Just downstairs from a real estate agency in the San Jose suburb of Campbell, California, a team from eBay is experimenting on a very different type of dressing room for their partner, the tech-forward fashion brand Rebecca Minkoff. These dressing rooms feature Kinect sensors that record the customers’ motions, adjustable lighting, touch screens, and a sophisticated tracking system which identifies the customer and remembers what they bring into the dressing room and don’t purchase. The goal? A dressing room which sends emails to customers down the line, offering them the clothing that they didn’t purchase in a size or color the store doesn’t have.

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It’s one of the most audacious attempts to merge e-commerce and the in-store experience yet… and one that raises a question of just how much privacy and anonymity customers actually want inside the store. Ebay executive Steve Yankovich (one of Fast Company‘s Most Innovative People) told me in a recent conversation that the goal behind building these tech-integrated stores is to “change what the retail experience is like,” citing the widespread use of smartphones by customers and proprietary sales floor apps by store employees. Customer tracking is only part of the equation for eBay—the end goal is to create a store that mimics the shopping experience of a website or mobile app. “Ultimately we want to try to enable this technology to turn the store into your store,” he added. “If there is a Minkoff customer, a devotee of the brand who is a fan of their styles, their CRM (Customer Relationship Management – ed.) data is collected. We could build a shopping experience for a client like Minkoff where you let us know you’re going to the store before you leave your home and you can do different things because of that.” Customer tracking is only part of the equation for eBay—the end goal, in terms of potential success, is creating a store that mimics the shopping experience of a website or mobile app. Ebay has invested a large sum in this technology and Minkoff is betting their brand that customers will appreciate that kind of forward thinking. Other bold-name brands such as Walmart, Macy’s, Target, and Zara are believed to be experimenting with implementation of similar connected dressing room technology. None of this is a sure thing: A costly attempt by Prada to build connected stores failed in the early 2000s because of a combination of consumer unease and technical glitches. According to a report by Forrester Research’s Stefan Ried, the appearance of objects like smart dressing room mirrors is an example of “bring-your-own-thing technology” where physical objects such as washing machines and car dashboards mimic the behavior of dashboard apps. But the privacy concerns of a scenario where dressing room mirrors track customers are new and companies are worried about blowback. Earlier this year, a consortium that supplies mobile phone tracking equipment for retailers offered opt-out lists for customers worried about privacy. Even lawmakers have weighed in on the issue of retail companies tracking buyers. Speaking of smartphone tracking in aisles, Senator Charles Schumer noted in Congress that the practice is “intrusive and unsettling.” “If you’re shopping, you expect to be the one doing the reviewing, but stores are flipping that on its head,” he said. However, retailers are betting that customers will prefer the benefits from pervasive in-store tracking to any potential loss of privacy—that connected shopping is the future.

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Building Smart Retail Ebay’s test project for Rebecca Minkoff, which they refer to as a “Connected Store,” is one of the largest attempts yet to marry Amazon-style e-commerce, with leads generated by every click and a highly personalized shopping experience, with the sort of store-as-destination retailing you see in city centers or high-end malls. Upon entering the store, the very first thing a customer encounters is a wall-length touch screen which offers free drinks. Guests have the opportunity to order a gratis water, tea, coffee, or espresso. They’re asked for a phone number where they will receive a text as soon as their drink is ready. That perk is not just out of the goodness of Minkoff’s and eBay’s heart; that phone number serves as a digital signature which tracks them throughout the store. That large touch screen also lets them browse the brand’s catalog and put together outfits. While shoppers don’t know it, the store’s employees are plugged into mobile apps which keep them appraised of who’s in the store and what data is being input into that giant video wall. But it’s once customers enter the dressing room that things get interesting. All the clothing and accessories in Minkoff’s new stores are outfitted with RFID tags—radio signal-emitting tags frequently used in theme park access wristbands and in credit cards. The dressing rooms at Rebecca Minkoff’s new stores in New York, Los Angeles, San Francisco, and Tokyo are equipped with RFID shields that allow them to identify which clothing customers bring in to that specific dressing room. But it’s once customers enter the dressing room that things get interesting.

The dressing rooms themselves have mirrors that double as large touch screens. Although eBay emphasizes the mirrors do not have cameras in them at the moment, they have every tracking tool short of them. A computer automatically builds an inventory, based on the RFID tags, of the clothing a customer brought in with them. The touch screen lets the customer switch to a series of mood lighting setups and, crucially, integrates Minkoff’s e-commerce operation into the dressing room. Different sizes and colors of the items a customer brings in are automatically brought onto the screen. If something does not fit, they can order a different-size version to be added to their online basket for future checkout—and eBay says they are working on the eventual ability to purchase and leave inside the dressing room. Owing to the free drink customers ordered earlier, each piece of clothing they bring in and don’t try on is converted into a lead. According to eBay retail innovation head Healey Cypher, the innovation lets retailers like Minkoff see which items individual customers aren’t buying. This lets retailers then send emails to customers in which the clothing they don’t buy at the store is later offered in follow-up messages. A customer enters their phone number into the touch screen, which then sends them a URL link via text message to connect to their store loyalty account.

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“It’s a beautiful experience,” he added. “People are upset that the store experience isn’t like it is online. We wanted something that wasn’t dystopian like Minority Report.” Giving a phone number, he adds, is crucial—eBay found that customers are much more comfortable with SMS text messages than scanning QR codes or short codes. A New E-Commerce World Uri Minkoff, the brand’s cofounder and CEO, said he was especially interested in the eBay pilot because his label’s core demographic–tech-savvy millennial women age 18-34—are the ones already on Instagram and expecting a highly curated experience. “We want to de-anonymize the shopping experience. Our customer is a girl who is in her own personal music video and doesn’t necessarily want to interact with people,” Minkoff said. “At the other end, there are customers who want a full pampered celebrity experience in the store. We want to serve these two extremes.” It also, implicitly, gives eBay a new revenue stream by turning them into the vendors which give retailers technology which merges their e-commerce and in-store experiences. Rebecca Minkoff and eBay have a pre-existing business relationship; Ebay also works with other brands such as Kate Spade and and Toms. As eBay prepares for a spin-off of PayPal, retail technology gives them a potential future revenue stream in the B2B sphere. Coming To Your Store The first of Rebecca Minkoff’s connected dressing room stores is opening this November in New York, with a second San Francisco location opening by the end of 2014. Additional stores in Los Angeles and Tokyo are opening with connected dressing rooms in 2015 as well. Although Minkoff has an early start with the technology—they are in the sweet spots of having a tech-addicted customer base with disposable income, as well as having few retail locations to retrofit—they aren’t the only ones using this technology. Within ten years, the odds are quite good that your favorite retailer will be tracking you in the dressing room as well. This past September, department store giant Bloomingdale’s announced that smart fitting rooms would be coming to their Palo Alto, San Francisco, Century City Los Angeles, Short Hills, New Jersey, and Garden City, New York stores. In their Bloomingdale’s iteration, the smart dressing rooms will be equipped with touch screens where customers and associates can scan clothing to instantly request different sizes or colors. The smart dressing rooms at Bloomingdale’s are part of a larger tech push by parent company Macy’s that focuses on adopting Apple Pay, full conversion to RFID tags (a daunting task given the fact that inventory at Macy’s and Bloomingdale’s is exponentially larger and more complicated than at Rebecca Minkoff), and on offering same-day delivery in urban markets.

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We want to de-anonymize the shopping experience. Microsoft, which manufactures the Kinect technology used in the Rebecca Minkoff project, also made a prototype smart dressing room of their own with the help of Accenture. And other retailers are giving persistent in-store tracking a shot too. Global fashion giant Zara, Walmart, and Marks & Spencer have all either adopted or are planning to adopt RFID tags for all in-store merchandise which let associates instantly conduct inventory and find products inside stores and warehouses. While the technology for connected dressing rooms and smart stores are here already, it’s going to be a long rollout before it makes its way to your mall or downtown shopping district. New brands like Minkoff have a running start; retrofitting inventory and infrastructure for RFID tags and e-commerce integration is a long and expensive process. In addition, many customers may rightfully have questions about privacy and anonymity when faced with dressing rooms containing an array of cameras and Kinect sensors. The big question for tech vendors like eBay, retailers like Minkoff, and millions of American shoppers is if the technology works in crowded retail stores and if the benefits are worth the privacy trade-off. In many ways, customers have already signaled that they don’t mind the attention. With mirrors that turn into touch screens and smart tags that note what you looked at and didn’t buy, Minkoff and eBay are simply implementing a real-life version of the pervasive tracking and cookies that have become part and parcel of the e-commerce experience.