Tackling watch theft has long been problematic due to its traditional paper-based certification and warranty process. This appeared to work for a while but as criminals have become increasingly sophisticated and skilled in creating highly believable counterfeits, even experts have been fooled into thinking they are dealing with the genuine article. Now it seems that blockchain technology could be the secret to eradicating from the secondary market, as well as help prevent potential watch theft.
Blockchain is often closely associated with cryptocurrency which has gained its fair share of negative press in recent years, mainly due to the lack of regulation and high instances of fraud. But blockchain is in fact, a far bigger entity than merely forming part of the cryptocurrency transaction process. In fact, there are many organizations and operations across the world that can benefit greatly from the advancements in blockchain technology, including voting, banking, hedge funds, advertising, education, entertainment and even real estate. In fact, if you are curious, here is a comprehensive list of 58 industries that could be positively impacted by blockchain.
The trouble with blockchain is that most people don’t really understand what it is, or what it can do. Blockchain in its simplest terms provides a digital record of all transactions between parties who don’t know or trust each other. The idea behind it is that it negates the need for a central ‘checking’ authority and allows for more peer-to-peer transactions. It also means that it isn’t owned or controlled by any one person or group, so can’t be influenced by politics or power.
So, how can blockchain work for the watch industry? Let’s consider the current scenario of trading a second hand Rolex watch. A dealer would need to verify that the item was genuine and to do so, typically relies on traditional warranty cards and paper certificates which are issued by manufacturers. The trouble is that when paperwork is the only means of validation, it is left wide open for savvy fraudsters to tamper with the process. That’s where blockchain technology comes in. It provides a fixed and unquestionable record for any watch, meaning that counterfeits and theft could be identified immediately. It essentially creates a ‘digital identity’ for the watch, which would remain with the item even as the watch changes hands.
Watch Certificate is a new venture created by entrepreneurs Guillaume Kuntz and Marc Ambrus which allows clients to put a watch through a detailed checking and authentication process which taps into expert watchmakers who are local to the client. Following successful checks, a steel card is provided which includes a QR code linked to a digital certificate in what has been likened to a ‘passport’ for the watch which can be viewed easily via a handy phone app.
The founders claim that the certificate is ‘tamper-proof’ as it contains 42 checkpoints, high quality pictures, details regarding the watch movement and the serial number. It also contains information relating to the condition and authenticity of parts, which becomes an important consideration when dealing with vintage watches.
Another important factor is that the behaviors of luxury watch customers are changing; according to Pierre-Nicolas Hurstel, co-founder and CEO of luxury digital identity solutions provider Arianee, Gen Y and Z are set to make up over half of luxury customers. They are by nature digitally native and these customers are likely to view luxury items as more liquid assets, rather than ones just to keep or gain value. Having a more transparent authentication process therefore, is going to be a key purchasing factor. They need to know that it can be transferred safely and securely at any given moment.
This evolution is an interesting one as it marks a sea change in the way luxury manufacturers view the secondary market. Typically, the secondary market has been looked down upon by luxury manufacturers as they believe it devalues their brand and works against their new products. This view is evidenced in the luxury fashion industry where it has been tradition to burn end of season stock to avoid it entering the secondary market, although consumer pressure is now causing brands to rethink this approach. What is clear is that the secondary market for luxury watches is thriving and with reports suggesting that it is worth as estimated $17 billion, cannot be swept under the carpet.
It can be argued that by legitimizing the validity of second-hand watch transfers, manufacturers can be confident that the value of their pieces will be retained even after multiple transfers have taken place. It is fair to say that it is the counterfeit items which cause the problems, so by eradicating these from the mix, it seems that watch manufacturers, dealers and customers alike can all benefit from the use of blockchain