It might be obvious from looking at this view, but we're pretty much at max capacity right now.

It's all part of Newly, an apparel rental service launched by URBN, or Urban Outfitters Incorporated, in May of 2019.

For $98 per month, Newly users can pick and rent six pieces, valued at an average of $800 per box.

The burden of shipping, cleaning and repairs are placed on Newly.

Between all its brands, the company brought in $4.8 billion in net sales in 2022.

Analysts predict that Newly will add at least $1 billion in value to its parent company over the next three to five years.

In 2019, they launched with zero dollars in revenue.

This is going to be one of the fastest kind of concepts to get to break-even profitability that we've ever seen.

Walking around the floor with the leadership team, there's been a lot of eyes open about, wow, this has grown quite quickly, and a little bit of amazement about how we've been able to keep it going.

The rental industry is expected to represent 3% of the total retail market by 2030.

Recommerce or secondhand sales will likely represent 12%.

Some analysts forecast the size of the global apparel and footwear market will reach $3.3 trillion U.S. dollars by 2030.

Gen Z and millennials are driving support of circular business models. 15% say they're willing to try rental, and 48% are willing to buy secondhand.

From August 2022 to August 2023, Newly's revenue almost doubled.

We didn't approach this like a test.

We built this giant building, and I think this wasn't like a pet strategy project.

It was going all in on a new business.

While clothing rental is not a new idea, it is an emerging market that's seen an uptick in recent years.

Companies like Express, Vince Camuto and Banana Republic all launched rental platforms in 2018 and 2019.

Rent the Runway, the biggest independent rental platform, went public in October 2021 at a $1.7 billion valuation.

It was named to the CNBC disruptor list five times, the last time in 2019.

Whenever there's kind of a hot new topic or an idea, everybody wants to test it.

You name the vertical brand and they very likely have some variation on a rental service.

With an increasingly climate conscious population that still cares about fashion, rental could be the sharing economy's new frontier.

While data varies greatly depending on several factors, most agree that the potential is great.

One report predicts the global clothing rental market could hit $7.5 billion, nearly double where it stands in 2023.

Another, by McKinsey and Company, expects the circular business model to reach $2.1 billion by 2025.

Millennial, Gen Z, Gen Alpha, what do they want?

They want everything of their choosing at their doorstep.

Those who are kind of offering this rental avenue are looking forward a decade.

This very well could be the beginning of that next big genre of servicing the customer.

So in 2019, Dave and Kim tossed their hat in the ring.

In the mid 2010s, there was a lot of interest in sustainability and a lot of interest in circularity.

We knew that we had an opportunity to get into that space.

It was just a matter of how and how to do it well and to do it right.

Dave is the son of URBN founder Richard Hain and worked with the company for 18 years before founding Nuuly.

The company wouldn't disclose its initial investment, but said the total amount is well over $100 million.

Leaders like Dave and Kim decided the service shouldn't follow the existing blueprint.

For one, building a business that includes but is not limited to URBN brands, urban outfitters, free people and anthropology.

It was very obvious to us quickly that that didn't exactly make a lot of sense because the one thing people want to do when they're renting is have a broad variety of choice.

Secondly, Nuuly featured day-to-day options in contrast to competitor Rent the Runway, who initially focused on occasion wear.

From our beginning days, our mission was to be there for customers every day of week, from fancy to casual work, events, anything that they have going on in their lives.

The service has already seen massive growth, with Nuuly now counting eight times more subscribers in October 2023 than in its first year.

Some industry experts have called Nuuly a case study of what happens when a company goes all in on rental.

We made a concerted investment with this business at the outset.

We didn't kind of dabble into the program.

We didn't experiment into it.

We built the platform ourselves.

We specifically invested in a unique team that was focused entirely on success of the business.

Rent the Runway, established 10 years before Nuuly, had about 137,000 active subscribers in the second quarter of 2023, almost 50,000 less than Nuuly.

Nuuly saw an 85 percent increase in subscribers from July 2022 to July 2023.

Rent the Runways only grew by 11 percent in the same time period.

Nuuly predicts it will be profitable in 2023's third or fourth quarter.

I think the possibilities are really endless, but we just have so much market left to address in the space that we're currently in.

Nuuly is opening a $60 million distribution center in Kansas City, Missouri, in Q1 2024.

We believe the growth is there and we're excited to fill a second building.

By the end of this year, it's arguable that they'll be north of $200 million in revenue, rivaling their own in-house wholesale business, which is about 5 percent of total sales.

Right now, wholesale business has been around for well over a decade.

McKinsey & Company found that 63 percent of consumers factor in the way a brand promotes sustainability when considering a purchase.

It's important to us.

Anywhere there's an opportunity to do something smartly, we try and do it smartly.

In 2019, research showed that consumers on average bought 60 percent more clothing than they did 15 years ago, but only kept those items for half as long.

Fast Fashion's increasing contribution to the global total of greenhouse emissions is somewhere between 2 and 8 percent and has been described as an environmental and social emergency.

Analysts say rental, e-commerce, repair and refurbishment could help the fashion industry cut about 143 million tons of greenhouse gas emissions by 2030.

But Nuuly's commitment is not only good for the planet, it's also good for business.

The more an item can stay in circulation for us, the better it is for our economics and the financials of the business.

Recommerce can extend an average product life by 1.7 times, rental by 1.8 times, repairs a little less by 1.35 times.

In Nuuly's warehouse, workers recycle laundry chemicals, repair items and ship orders with reusable boxes.

They also get rid of a lot of cardboard waste.

So we don't have, we're not just dumping cardboard into landfills.

Nuuly also launched Nuuly Thrift, a resale marketplace in October of 2021.

It takes a 20 percent commission on all sales.

That latest offering sets URBN apart, a sort of trifecta of retail, rental and resale.

The 2020 COVID-19 pandemic permanently changed how and what consumers buy.

The casualization of the workforce is tremendously different than it was circa 2019, before this all happened.

It was almost like I'll still have a certain portion of my entire wardrobe that's going to be generally casual. 10 percent of my life is more just going to be that way sort of permanently.

Nuuly took off less than a year before the world shut down and didn't walk away unscathed.

The pandemic was a weird time.

We had been growing nicely up to that point.

I think we had around 25 or 30,000 subscribers right as the pandemic kind of hit.

The next three or four weeks, we lost a good half of our subscriber base.

Women just didn't need to rent.

Despite these losses, Nuuly didn't fail, helped in part by the backing of its multi-billion dollar parent company, which continued to invest rather than pull the plug.

We believed in the concept.

Leadership across URBN believed in the concept.

Our board believed in the concept and we were able to ride it out.

Dave's father, Dick Hain, has been known to be more risk averse, so the company's decision to take a risk with Nuuly is notable.

They don't spend foolishly.

They don't make investments sort of that haven't been studied on the return on that invested capital.

They never took down debt during the period of the pandemic when people needed debt to just get through.

But overall, the rental sector struggled.

Latote filed for bankruptcy in 2020, citing complications from the pandemic, though it was later acquired by Sadia Group for $12 million.

Lofts, Bloomingdale's and Diane von Furstenberg's rental platforms all shut down.

Rent the Runway reported a net loss of $171 million and its active subscriber count fell almost 60 percent to about 55,000 in 2020.

While the company bounced back and went public in October 2021, it backfired when Wall Street quickly turned on it.

We've been focused on building a long term business and we continue to execute against that strategy.

One of the major components of our path to profitability is capital light acquisition models for our rental product, our inventory.

Rent the Runway's share price has fallen by about 97 percent to 45 cents on November 2nd, 2023.

In its second quarter 2023, the company's reported revenue was $75.7 million, down 1 percent from the same quarter the year prior.

This as Nuuly's net sales rose to $55.8 million in its second quarter.

At the moment, the focus is on supporting current clients, keeping up with the enormous product volume and constantly innovating new features.

We are surviving this fall because we have this carousel system in place.

We launched this summer something called Closetless that we've been hearing from customers for so long.

They go on, they heart their favorites and it goes into a closet.

Sky Pollard was poached from J.Crew in 2018.

This brand is amazing.

Since Nuuly's launch, she's added more than 100 new brands to the service that URBN had not previously worked with on the retail side.

A lot of it started with just making connections with brands that our sister brands already worked with, had developed relationships with, knew how it was to work with URBN.

I think as we bring new customers into the URBN family, which we have seen we are doing through Nuuly, they're getting exposure to our family of brands and they are actually more inclined to go buy from our sister brands, which is a good thing.

Unlike competitor Rent the Runway, who built everything from scratch, Nuuly is uniquely positioned, and that's mainly due to URBN's existing partnerships with hundreds of brands and a global network of over 700 stores.

It's built its customer base and brand loyalty over decades.

Competition will undoubtedly continue to trickle in, but experts say there's plenty of room for more.

I think that's harder for people who don't have the background of, say, you know, an urban outfitters or being in that sort of youth culture.

That's a lot of risk.

Most retailers will not take risk on 80 percent of what they buy.

They like to play it safe.

There's a lot of advantages that we have competitively.

If other people enter, I welcome competition.

I actually do think it could make us better.

Nuuly has other challenges, like being under a parent company with a volatile stock, a consequence of being in fast fashion.

URBN has to accurately invest in the latest trends while constantly fending off competition.

The company is also facing a trade secret lawsuit by rental company Latote.

Latote alleges that URBN stole proprietary information during potential acquisition talks and used that knowledge to build Nuuly as a direct competitor.

URBN told CNBC it was unable to comment on ongoing litigation.

When companies are doing well and are on a certain glide path of success, we often do see, you know, infringement lawsuits or things that sort of try to slow down kind of the success of what that company is perhaps doing.

Nuuly, like the rest of the world, has been impacted by inflation, which reached a 40-year high in 2021 and 2022, though dropped to an annual rate of 4.9 percent in April 2023.

Nuuly recently increased its subscription price to $98 from $88.

Like everything else, clothing itself has significantly inflated.

I mean, even from April of 2021, clothing in general has inflated about 9 percent.

It was not the only platform to do so.

When Rent the Runway phased out its unlimited rental option in 2021, the offer was replaced with new membership tiers with worse values, higher prices for less inventory.

While this may have affected Rent the Runway, Nuuly says its price change hasn't disrupted business.

By and large, we have not seen a disruption in our subscriber growth, and we've actually seen new subscribers coming in at quite the same rate.

Analysts say ultra-fast fashion poses the biggest threat to the rental industry.

The mentality of buy it today, throw it away tomorrow, and this is the Shein, the Timu, sort of that whole ilk. $300 divided by the average price of $20, right, that's a bunch of stuff that I could get.

I think that that is very attractive to truly the younger generation.

But as consumers age, they tend to look for higher quality clothing.

And since the younger generation is more eco-conscious than the previous one, the rental market's appeal over fast fashion is spreading as other players continue to innovate and refine their rental services.

Nuuly will, too.

Certainly there are other categories that we could consider.

You know, what about kids clothes?

What about menswear?

I think because we built everything from scratch, we're really able to kind of flex into whatever that next opportunity is.

We want growth.

We want to try new things.

Some things might work, some things might not.

But I think that's the only way you stay ahead.

And I think that's that's what allows us to be successful.