If you think vintage label Momotaro for $170.00 sounds too good to be true, you’re right. But that was almost the reality for almost 200 users of the group buy website, Massdrop, before Momotaro shut down the deal.
Massdrop is a young tech startup that organizes wholesale buys of a single product for a heavily discounted price. Massdrop has facilitated “drops” in mechanical keyboards, car parts, 3D printers, and most recently, raw denim.
Users create polls featuring a variety of products, the community then votes for their favorite item, and Massdrop contacts the vendor to arrange a wholesale deal. Massdrop posts the item with a week deadline to collect orders then places the order with the vendor, receives the goods in one large shipment, and distributes them to their users.
The winners of two recent “Raw Denim” polls were Momotaro 702s and Japan Blue 0401s. Massdrop contacted the Rampuya & Co. (the umbrella company for Momo and JB) and set a rate of $179.99 for the Momo’s and $110.00 for the JB’s–considerably below their MSRPs of $295 and $200, respectively. The postings garnered over 300 orders total and Massdrop sent them in.
And here’s where things got tricky. Rampuya responded that they would still fulfill the JB orders, but that $179.99 was too low for Momotaro and they were canceling the offer. Massdrop wired money for the JB order and scrambled to salvage the Momotaro jeans but set a hard deadline for refunding their users’ money if they could not reach an agreement.
That deadline passed on February 21 and Massdrop issued a full refund plus a credit to any future purchases on the site. In the same time period, Japan Blue bounced back the money from Massdrop’s wire transfer and said it wouldn’t ship that order either, leaving several hundred potential customers denimless and disappointed.
We spoke with Momotaro General Manager Tatsushi Tabuchi who said that the issue stems from miscommunication. In an email he wrote,
They would sell our denim [at] the discount price without sufficient explanation to us. For example, 0702 was $170. It is too [much of a] discount. This price is at a price that was clearly wrong, we were not able to accept [it]. Be[ing] sold at a price too low will lower the brand value. Cause all thing were happened by what they sold without a sufficient explanation to us [sic].
Tabuchi believed they would be selling the denim wholesale to Massdrop but was unaware they would be offering that price to consumers as well, something that would hurt Momotaro‘s brand value as they are rarely offered on sale. When other American Momotaro retailers began to complain about the discounted price, Momotaro realized what was actually happening and backed out of the order as quickly as possible.
Massdrop founder and CEO, Steve El-Hage, agrees that communication was a big problem in the drop, specifically citing the barriers created by differences in language and location. El-Hage admits this was not only their first raw denim order but also their first with a Japanese company and they didn’t have a translator on staff or a complete understanding of Japanese business practices. So when things with the drop started looking shaky they tried to act quickly or lose credibility with their newfound raw denim customers.
“We tried to be as transparent and honest with our customers about what happened.” El-Hage explains, “The worst thing would have been to drag this on for months so we set a hard deadline for a refund after one week, and we unfortunately had to follow through on it.” To prevent issues like this from arising in the future, Massdrop now requires vendors to sign contracts before each sale is posted on the site and they will be using an intermediary agency for future deals with Japanese companies.
Despite the outcome, El-Hage says he still had a very positive experience with the raw denim community, “When we had to tell them about the canceled shipment, we thought they [the buyers in the drop] were going to rip us apart, but everyone’s been really supportive and understanding.” And it looks like Massdrop has no plan to leave raw denim anytime soon as they just finished two recent drops with American jeans makers, Rising Sun & Co. and Taylor Stitch.
El-Hage even said he’d be open for another deal with Momotaro, including the honoring the 702 drop. “At the end of the day,” he says, “I just want to get people their jeans.”