What is returns forecasting?

Returns forecasting is the practice of predicting how many units of a product will come back into a warehouse, and when, based on what was sold and the behavior of returns for that product or channel historically. It has two parts: a rate (what share of units sold eventually return) and a delay (how long, on average, between the sale and the return). Done well, a returns forecast produces a day-by-day or week-by-week estimate of inbound return volume, the same way a demand forecast produces a day-by-day or week-by-week estimate of outbound sales. That estimate then feeds into replenishment planning so warehouses order less from suppliers when a meaningful volume of stock is already on its way back to them. Returns forecasting matters most in categories with high return rates (fashion, footwear, categories driven by fit or personal taste) and in any circulation-based business model, such as equipment or apparel rental, where inbound returns are a core, permanent part of the operating cycle rather than an occasional correction.