i think something that would be better than losing the gear when you fail would be that all of the materia already attached are destroyed instead heck you'll already have to turn 5 pieces of gear a the very least (more if you dont get the one you want or you want a higher grade) into materia just to even attempt this.

what i see as the best aspect of materia crafting is the fact you have to turn gear you have worn for a while into it. this will require to either make or buy more gear to try to get the ones they want and effectively revive the economy since making gear of any rank will be worth it now