Are You a New Costco Supplier? Here's What You Need to Know About Costco Dropshipping

Costco can be a transformative opportunity for manufacturers and brands, especially if you are stepping in as a new supplier with dropshipping in your plans. At BOLD VAN, we support finance, IT, and operations leaders through the daily work of EDI and integration that Costco expects. Our vantage point is shaped by the conversations and technical hurdles we see clients face as they launch or scale their relationships with Costco. What follows is a detailed, practical guide for anyone considering Costco dropshipping, especially if you want to approach this channel with cost transparency, operational control, and long-term credibility.

Understanding Costco’s Supplier and Dropship Models

Costco takes a deliberate approach with new suppliers, screening for quality, value, and reliability before any product reaches its shelves or a member’s doorstep. The process always involves:

• Evaluation by Costco buyers
• Formal contracts and vendor setup
• Onboarding technical requirements (including EDI and traceability)
• For food and consumables, extra safety audits and compliance steps

You may see “dropshipping” described differently in Costco documentation—expect phrases like direct-ship, vendor-direct, or cross dock. All of these usually mean you, as the supplier, are responsible for getting product straight to the customer, bypassing Costco’s physical warehouse network for those SKUs. The structure you adopt will shape everything from audit burden to your data integration needs.

Depot, Intermediary, or Direct: How Dropship Impacts Risk and Compliance

If you fulfill orders to a Costco depot or warehouse, certain recall and audit requirements may be lighter compared to going through a third-party logistics provider or shipping direct to the consumer. Where an intermediary is involved, Costco expects annual mock recalls and more intensive traceability, right down to documenting communication and lot code alignment. For direct-to-consumer dropship, you need the same order accuracy and packaging discipline as you do with warehouse delivery, but with even sharper accountability around tracking, customer packaging, and timely EDI events.

Meeting Costco Audit and Food Safety Expectations

Food and other regulated suppliers are held to a dual standard: a recognized food safety certification (such as BRCGS, FSSC 22000, or SQF) and Costco’s own addendum. This brings added requirements like:

• Foreign material detection technology for manufacturing lines
• Written, validated procedures for cleaning and sanitation of surfaces
• A finished goods “test and hold” policy for at-risk products
• Annual traceability exercises completed in less than two hours, covering finished goods, ingredients, and packaging
• Supplier approval validation and regular outside audits of your own ingredient and packaging sources
• Additional hair and glove protocols for manufacturing staff
• If importing, an FSVP (Foreign Supplier Verification Program) letter that aligns with Costco and US law

Anticipate several months of process review and adjustment before you will be ready for audit clearance as a new Costco supplier, even with experience supplying other major retailers.

Packaging and Handling: Dropship Requirements to Know

Costco publishes specific packaging and shipping requirements that matter for every supplier, not just traditional warehouse delivery. Your packaging must:

• Survive carrier handling with minimal product damage or loss
• Match Costco’s detailed labeling, presentation, and traceability rules
• Be designed or vetted by engineers with experience in both consumer direct and retail packaging

This is not only about customer experience, but about controlling your margin by reducing returns and claims. If you are used to retail-ready packing, expect to modify your protocols for the carrier and fulfillment context of dropshipping.

EDI and Integration: The Backbone of Costco Dropship Success

With Costco, you face a steady flow of EDI messages: purchase orders, acknowledgments, advance ship notices (ASN), invoices, and often returns. Each must be produced on time and accurately, or your team can face rejected documents, financial penalties, or customer experience breakdowns. Key areas of focus should be:

• Real-time processing of EDI transactions, with rapid order acknowledgment and ASN turnaround
• Error-free invoicing that matches exact shipment and pricing records
• Data accessibility for at least 90 days, and archival capacity to cover years of operation for audits
• Direct, reliable integration into your ERP so that sales, operations, and finance are working from the same data

In the early weeks, missed or late ASNs, incorrect quantities, and mismatched invoice data are the most common tripwires. We have seen many organizations reduce errors and speed up timelines by relying on a VAN with specialized trading partner mapping for Costco, paired with seamless ERP integration.

You can find more on practical integration steps and protocol options in our guide on EDI-ERP integration best practices.

Quick Checklist for New Costco Dropship Suppliers

If you are mapping out your first or expanded Costco engagement, use this as a north star:

• Assess your facilities, staffing, and systems for Costco scale and reliability expectations
• Document which products (SKUs) are appropriate for dropship and which for warehouse delivery
• Engage a recognized food safety certifying body and address all Costco addendum items if applicable
• Work with packaging engineers to align packaging and labeling for direct-to-consumer fulfillment
• Identify required EDI documents and protocols with your team (common are 850 for PO, 810 for invoice, 855 for order acknowledgment, and 856 for ASN)
• Decide whether you will run EDI in-house or through a VAN, confirming integration capabilities for your ERP (NetSuite, SAP, Microsoft Dynamics, Oracle, Infor, and others)
• Run end-to-end testing with real orders and ASN generation before your go-live
• Compile documentation for recent traceability exercises, supplier validation, sanitation protocols, and, if needed, mock recalls

This type of preparation helps avoid the costly rework and operational headaches that we see over and over, especially in the first months with a new warehouse or dropship account.

Managing Risk During Your First Costco Season

The biggest pitfalls for new dropship suppliers usually show up during launch and the first high-volume period. You can contain your risk and demonstrate reliability to Costco by:

• Setting internal SLAs above and beyond Costco’s minimums
• Monitoring daily EDI error rates and ASN completion
• Running real-world mock recalls that follow a random Costco order from sale to ingredient and back
• Holding weekly cross-functional meetings with key departments—operations, QA, IT, and finance—to surface any issues

We encourage every new supplier to look at audits and traceability not as an occasional event, but as ongoing proof that your systems and teams are working at the right standard.

Key EDI Resources for Costco Suppliers

We hear from many finance and IT leaders that the difference between barely passing and running a controlled Costco dropship program often comes down to the practical details of your EDI platform and documentation.

• If you need a refresher or want more context on onboarding new trading partners, our blog on trading partner onboarding in EDI is a useful guide.
• To make sure your EDI flow matches evolving retailer requirements, check our breakdown on EDI compliance requirements for retailers.

If you are weighing how to get started with Costco dropship, or you are finding that your current solution is adding cost or friction, our team at BOLD VAN is ready to walk through your setup. You can schedule a complimentary review from our site at www.boldvan.com to find out exactly how predictable, integrated EDI can help make your Costco ramp less stressful and more profitable.