Gross-profit floor
A gross-profit floor is the lowest margin percentage a category accepts on a line before a more senior person has to agree to the decision.
- Is
- The lowest gross margin a category accepts on a line without senior sign-off.
- Decides
- Which price, range and buying decisions move freely and which wait for approval.
- Watch for
- One floor for every category. It should follow the category's role.
Updated
Meaning / 01
What it means for retail and category teams
It is a policy threshold, agreed with commercial leadership and applied to price changes, new listings, promotions or buys. Decisions that keep a line above the floor move through normal approval; decisions that would take it below are held for someone with the authority to agree, often with a note of why the exception is worth it.
Stakes / 02
Why it matters
Without a floor, margin erodes one reasonable-looking decision at a time. With one, teams can move routine decisions quickly and focus senior attention on the exceptions. The floor should reflect the category's role: a destination category may run a lower floor than a convenience one.
In twelfth / 03
How Twelfth handles this
In twelfth, the category GP floor is one of the workspace guardrails, which owners and admins set. New lines below the floor are held for review, and a price change that would take a line below it is held in the same way.
Example / 04
Illustrative example
The business and figures are illustrative. None of it is customer data.
| Item | Gross margin | Result |
|---|---|---|
| Current price $10.00 | 38% | Normal approval |
| Proposed price $8.50 | 27% | Held for the category lead |
| Reference line | GP floor: 30% | |
The cut takes margin under the floor, so it needs a senior yes.
Read the example as text
A category sets a 30% gross-profit floor. A buyer proposes cutting a line from $10.00 to $8.50 to match a competitor; the line costs $6.20, so margin would fall from 38% to about 27%. The change is held for the category lead, who approves it for four weeks because the line is a known-value item that shapes how shoppers see prices across the range.
Related / 05
Related concepts
Next step
Look at the price gaps that matter
Bring a few products and competitors. We can walk through matching, observation dates and which gaps deserve a closer look.
