The global shutdown last year highlighted the intrinsic value of our digital tools. With stores and major fairs postponed indefinitely, Covid-19 fast-tracked the global shift online for the luxury-watch industry to showcase and sell its novelties. The fairs have now returned, offering a “phygital” (physical and digital) immersion and interaction with brands.
As was reinforced during the recent Geneva Watch Days (GWD), the past 18 months have clearly transformed the way manufactures launch, market, and sell watches, with many players in the industry, including auction houses like Phillips, having embraced the change. For many years, the industry pooh-poohed e-commerce as impersonal, unsatisfying, and a “cheap” way of selling premium items. Yet overnight, it has become one of the main drivers for the industry and a useful education tool. It builds trust, even augmenting personal relationships. Along with “sustainability”, the “digital revolution” has topped the agenda of talks at Watches & Wonders (W&W) and GWD, focusing on consumer experience, transparency, and authentication through the use of blockchain technology.
By now you’ve at least heard of blockchain through the speculative-investment frenzy around bitcoin, for which the technology was created as a “shared public ledger that supports a cryptocurrency network”, according to Investopedia.com, which offers a comprehensive explanation and history of the subject. More recently, the crypto-token craze has produced colourful headlines on the use of blockchain verification in the art world through the trading of collectable digital art NFTs (non-fungible tokens), a form of “cultural cryptocurrency”.
Earlier this year, after teaming up with the newly launched NFT platform ArtGrails, Jacob & Company presented the first luxury-watch NFT for sale on a tokenised asset in the form of a unique 3D animation inspired by its Epic SF24. It features a tourbillon and its patented city-time world-time display split-flap system instead displaying the names of 10 cryptocurrencies. On the first day of the online auction, bidding overloaded the system, and it crashed. When it restarted, the virtual hammer fell on a final bid of 50.74 ether (about R1.45-million). The retail price for a physical Epic SF24 Tourbillion World Time in rose gold is around R1.8-million.
Blockchain and the luxury-goods industry
Interest in blockchain platforms has grown exponentially. They can improve traceability and supply chain tracking, which is great for the growing concern around sustainability. Blockchain platforms can also facilitate secure financial transactions thanks to their decentralised data storage – blocks of information linked in a chain, with each block containing a full record since the inception of an item or transaction. This also means that no single person or group has control.
As Investopedia explains, “If one node has an error in its data, it can use the thousands of other nodes as a reference point to correct itself.” This means that the history of transactions in each block is irreversible and cannot be tampered with.
The luxury-goods industry’s use of blockchain was first part of the fight against counterfeiting but is now incorporated into most aspects of the business. The advantages for the industry were highlighted during a panel discussion the Fondation de la Haute Horlogerie hosted at W&W 2021. “Blockchain creates digital value that can be traced, exchanged, transferred, and stored,” explained Pierre-Nicolas Hurstel, CEO of Arianee, an independent non-profit consortium developing a global standard for digital certification, particularly in the luxury industry, based on an open-source protocol — the key being transparency. “The fact that you can digitally prove that you are the owner of a product gives access to communities, service, and experiences. That’s where the revolution lies. Think of it as storing information securely and anonymously in a digital safe. The customer is the only person who has access to the safe, through their phone, without ever having to provide personal information.”
Arianee uses a side-chain linked to the ethereum public blockchain, making it more transparent than permission-based enterprise blockchains, over which companies have direct control. The Richemont group has contracted Arianee to work with its brands, including Panerai and Roger Dubuis, and is joined by Audemars Piguet, Breitling, and MB&F. “Brands commit to a digital passport,” Hurstel said. “Then it’s up to them to decide what type of information they want to share with the customer, bearing in mind that this information can be certified, through blockchain, by a third party.
Pierre-Nicolas Hurstel, CEO of Arianee
The fact that you can digitally prove that you are the owner of a product gives access to communities, service, and experiences. That’s where the revolution lies
Ethical sourcing of gold would be an example.” While most premium watchmakers have by now woken up to the potential of luxury e-commerce, Richemont leads the way, with its sites Net-a-Porter and Mr Porter being early adopters of online luxury watch sales, presenting brands such as IWC, Cartier, and Jaeger-LeCoultre, among others. But even e-commerce seems to have evolved, and the focus is now more on getting to know your customer than just click-and-pay. The huge interest in vintage time-pieces has seen exponential growth of the secondary market, and in 2018 Richemont acquired UK-based Watchfinder & Co, showing how serious it is about controlling all aspects of the market.
However, this segment presents an opportunity for unscrupulous dealers and counterfeiters. Along with efforts to counteract counterfeiting, and in order to safeguard transactions and guarantee the authenticity of its brand watches, both old and new, Richemont piloted a certification process in 2019, supported by protocols developed by Arianee, through its most premium offering, Vacheron Constantin. A forgery-proof digital certificate of authenticity and history follows a watch throughout its life, allowing for several changes of ownership and a historical record that cannot be changed but can be added to over time, as Vacheron’s chief digital officer, Angela Au-Yeung, explained during the W&W talks.
“We focused the pilot project on our Les Collectionneurs, which are vintage timepieces that our heritage division collects [on the pre-owned market]. These watches go through a process of refurbishment and authentication, and then we put the digital certification on the blockchain before offering them for sale to our customers. We were also able to use our amazing archive to add stories and information about these watches.” The success of the first test phase has prompted the maison to extend the certification to all timepieces.
Whether they are the first or subsequent owners, Vacheron sees blockchain as a means to interact with customers digitally and securely via its Hour Club platform. The Arianee protocol allows Breitling owners to prove the authenticity of a piece and its ownership. A fixed digital identity that is unique to each product ensures airtight security and privacy. With a Dentsu Tracking-powered digital warranty, owners can also track any repairs to their watches. Customers have full control of their personal data and remain anonymous if they choose, without missing out on an innovative and symbiotic brand-customer relationship.
Hublot was actually one of the first companies to equip a timepiece with a blockchain-based authentication system back in 2009, through cybersecurity firm WISeKey. Last year, Hublot introduced an e-warranty and electronic passport for all watches through a blockchain-based platform in partnership with KerQuest. This system works much like facial recognition based on the unique, micro-structure of the materials used in each watch, and a photo taken with a mobile phone is all that’s required to activate it. The e-warranty is kept on the Aura luxury blockchain network (developed by Microsoft and the blockchain company ConsenSys), which was initiated by the LVMH Group – owner of Hublot – as part of its efforts to curb counterfeiting. With access to all the date on the life cycle of a timepiece, from production to sale and resale, anyone can now verify its authenticity.
• From the 2021/2022 edition of Wanted Watches, Jewellery and Luxury.