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.

STILL Danmark A/S

Sponseret

Smart varetransport i et dynamisk logistikcenter

SCM.dk

Produktionsdanmark får nu eget fagmedie

Relateret indhold

30.01.2026SCM.dk

Ekstra pulje på én millard skal styrke Danmarks beredskab

29.01.2026SCM.dk

IFS ansætter softwareveteran som ny nordisk direktør

29.01.2026Bureau Veritas

Sponseret

Få en verifikation af jeres bæredygtighedsrapport

28.01.2026RELEX Solutions

Sponseret

RELEX Closes 2025 with Strong Subscription Growth and Expanding AI Capabilities

27.01.2026SCM.dk

interpack 2026 klar til global industri-revolution

27.01.2026SCM.dk

Pandora ryger til tops på global bæredygtighedsliste

26.01.2026SCM.dk

Nu har 10.000 virksomheder et science-based klimamål

22.01.2026SCM.dk

Overfladebehandling får eget område på HI Tech & Industry Scandinavia 2027

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
DTU Learn for Life
Efteruddannelse
Udviklingsmetoder og udviklingsprocesser

Vil du styrke dine kompetencer inden for systematiske metoder til analyse, design og implementering af objektorienterede systemer? Så er dette kursus, som også er et diplommodul, interessant for dig.

Dato

28.01.2026

Tid

17:00

Sted

Lautrupvang 15. 2750 Ballerup

DNV Business Assurance Denmark
Kursus
CQI and IRCA QMS Lead Auditorkursus baseret på ISO 9001:2015 (Dansk)

5 dages intensivt kursus der giver dig den fornødne viden og færdigheder, så du efter endt træning kan organisere og lede audits af kvalitetsledelsessystemer baseret på ISO 9001:2015. CQI and IRCA Nr.: 17898

Dato

02.02.2026

Sted

Odense

Bureau Veritas
Seminar
ISO 27001 Inspirationsseminar (Online)

ISO 27001 Inspirationsseminaret giver dig en grundlæggende forståelse for ISO 27001 standarden og Annex A samt, hvilke trin, der er nødvendige for vellykket, praktisk og bæredygtig informationssikkerhedsledelse i henhold til ISO 27001 standarden.

Dato

02.02.2026

Sted

Online

Bureau Veritas
Kursus
ISO 27001 Inspirationsseminar (Online)

ISO 27001 Inspirationsseminaret giver dig en grundlæggende forståelse for ISO 27001 standarden og Annex A samt, hvilke trin, der er nødvendige for vellykket, praktisk og bæredygtig informationssikkerhedsledelse i henhold til ISO 27001 standarden.

Dato

02.02.2026

Sted

Online

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

03.02.2026

Sted

Dansk Standard, Nordhavn

Dansk Standard
Kursus
Risk Manager ISO/IEC 27005 - certificeret af PECB

Få bevis på dine kompetencer inden for styring af informationssikkerhedsrisici med den internationale personcertificering, PECB ISO/IEC 27005 Risk Manager.

Dato

03.02.2026

Sted

Dansk Standard, Nordhavn