Though it seems like I only present optimistic and positive takes on Web3, I can assure you I’m a cautious optimist. We have a long way to go before mass adoption with a murky regulatory environment, shady characters lurking around, and entrants that prioritize profits over everything else.
A few recent headlines caught my eye, encouraging me to highlight them as things to look out for with the new interaction models Web3 presents.
RTFKT: Physical limitations in phygital
When I covered RTFKT’s Cryptokicks IRL announcement yesterday, I focused more on how the announcement was made from a Go To Market (GTM) viewpoint.
A detail I underestimated:
Due to advanced tech and product regulation, product can ONLY be shipped to US 🇺🇸
As someone that lives in the US this didn’t really matter. However, with RTFKT’s diverse and diehard community, this was a the straw that broke the camel’s back.
What was the community upset with?
The Cryptokicks drop was only available to those in the US as the above tweet suggested. That wasn’t all...
The Cryptokicks IRL are expensive. Those holding a lace engine NFT receive a discount depending on the colorway they mint, anywhere from $100 to $333.
Because the lace engine NFTs ended up being a coupon of sorts, their value dropped from $1500+ pre-reveal to ~$360 post-reveal. Those that purchased the MNLTH (what the lace engine NFT was prior to reveal) at earlier points paid even larger sums. There may be future utility for these lace engines, but that’s unknown for the time being.
As a result, folks who were geographically snubbed were also hurt financially with their purchase.
Hanzo Hattori (💙,🧡) @iamhanzohattori
Due to advanced tech and product regulation, product can ONLY be shipped to US 🇺🇸
Adding insult to injury, RTFKT is now being perceived as greedy with the price points. No one expects these tech-enabled sneakers to be cheap, however many didn’t expect them to cost the same as a laptop or phone.
Though the tweet may not be correct with the RTFKT x Nike relationship, it does feel that way. Back in August, RTFKT’s SZN 1 event brought a lot of excitement with NFC-enabled capabilities. I got caught up in all the excitement made the wise decision to spend $4,200+ in ETH for 19 pieces of merch. This is coming from someone with one RTFKT Clone. I can’t imagine how much multi-Clone holders spent.
I am genuinely excited for the merch though! 🥲
Clone X Forging SZN 1 : Next Gen Fashion unlocked by your Avatar 🧬⚒️ Here's all you need to know 🧵👇
To highlight the pain more, this is coming from a brand that has made $185 million from primary sales and secondary royalties.
If the 19,000 Cryptokicks were to sell out at an average price point of $600, that would be another $11.4 million added to that stat.
So…why did this happen in the first place?
The community and legal professionals are speculating that the lithium ion batteries in the Cryptokicks are what’s caused the US-only decision. Others are thinking of creating shipping forwarding services to help their overseas friends.
Hanzo Hattori (💙,🧡) @iamhanzohattori
Whether it was due to a legal detail that was overlooked, or possibly a larger point of contention between RTFKT and Nike, this snowballed into a larger issue. I would break it down into two tiers:
Catalyst issues: US-shipping only for Cryptokicks
Secondary issues: High price points, perception that RTFKT is greedy
Secondary mistakes are the issues where community members grumble about. There may be some vocal detractors, not enough to get a majority of the community riled up though.
However, when there is a catalyzing mistake, the skeletons come out of the closet and the issues and complaints amplify each other exponentially.
Add this on top of a new paradigm where communities > customers. They can be your biggest promoters and conversely can be your biggest detractors. On top of that, there are material financial consequences for some community members which further fuels the negative sentiment.
I would argue that there are more factors that aren’t mistakes, but could fester into mistakes if unattended. An example of this is the RTFKT ecosystem. There are so many collections and things going on it’s hard to keep track of.
Visualizing these problems, we get something like this:
The iceberg comparison isn’t perfect but it illustrates the threats, risks, and complaints that any company, product, and brand faces well. One mistake can bring up other issues and problems that have previously been hidden under the surface.
The iceberg can be chipped away and some issues can move down or be removed from the proverbial iceberg stack (I’m going hard on this iceberg analogy 😂).
Do you know what an iceberg is? Now you know, so share or subscribe!
What will RTFKT do about it?
Unclear for now. Fortunately, there is a refreshing sense of transparency and ownership which reflects the general ethos of Web3. The RTFKT founders quickly acknowledged that mistakes were made and will be working to make changes.
Benit0 RTFKT 👁🗨 @benitopagotto
I imagine the RTFKT response will incorporate some version of the following:
Providing avenues for international holders to purchase Cryptokicks directly or through verified shipping forwarding partners
Optimized price points for the Cryptokicks drop or future ones
Geo-agnostic requirements for all activations
Improved communications around expectation setting with NFTs. RTFKT has been masters of surprise, but some surprises are nasty.
Improved checks and balances with internal processes
Lastly, this situation reemphasizes the reality and limitations of phygital experiences and goods.
When I shared my utility framework a few months ago, I called out the limitations of physical utility. One of the benefits of digital goods is that they transcend geographic limitations.
When this manifests into the physical world, the limitations come back to reality.
If my realization of the Tiger Archives limitation was a slap in the face with a 0.01 ETH floor, then I would imagine the Clone X limitation is like if this guy punched you in the face.
I hope RTFKT finds the happy medium to satisfy community members while keeping their plans and business in a strong position.
And for us, consider this example as another case study to keep in our back pocket.
See you tomorrow for Part 2!