Hierarchical time series forecasting via Support Vector Regression in the European Travel Retail Industry

•A novel strategy hierarchical time series forecasting is proposed.•Support Vector Regression is adapted for dealing with hierarchical time series.•The proposal is successfully applied in a case study in sales forecasting.•Best predictive performance is achieved in experiments on benchmark datasets. Times series often offers a natural disaggregation in a hierarchical structure. For example, product sales can come from different cities, districts, or states; or be grouped by categories and subcategories. This hierarchical structure can be useful for improving the forecast, and this strategy is known as hierarchical time series (HTS) analysis. In this work, a novel strategy for sales forecasting is proposed using Support Vector Regression (SVR) and hierarchical time series. We formalize three different hierarchical time series approaches: bottom-up SVR, top-down SVR, and middle-out SVR, and use them in a sales forecasting project for the Travel Retail Industry. Various hierarchical structures are proposed for the retail industry in order to achieve accurate product-level predictions. Experiments on these datasets demonstrate the virtues of SVR-based hierarchical time series in terms of predictive performance when compared with the traditional ARIMA and Holt-Winters approaches for this task.