Will watch brands master the metaverse?

How much would you fork out for a watch you own but can’t wear, or even touch? A tenner? A grand? More? Or what about spending your hard-earned cash on a luxury watch to clothe a virtual version of yourself? You know – in the metaverse?

The answer may be zero for any of the above, but for the watch industry and many of its customers, the questions are suddenly becoming real. Already, there are signs that the metaverse and NFTs – lumped together here because there’s so much overlap – are well on their way to watchmaking.

This, despite the fact understanding of this new virtual Wild West is still in creep mode.

NFTs, or ‘non-fungible tokens’, about which few brief explanatory sentences have yet been written, are unique, digital assets, unalterably registered on a blockchain, that can be bought and sold like any other product or commodity.

Expensive, encrypted jpegs or gifs, if you like.

The metaverse, already a shoo-in for the word of 2022, is a virtual world where you can play, consume and live the life you always wanted, without having to worry about covid, STDs or anyone ever finding out who you really are. I gather.

Luxury brands are scrambling to get in on the act. In the never-quite-parallel world of high-end fashion, is Dolce & Gabbana, which a few months back shifted its nine-piece ‘Collezione Genesi’ debut NFT collection for a scarcely believable $5.7 million. Tommy Hilfiger is now working on ‘v-commerce’.

And in watches, last spring, Jacob & Co. created an NFT version of its SF24 Tourbillon, a digital piece-unique that sold at auction for $100,000, ushering in a new era of virtual watch ownership.

No mistake, a new era has begun.

And it will leave many scratching their heads. Why would anyone want to spend huge sums on watches they can’t wear? And in any case, surely luxury watch brands that set their stall on the timeless traditions of hand-crafted mechanical watchmaking wouldn’t consider making NFTs, or virtual watches for avatars? Would they?

Well, they just might. Not that we’ve seen it yet, but many already are. Back-alley NFT chatter has become bar-stool gossip, and by the end of this year, it appears increasingly likely it’ll be front page news.

In January, I spoke with LVMH’s watch division president Stéphane Bianchi and TAG Heuer chief executive Frederique Arnault about their NFT plans.

Both became highly animated by the subject, admitting they’re working on an NFT strategy, albeit without revealing any detail. Like the rest of us, they’re still figuring it out.

Meanwhile, Mr Arnault is quite comfortable talking about his charge as a “tech company”, while Mr Bianchi chimed in that TAG Heuer has “legitimacy” in the field because of its now well established Connected watch strategy.

In the same breath, we can be sure Hublot will come to the virtual table, too. It was the official timekeeper of January’s Crypto Finance Conference in St. Moritz, part of the same universe.

And as for the luxury metaverse, analysts have already decided it’s coming. Morgan Stanley has said the virtual luxury goods market could hit $50 billion by 2030.

Industry personalities are getting behind it, too. The Canadian businessman and avid watch collector Kevin O’Leary, known for his long-running role on the US version of Dragon’s Den, Shark Tank, has said he’s funding a white paper to standardise a watch NFT protocol and that, come July, he’s going to be minting watch NFTs for the secondary market.

These encrypted dial scans, he says, will sit alongside the physical product, and act as digital authentication certificates, useful for transactions and insurance, as well as for brands and retailers wanting to keep track of their watches. Perhaps the market will decide whether these have their own value.

If this seems to be coming too fast, not least for an industry that prides itself on slow luxury, consider this: for some, it will already be too late.

Why? Let’s peg this back to the real world, where, for now, manufacturers make actual watches. The problem is that Swiss watchmaking has a huge volume problem.

In 2021, Switzerland shifted 25% fewer watches than in 2019, a knotty issue that’s currently varnished by a 3% uptick in overall value in exports.

In no time at all, and fuelled by a pandemic, the average export price of a Swiss watch has jumped by almost 40%.

But how long can brands rely on that trajectory? What happens if volumes drop further? We’re at around 15 million watches exported from Switzerland today, and some predict we’ll slide to 10 million by the end of this decade, if not sooner.

Then what? Can prices rise exponentially? Or does the average punter find a limit that is is lower than brands imagined?

Recognising this trend, smart brands have already begun diversifying into the virtual world. Some are sitting on products that will be injected into the metaverse, expecting a spectacular spike in revenues. H

ow many of the world’s three billion gamers need to spend 10 V-Bucks (the virtual currency on gaming platforms such as Roblox that’s purchased with real money – ask my kids) on a luxury watch they can wear through the metaverse before the ‘maker’ of said watch is creaming off high-margin profits?

Add in an incentive – win a physical watch? – and you’re starting to mitigate those volume worries.

But, of course, it’s easier to write the future than make it happen. Swiss watchmaking has its progressives, but many are rooted in the past, trapped by what economists call active inertia – the tendency to follow established patterns of behaviour, particularly when they’ve proved profitable before.

The same could be said of the consumer, for whom the idea of spending money on virtual assets will surely be secondary to the buy-it-own-it-wear-it approach for a time yet. There’s another hurdle, too.

Brands and buyers know, and often freely admit, that no one needs a luxury mechanical watch. How much less do we need watches that don’t actually exist? So much less that we’ll draw the line at buying them?

But then if there’s a virtual image to be curated and profits to be made in owning and trading an NFT watch for consumers, the needle could move faster than even the most optimistic predict. Into the new Wild West we go. On a virtual horse.

And if I’m wrong, you can shoot me with your NFT Smith & Wesson (currently trading at $15,000, by the way).