Costco Vendor Compliance: Club Store Fulfillment Requirements

Costco Wholesale is fundamentally different from traditional mass retailers—and that difference extends directly to vendor compliance. Where Walmart expects standardized EDI and OTIF metrics, Costco operates a buyer-driven relationship model backed by unique operational requirements. Club-pack packaging, cross-dock delivery logistics, and buyer-managed vendor status create a compliance environment that requires specific expertise.

For brands shipping into Costco, the operational reality is that their 3PL either has Costco experience or they will learn it at your expense. Costco's depots move product extremely fast—often within 24 to 48 hours from inbound dock to club floor. A compliance failure in a Costco shipment creates immediate ripple effects across multiple club locations. The penalty structure and vendor review consequences mean that Costco compliance requires precision from the first shipment, not a learning curve.

We work with brands shipping to Costco across diverse product categories. This guide covers what we have learned about meeting Costco's operational requirements consistently—the specific requirements that determine whether you maintain your Costco vendor status or face penalties and volume reductions.

Why Costco Is Different: The Club Store Model

Costco's retail model is fundamentally different from the traditional grocery and general merchandise model. Traditional retailers stock broad SKU assortments with lower volume per item. Costco executes the opposite strategy: extremely narrow assortment—typically 3,500 to 4,000 items per club—with very high volume per SKU. This changes everything about the supply chain relationship.

A Costco buyer does not rely on supplier applications and RFPs. Instead, Costco buyers identify and recruit vendors directly based on strategic fit and category needs. The relationship begins with a buyer conversation, not a vendor portal registration. This means getting into Costco requires visibility to the right buyer and the ability to execute their vision for how a category should be sold in clubs. It is relationship-driven in a way that Walmart, Target, and traditional retailers are not.

Once you are a Costco vendor, the volume requirements are often substantial—Costco expects suppliers to commit to the scale needed to support club distribution. The flip side is that a successful Costco relationship can represent massive volume with relatively low complexity compared to managing 20 different retailers with different compliance requirements.

Costco's Vendor Onboarding Process

Unlike retailers with formal vendor portals and standardized onboarding, Costco vendors typically work directly with their assigned buyer. The buyer coordinates the initial setup, specifies requirements, and assigns Costco's vendor number once contracting is complete. The buyer also specifies initial order quantities and cadence.

During onboarding, the buyer will typically specify:

• Club-pack configuration. The exact multi-pack format, pallet configuration, and case quantities required for the product category. This is non-negotiable and often reflects Costco's strategic vision for how the product should be presented on the club floor.
• Delivery location. The specific Costco depot or depots that will receive the product, and any region-specific requirements. Costco's depot network is organized by region, and some suppliers serve multiple regions with coordinated shipments.
• EDI requirements. Whether EDI is required from the start or will be phased in, and the contact information for Costco's EDI support team. Costco specifies the format and transmission timing for 850s, 856s, 810s, and 997s.
• Compliance standards. Specific requirements around pallet configuration, labeling, delivery scheduling, and any product-specific certifications or documentation. These details differ by product category and often reflect health, safety, or shelf-life considerations.

The buyer remains the primary relationship contact throughout the vendor lifecycle. Operational issues, requests for volume changes, new product discussions, and compliance questions all route back to the buyer. This is a significant operational difference from mass retailers where vendor communication typically flows through a centralized vendor portal.

EDI Requirements and Setup for Costco

Costco requires EDI for major volume suppliers, but the specifications and formats are Costco-proprietary. The required transaction sets include the 850 (Purchase Order), 856 (Advance Shipping Notice), 810 (Invoice), and 997 (Functional Acknowledgment). The data mapping must follow Costco's exact specifications, which differ from both Walmart and Target in specific fields and segment structures.

The 856 (ASN) is particularly critical because Costco relies on the ASN to schedule depot receiving. An ASN that arrives late, carries incorrect data, or is missing entirely will disrupt Costco's receiving timeline. Costco depots operate on tight schedules because of their cross-dock model—the depot must receive, sort by destination club, and stage for outbound within hours. An inaccurate ASN means the depot has no advance notice of what is arriving, which creates receiving delays that cascade to multiple club locations.

Smaller vendors may start with manual purchase orders transmitted through Costco's vendor portal and manual ASNs communicated via email. As volume grows, EDI becomes the standard. The transition to EDI typically requires several weeks of testing and validation to ensure that the mapping is correct for every PO type and order scenario that Costco may generate.

Club-Pack Packaging and Display-Ready Requirements

Club-pack packaging is where many suppliers encounter their first Costco surprise. A club pack is a multi-unit bundle designed for display and sale directly to club members. Unlike traditional retail where a case contains individual items that are shelved one at a time, a Costco club pack is a retail-ready package designed for display on the club floor.

Key requirements for club packs include:

• Display-ready packaging. The club pack carton must open or peel to reveal product that is immediately ready for customer purchase. The packaging must be attractive on the club floor—Costco members expect premium presentation.
• Robust packaging. Club packs sit on the sales floor and are handled by customers. Packaging must withstand handling without damage. Weak containers, broken cases, or product falling through the packaging result in chargebacks and reduced reorders.
• Quantity specification. Costco specifies the exact number of units per pack. A club pack might be 6-packs, 12-packs, or larger quantities depending on product category and Costco's strategy for that item. All packs must be identical and meet the specified quantity exactly. Under-packs or over-packs both result in chargebacks.
• Pre-packing at source. Club packs must be assembled before the product arrives at your facility if you are using a 3PL. If the supplier pre-packs, the 3PL receives already-packed club packs. If the 3PL performs the packing, that adds operational complexity but keeps your supplier's packaging simpler. Either way, the club packs must be 100% ready for shelf when they arrive at Costco.

The distinction between club-pack and traditional retail packaging cannot be overstated. Many suppliers attempt to apply traditional retail cases to Costco and discover that Costco rejects them because the presentation does not meet club store standards. Successful Costco vendors invest in packaging engineering that is specific to the club model.

Pallet Specifications and Configuration

Costco requires standard 48×40 GMA pallets with highly specific configuration requirements. These specifications reflect the cross-dock model: pallets must be built for rapid handling, automated or manual scanning, and secure transport without product damage or shifting.

Key pallet requirements include:

• Pallet base and layer specifications. Pallets must use standard 48×40 inch GMA pallets with wood decking and stringers, not block construction. The pallet itself must be in good condition with no broken boards, splintering, or discoloration. Used pallets are acceptable if they meet condition standards, but heavily worn or damaged pallets are rejected at receiving.
• Layer integrity. Cases must not lean more than 0.5 inches from the pallet base. Layers that tilt or shift indicate improper stacking or insufficiently supportive cases. Costco receiving teams physically check layer alignment during unload.
• Weight limits per layer. No single layer can exceed 500 pounds. This limit ensures that the pallet does not become unstable or difficult to handle during manual or automated depot processing.
• Overhang and underhang control. Cases cannot extend beyond the pallet footprint (overhang). Underhang is monitored to ensure the pallet is compact and secure. Excessive underhang can cause cases to shift during transport.
• Overall height. Pallet-plus-freight height should not exceed 60 inches (Costco will specify the exact height limit per category). Pallets that are too tall cannot stack effectively in trailers or depots.
• Display pallet configurations. Costco often uses half pallets and quarter pallets for on-floor display. These require different pallet bases and configurations. Display pallet specifications must be reviewed with the buyer during setup.

Pallet quality problems are among the most common reasons for receiving delays or refusals at Costco depots. A shipment that arrives with visibly damaged cases, leaning layers, or unstable pallets will be flagged immediately. Correcting the problem requires coordinating with the depot to restack or replace the load, which creates delays across multiple club locations.

GS1-128 Labeling for Costco

Every pallet and case shipping to Costco must carry SSCC-18 labels using GS1-128 barcode format. Costco uses these labels for receiving identification, automated sorting at the depot, and audit tracking. Label accuracy and scan quality directly impact depot throughput.

Costco's labeling requirements include:

• SSCC-18 barcode format. The Serial Shipping Container Code is a 20-digit number that uniquely identifies each pallet. The SSCC must be generated in GS1-128 barcode format with proper check digits. The barcode must be scannable on the first attempt.
• Label placement. Labels must be placed on two adjacent sides of the pallet for redundancy. If one label is damaged during transport or handling, the second label ensures the pallet can still be scanned at receiving.
• Required data fields. The label must include the SSCC, vendor number, PO number, item information, quantity, weight, and destination information. All fields must be legible and correctly formatted according to Costco's specifications.
• Print quality. Labels must be printed using thermal transfer or similar durable printing technology. Direct thermal labels that fade during transit will cause scan failures at the depot. A faded or unreadable barcode is treated as a compliance failure.
• Accuracy. The SSCC on the label must match the SSCC in the ASN. A mismatch between physical label and electronic advance notice creates receiving discrepancies. Costco scanning systems will flag the mismatch immediately.

SSCC labeling defects are one of the most common chargebacks at Costco. Supplies using incorrectly formatted SSCCs, faded barcodes, or single-side labeling (instead of the required two sides) can expect penalties on every shipment until the issue is corrected. Preventing labeling problems requires validated label templates and rigorous quality checks before any shipment leaves your facility.

Cross-Dock Delivery and Depot Scheduling

Costco operates cross-dock distribution centers designed for ultra-fast product flow. Unlike traditional DCs where product may sit in inventory for days or weeks, Costco depots receive inbound product, sort by destination club, and stage for outbound shipment within 24 to 48 hours. This fast-flow model creates tight receiving schedules and minimal tolerance for non-compliant shipments.

How cross-dock delivery affects vendor compliance:

• Appointment scheduling is critical. You must schedule a delivery appointment before arriving at the depot. Costco does not accept walk-in deliveries. The appointment must be scheduled within a specific date and time window defined by Costco. Missing the appointment results in a refused delivery and a penalty chargeback.
• ASN must precede physical arrival. Costco requires the 856 ASN to arrive before the physical shipment reaches the depot. The ASN gives the depot advance notice so they can schedule receiving dock space and plan the sorting workflow. An ASN that arrives after the truck arrives creates chaos at the depot.
• Early arrivals are rejected. If your truck arrives before the scheduled appointment time, Costco may refuse unload until the appointment window opens. Early arrival does not speed up processing — it creates delays and potentially results in missed appointments.
• Compliance is non-negotiable in fast-flow. Because Costco depots move product quickly, there is no time to hold shipments for correction. A pallet with improper labeling, wrong configuration, or quantity discrepancies will be flagged immediately and may be refused. The onus is on the supplier to ensure every shipment is compliant before arrival.
• Transit time must be factored into planning. When scheduling your shipment, calculate backward from your delivery appointment to determine your pickup date. This must account for carrier transit time plus safety buffer. Missing the appointment because of carrier delays or scheduling miscalculation results in penalties and potential order cancellation.

Successfully managing Costco deliveries requires real-time visibility into carrier pickup, in-transit status, and estimated arrival. A 3PL that cannot provide this visibility cannot reliably meet Costco delivery appointments.

Costco Chargebacks and Compliance Penalties

Costco enforces vendor compliance through a chargeback system similar to traditional retailers but with a key difference: the chargebacks are more often assessed individually rather than as a standardized percentage. This makes the impact of each failure potentially larger and more variable.

Common chargeback categories include:

• Late or refused delivery. Charges for missing the delivery appointment or arriving with non-compliant shipments. These charges reimburse Costco for the operational disruption at the depot and the cascading delays to clubs.
• Labeling defects. Charges for incorrect SSCC labeling, faded barcodes, missing labels, or incorrect label placement. These charges reflect the time spent at the depot to identify, correct, or manually process the shipment.
• Pallet configuration errors. Charges for improper stacking, lean, overhang, underhang, or damaged pallets that require depot staff to restack or reconstruct the load.
• Quantity discrepancies. Charges for receiving a different quantity than specified on the PO or ASN. This includes over-shipments and under-shipments.
• Packaging or product damage. Charges for damaged cases, compromised product, or packaging that does not meet club standards. Costco customers expect pristine product on the club floor.

Repeated chargebacks or compliance failures trigger vendor review with the assigned buyer. The outcomes of vendor review can range from corrective action plans to volume reductions to termination. Unlike some retailers where vendors can absorb chargebacks and continue as normal, Costco relationships are more relationship-based, and poor compliance affects the buyer's perception of the vendor.

Common Compliance Failures in Costco Shipments

Based on our experience working with Costco vendors, here are the most common failure modes that lead to chargebacks and compliance issues.

Pallet Configuration Problems

The most frequent issue is pallet configuration that does not meet Costco's specifications. Suppliers often assume that “a standard pallet” is acceptable and do not realize that Costco requires specific layer stacking patterns, weight limits, and lean tolerance. Cases that are poorly stacked, layers that tilt, or pallets that are built to maximum height without regard for weight distribution are rejected at the depot. Fixing pallet configuration requires rebuilding the entire load, which creates receiving delays.

SSCC Labeling Errors

SSCC labeling errors range from incorrectly formatted barcodes to labels placed on only one side of the pallet (when two sides are required) to faded barcodes that cannot be scanned. Many suppliers transition from other retailers (like Walmart) and use Walmart's label templates without realizing that Costco's label format and placement requirements are different. A label that is acceptable to Walmart may not be acceptable to Costco.

Appointment Scheduling Failures

Suppliers occasionally assume they can coordinate directly with the truck driver or carrier to show up at the depot without a scheduled appointment. Costco does not accept unscheduled deliveries. A truck that arrives without an appointment will be turned away, incurring a failure charge and creating cascading delays to multiple clubs. Appointment scheduling must be coordinated well in advance and confirmed with both the carrier and Costco.

ASN Timing Issues

ASN arrival timing must be precise. An ASN that arrives after the physical shipment is problematic because Costco has no advance notice of what is arriving. Conversely, an ASN transmitted too early (before the shipment actually departs) may be invalid if the actual shipment does not match the pre-departure ASN. The ASN must be transmitted after the shipment departs but before the truck arrives at the depot.

Club-Pack Configuration Mismatches

Suppliers sometimes misunderstand the club-pack specification and ship traditional retail cases instead of club packs. Or they ship the wrong pack size — for example, 6-packs instead of 12-packs. These mismatches are discovered at the depot and result in chargebacks and possible cancellation of future orders until the issue is corrected. The buyer is the source of truth for club-pack configuration, and any uncertainty should be clarified before the first shipment.

How a 3PL Handles Costco Compliance

When a brand uses a 3PL to fulfill Costco orders, the 3PL takes on responsibility for nearly every operational variable that determines compliance. This includes receiving inbound inventory, storing product in the configured club-pack format, picking and packing against Costco purchase orders, generating accurate ASNs with Costco's EDI specifications, creating compliant SSCC-18 labels with proper barcode quality, building pallets to Costco's exact specifications, scheduling delivery appointments, managing carrier selection, and monitoring delivery compliance.

Because Costco relationships are buyer-managed, the 3PL also needs to facilitate communication with the buyer about inventory levels, order status, capability changes, and compliance issues. Many brands find that this direct buyer engagement is essential to maintaining the Costco relationship.

A 3PL with Costco experience has already solved the major configuration problems: EDI mapping is tested and validated, label templates match Costco's specifications, pallet standard work is documented, and ASN generation is automated and validated. A 3PL without Costco experience will learn on your account—and every week of learning is a week where compliance failures can generate chargebacks and potentially affect your vendor status.