The Cosmetics Brand with
Empty Shelves and Empty Accounts
John sells luxury skincare products—face serums, moisturizers, and premium cleansers—manufactured in South Korea. His suppliers are reliable, his customers are loyal, and his products are flying off the digital shelves. But John has one big problem – “I never have enough inventory.”
Because he often runs out of stock, John panics and pays for emergency air freight shipments to replenish his warehouse. Let’s run a quick comparison:
| Scenario | Sea Freight | Air Freight |
| Units shipped | 1,000 | 1,000 |
| Cost per unit | $5.00 | $5.00 |
| Freight per unit | $1.00 | $6.00 |
| Landed cost/unit | $6.00 | $11.00 |
That’s $5,000 in extra freight for the same shipment.
And that’s not just a one-time hit. John did this four times last year. That’s $20,000 straight out of his margins.
Air vs. Sea Freight: the Real Difference?
Air freight gets your products to your warehouse quickly—often in 3 to 7 days. Sea freight on the other hand can take 30 to 45 days or more, depending on routes, customs delays, and port congestion.
But that speed comes at a 6–10x price for the exact same product.
- Air Freight Cost: $6 to $10 per kg (or more)
- Sea Freight Cost: Often under $1 per kg when consolidated efficiently
The Real Damage:
It’s Not Just Freight Costs
Using air freight as a Band-Aid fix doesn’t just affect your cost of goods. It snowballs into bigger problems:
- Low Gross Profit Margin (GPM)
John’s gross profit margins were hovering around 42%—too low for a DTC brand relying on paid ads. Once air freight was removed from the picture, we modeled his GPM closer to 58%. That 16% margin leak was the difference between break-even and profitability.
- Inventory Churn Breaks Down
Every time John paid for emergency freight, he had less capital available for a larger sea freight order. That kept his order sizes small… which meant more stock-outs… and more air freight. The vicious cycle continued. - Cash Locked in Transit
Air freight shortens shipping time, but doesn’t solve the bigger issue—lead-time planning. John’s capital was still tied up in inventory because he didn’t build his reorder system around gross margin and lead-time math.
What John Should’ve
Done Instead
✅ Build Inventory Around Sea Freight
Yes, sea takes longer. But if John had invested in larger, more predictable inventory orders and managed his reorder points with clear lead-time buffers, he could have reduced freight costs by over 70%.
✅ Use Air Freight Selectively
Emergency shipments should only be reserved for:
- New product launches
- Influencer campaigns
- Holiday season best-sellers
✅ Calculate True Landed Cost Per Unit
When CronosNow rebuilt John’s COGS model, we discovered he hadn’t been including freight, packaging, duties, or FBA prep fees in his landed cost. That distorted his gross profit calculations.
✅ Use the Reorder Calculator
By using the Inventory Reorder Calculator, John could’ve planned smarter by understanding:
- How often he needs to reorder
- How much capital each PO actually requires
- What gross margin is required to avoid stockouts
Air Freight Feels Like a Quick Fix—But It’s a Slow Killer
In John’s case, every quick air shipment delayed a larger, cheaper sea shipment. Every margin he gave up made it harder to reinvest in growth. His brand looked successful from the outside, but was teetering financially.
Final Thoughts
You’re not in the logistics business. You’re in the margin business. And the freight decisions you make today shape your cash flow, your growth runway, and your exit valuation tomorrow.
If you’re leaning on air freight too often, you’re probably not planning inventory with margin math—and that’s where we come in.
Tired of letting freight destroy your margins? Let us help you get clarity and control.
CRONOSNOW | CPG & ECOMMERCE ACCOUNTANTS
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