[Dive #153] Mistakes Pt. 1: RTFKT

😔 What happens when you mix mistakes with strong communities?

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:

RTFKT @RTFKT

Due to advanced tech and product regulation, product can ONLY be shipped to US 🇺🇸

6:11 PM ∙ Dec 5, 2022


280Likes26Retweets

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...

Twitter avatar for @fun_nft

The Baron ᵍᵐ @fun_nft

2/3 Is there any purpose to the MNLTH2 NFT after the shoe-mint/forge window closes for people outside the US who cannot buy the shoe? Is the MNLTH2 just a nice NFT collectible to ‘gather dust’ in one’s wallet? Is RTFKT just for US customers and a US community?

7:12 PM ∙ Dec 5, 2022


64Likes5Retweets

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.

Source

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.

Twitter avatar for @iamhanzohattori

Hanzo Hattori (💙,🧡) @iamhanzohattori

I spent 4 ETH ($5200) on MONOLITH2 to get a $130 discount on sneakers that I can't even order because I live outside of the US. Bravo @RTFKT, you have exceeded my expectations. Shit! ✖️

Twitter avatar for @RTFKT

RTFKT @RTFKT

Due to advanced tech and product regulation, product can ONLY be shipped to US 🇺🇸

7:06 PM ∙ Dec 5, 2022


735Likes71Retweets

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.

Twitter avatar for @0xSeraph_

Seraph @0xSeraph_

I'm still a CloneX holder, so I don't mean this as fud... But I think the biggest problem with CloneX being a part of Nike is that they may be held to the mothership's corporate incentive structures. That is, the project may overall be responsible for hitting revenue + profit

7:51 AM ∙ Dec 6, 2022


123Likes7Retweets

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! 🥲

Twitter avatar for @RTFKT

RTFKT @RTFKT

Clone X Forging SZN 1 : Next Gen Fashion unlocked by your Avatar 🧬⚒️ Here's all you need to know 🧵👇

7:26 PM ∙ Aug 29, 2022


3,476Likes1,132Retweets

To highlight the pain more, this is coming from a brand that has made $185 million from primary sales and secondary royalties.

Source

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.

Twitter avatar for @GenericLedger

CW @GenericLedger

@Jakester2705 @RTFKT RTFKT needs to be a bit more clear about what the issue is here. My guess is they forgot/didn’t realize they needed to get the shoes cleared and marked with whatever health/safety symbols are needed in foreign jurisdictions. If that’s the case I’m not aware of an exception 1/

2:10 PM ∙ Dec 6, 2022


1Like1Retweet

Twitter avatar for @Jakester2705

Jacob Martin @Jakester2705

If you have RTFKT items and you live outside of the US so you can’t buy them… maybe I just have you send them all to my escrow wallet, I mint / acquire the things for you then ship them to you wherever you are? Seems simple enough. I charge some fee per item? Thoughts? Legality?

Twitter avatar for @iamhanzohattori

Hanzo Hattori (💙,🧡) @iamhanzohattori

I spent 4 ETH ($5200) on MONOLITH2 to get a $130 discount on sneakers that I can't even order because I live outside of the US. Bravo @RTFKT, you have exceeded my expectations. Shit! ✖️ https://t.co/Man2IxacQg

3:15 AM ∙ Dec 6, 2022


16Likes2Retweets

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!

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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.

Twitter avatar for @clegfx

ClegFX RTFKT @clegfx

No excuses on our behalf. Been reading through countless tweets and concerns. Working together with the community and the team to solve this issue and come out with a solution. I am deeply sorry for the communication on our part and will be sure to figure this out.

12:23 AM ∙ Dec 6, 2022


511Likes63Retweets

Twitter avatar for @benitopagotto

Benit0 RTFKT 👁‍🗨 @benitopagotto

Huge error not to have communicated about the US only shipping of the Cryptokicks iRL and really sorry for the disappointment this creates. I’m now looking into this with the team, don’t start to judge all we accomplish together on this mistake.

12:01 AM ∙ Dec 6, 2022


704Likes65Retweets

Twitter avatar for @Zaptio

Zaptio RTFKT @Zaptio

I wanted to provide some clarity regarding the Cryptokicks iRL mechanic and US shipping. MNLTH is our platform we airdropped to clones to distribute new experimental innovations.

9:28 PM ∙ Dec 5, 2022


427Likes68Retweets

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!

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