Retailer Factory Audits: What Walmart, Costco and Big Retailers Check Before You Can Sell

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You pitched the buyer. They liked the product. The price works. Then comes the email: "Please send the factory audit report before we can set you up."

This is where a lot of first big retail deals slow down, or fall apart. Not because the product is bad, but because the factory isn't ready for the retailer's audit.

Here's what retailers actually check, which audit programs they accept, and how to get ready before the buyer asks.

Why retailers audit your factory

When a big retailer sells your product, their name is on the shelf next to yours. If a factory making that product uses child labour, locks fire exits or ships unsafe goods, it becomes their headline too.

So most large retailers have a supplier code of conduct, and they want proof that the factories making their products follow it. That proof is the audit report.

Important: the audit is about the factory, not just your company. Even if you're a two-person brand, the factory that makes your product is what gets checked.

The 3 types of audit you'll hear about

1. Social compliance (ethical) audit

This is the one almost every big retailer asks for. It checks how workers are treated:

• No child labour or forced labour
• Working hours and overtime within limits
• Wages paid correctly and on time, with records to prove it
• Fire safety: exits, extinguishers, drills, clear aisles
• Health and safety: machine guards, protective equipment, first aid
• Worker dormitories, if the factory has them
• Freedom to resign, no holding of ID documents

2. Quality / technical audit

This checks whether the factory can make your product consistently:

• Quality system and written procedures
• Incoming material checks
• In-line and final inspection
• Testing equipment and calibration
• Production capacity: can they actually make the volume the retailer will order?

Some retailers use their own quality audit. Others accept a recognised capability assessment.

3. Security audit

For goods shipped to the US, some retailers also want proof the supply chain is secure, often linked to the US customs CTPAT program. It checks things like container sealing, who can enter the loading area, and how shipments are tracked. The goal: nothing gets added to your container that shouldn't be there.

Which audit programs do retailers accept?

Many retailers don't send their own auditor every time. They accept reports from recognised programs. For example, Walmart's Responsible Sourcing team lists these approved third-party programs:

Program	Works for
amfori BSCI	All product types (membership required)
SMETA (Sedex)	All product types. Walmart requires the 4-pillar version
SA8000	All product types, 3-year certification
WRAP	Apparel, textiles, soft goods
RBA	Electronics and toys
Ethical Supply Chain Program (formerly ICTI / IETP)	Toys, juvenile, gifting, seasonal, packaging

Costco works with independent auditors who must, with very few exceptions, be members of the professional auditor body APSCA. For higher-risk factories, Costco says audits are partially announced (a two-week window) and happen at least once a year at first. Any problems must be fixed with a corrective action plan that has a deadline for each item. Costco may also accept some existing independent audit reports in place of its own.

Every retailer has its own list and its own rules, and they change. Always ask the buyer which audit they accept before you book one. Paying for the wrong audit is a common and expensive mistake.

How an audit day works

1. Booking: the factory or you book an approved audit firm. Some audits are announced, some have a date window, some are unannounced.
2. Opening meeting: the auditor explains the scope.
3. Factory walk: production floor, warehouse, chemical storage, dormitories, canteen.
4. Document review: time cards, payroll, contracts, licences, fire certificates.
5. Worker interviews: private, without managers present.
6. Closing meeting: findings are shared.
7. Report and rating: you get a report with findings, often graded by severity.
8. Corrective action plan: the factory fixes the problems by agreed dates. Some fixes need a follow-up audit.

The most common reasons factories fail

• Working hours: too much overtime, or time cards that don't match payroll
• Fire safety: blocked exits, missing extinguishers, no drill records
• Missing records: no proper wage records, or records that look "too perfect"
• Chemicals: unlabelled containers, no safety data sheets, no spill kits
• Dormitories: overcrowding, poor fire safety
• Subcontracting: part of the order made in a different, unaudited workshop

That last one is a big one. If your order is quietly moved to another workshop, that workshop isn't covered by the audit report. Retailers treat this as serious.

How to get ready (before the buyer asks)

1. Ask early. As soon as a retailer is interested, ask which audit programs they accept and what rating they need.
2. Check the factory's history. Ask if they already have a recent audit report for a recognised program. Many good factories do.
3. Do a pre-audit. A practice audit finds the problems while there's still time to fix them.
4. Fix the easy things first. Fire exits, extinguishers, labels, first aid kits and records cost little and fail a lot of audits.
5. Agree on no subcontracting in writing, unless the subcontractor is also audited.
6. Budget for it. Who pays for the audit (you or the factory) should be agreed up front.
7. Plan for re-audits. Audits usually aren't one-time. Plan for them every year or so.

The bottom line

A retailer audit isn't a box to tick at the end. It decides whether your factory, and so your product, can go on the shelf at all. Ask the buyer which audit they accept, choose a factory that already passes, do a practice audit first, and keep it up every year.

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