortunately we have never seen this approach meet with success. It comes closer to a recipe for disaster, because it doesn’t take into account the multitude of large and small differences that can wreak havoc on the supply chain if not addressed properly.

Population density and infrastructure

To illustrate how divergent urban distribution environments can be, we will focus on two major characteristics: population density and traffic infrastructure. In emerging market cities, population densities can be much higher than in mature markets – consider Mumbai, with over 29,000 people per square kilometre, and New York City, with just over 2000. Also, because the average store is much smaller in emerging markets, the number of stores is higher and the average shipment size considerably smaller, so that the scale of logistics operations in emerging markets is fragmented when compared to mature markets. This explains why, for example, roughly 25% of the cost of goods must be attributed to transportation in Latin America and only 5% in North America.

Urban authorities in emerging market countries have many problems to deal with, and creating a transportation-friendly environment is usually not a top priority. Even if it were, realising infrastructure changes is a matter of several years if not decades. Today’s reality is one of congestion and delays.

Shred all assumptions

Developing a distribution network based on invalid parameters can be a costly mistake. One way to avoid that mistake is to start from scratch and rigorously check every single assumption. For companies that don’t want to take the time and to devote the resources required for this process, there also is the option to team up with a logistics provider who already has a local presence, knows the challenges, and is experienced in dealing with them.

If you are considering an expansion into emerging markets and have any questions about your distribution network, our experts will be happy to support you. Please get in touch with your local Damco office here.

Are you interested in more ways to avoid risks and reduce your supply chain costs? Then you can download our recent white paper Six ways to lower your logistics costs (without compromising on speed or quality)here.

N.C. Nielsen A/S

Sponseret

Efter 20 år med samme truckmærke sender lagerchef stafetten videre hos INOX

SCM.dk

Stort tema om smart produktion i praksis: Fra Industri 4.0 til 5.0

Relateret indhold

25.06.2026SCM.dk

Disse tre egenskaber kendetegner verdens 25 bedste forsyningskæder

24.06.2026PALOMAT

Sponseret

Slip for pallekaos – RetNemt viste vejen

SCM.dk

Toldstyrelsen etablerer beredskabsgruppe

SCM.dk

Hedebølgen afslører de svage led i virksomhedernes drift

19.06.2026SCM.dk

STARK styrker ledelsen af nyt distributionscenter

18.06.2026Descartes

Sponseret

Descartes Releases Global Shipping Report on Strait of Hormuz Disruption

16.06.2026SCANLOX ApS

Sponseret

Få op til 125.000 kr. i tilskud til test af robotteknologi

15.06.2026PALOMAT

Sponseret

Prøv gratis i 2 uger: Kan PALOMAT® gøre en forskel hos jer?💡

09.06.2026SCM.dk

Fibox henter CEO med supply chain-erfaring

04.06.2026SCANLOX ApS

Sponseret

Rasmus, Rolli, Gitti, Anni og T-Rex indtog gulvet

Jobmarked

Se alle

Hold dig opdateret med SCM.dk

Tilmeld dig nyhedsbrevet og følg med i alt som rører sig indenfor ledelse af forsyningskæden, Nyhedsbrevet kommer kun to gange pr. uge.

Seneste temaer

Se alle

Events

Se alle
Consafe Logistics
Webinar
CYBERSIKKERHED – Beskyttelse af WMS-operationer

Forstå cyberrisici i moderne lagerdrift.

Dato

01.08.2026

Sted

On-Demand Webinar

Bureau Veritas
Seminar
ISO 22000 inspirationsseminar

Med udgangspunkt i praktiske cases giver vores ISO 22000 Inspirationsseminar dig en grundlæggende forståelse for fortolkning af ISO 22000 standardens kravelementer og opbygning samt fødevarestandardens integration med andre standarder.

Dato

17.08.2026

Sted

Vejle

Dansk Standard
Kursus
ISO 14001 kursus: Diplomkursus i miljøledelse

På to dage præsenteres du for det grundlæggende indhold i ledelsesstandarden ISO 14001 Miljøledelse, og lærer hvordan de enkelte krav efterleves i praksis. Der vil undervejs i kurset være praktiske øvelser, der kan inspirere dig til arbejdet til i din egen organisation efterfølgende. Som afslutning følger en multiple choice eksamen, som måler på dine erhvervede viden og færdigheder.

Dato

18.08.2026

Sted

Nordhavn, København

Dansk Standard
Kursus
ISO/IEC 27002 Diplomkursus - træf de rigtige foranstaltninger

På dette kursus får du hjælp til at træffe de rigtige foranstaltninger med ISO 27002, og bliv bedre til at kvalificere og udpege de handlinger, der er nødvendige for din virksomheds informationssikkerhed.

Dato

18.08.2026

Sted

Nordhavn, København

Dansk Standard
Kursus
CE-mærkning af maskiner og anlæg - diplomkursus

Sådan udfører du CE-mærkning af maskiner, maskinlinjer og ombyggede maskiner – Diplomkursus – 2 dage

Dato

18.08.2026

Sted

Dansk Standard, Nordhavn

Bureau Veritas
Kursus
ISO 9001 inspirationsseminar

ISO 9001 Inspirationsseminaret giver dig en grundlæggende forståelse for formål, baggrund og indhold for ISO 9001 standarden, som er en af de første og mest udbredte standarder og derfor betegnes som ”moderen af alle standarder”.

Dato

20.08.2026

Sted

Fredericia