peaking in Paris last April at LVMH’s first in-person Annual Shareholders’ Meeting since the pandemic, Chief Executive Bernard Arnault cautioned against the metaverse: “We don’t need that [in the] short term, or such an adventure…what we want is to sell real products.” Yet, in the same breath, the luxury group boss conceded, “We need to look at it, we are looking at it closely. We need to be prudent… Maybe it will yield something interesting.”
Anyone hoping to tap into the potential of this new digital landscape first needs to understand it. And it is a minefield. In that respect, LVMH-owned TAG Heuer has a definite advantage. Frédéric Arnault, the 28-year-old son of group chief Bernard Arnault, was appointed CEO of the Swiss watch company in July 2020 and has persistently shown a keen interest in tech (before joining the watch world, he spent a few months in 2017 interning at Facebook’s artificial intelligence research unit).
This year, TAG Heuer has been very vocal about the Web3 space. In May, despite the crypto market crash, the luxury brand added cryptocurrency payments to its US e-commerce site. Then, in June, the new TAG Heuer Connected Calibre E4 added a new watch face as its first foray into the NFT world. The smartwatch’s Lens is an innovative and custom dial design that allows the wearer to display NFTs on the watch face.
- Frédéric Arnault, CEO of TAG Heuer
“I am bullish on the long term. The fact that the market has readjusted does not change our ambition and our investment in this space.”
Spotting affinities between NFTs and watch aficionados
As Teddy Florent, Managing Director of the TAG Heuer Connected Watch Business Unit, explains, there is a clear strategy behind this move. “We didn’t want to be doing just another drop. After interviewing people in the ecosystem – brands, peers in the industry, and users – we observed some level of frustration that there was no incarnation of NFT artworks in a physical realm.”
In profiling their target audience, the team identified close affinities between Web3 natives and traditional watch collectors. Both share a strong appetite for uniqueness, desirability, authenticity, and community. “We wanted to create a bridge between the digital world and the physical world and TAG Heuer was ideally positioned to provide value with the Connected watch,” said Florent.
Florent is happy about the uptake of the new product offering. “Our fraction of adoption into the TAG Heuer business is representative of the Web3 users out there, which is less than 15% of total internet users. However, we see the rate of adoption growing much faster than in the outside world, thanks to that fit between Web3 customers and our existing customers. We are glad about it, and we will continue to create awareness to grow it more,” he said.
Florent also believes that by aligning the Web3 community’s aspirations with traditional customer values, there is a strategic point that could power a wider company strategy in this direction. “Web3 is a revolution, it is here to stay. When you go into a revolution, you don’t think about ROI, you think about product-market fit. Am I addressing the audience in the right way? Am I creating the right emotion for them? We are heading into new territory. But of course, we are just day one, and there is more to come.”
“Bullish on the long term”
Florent’s ideas chime with the vision of Frédéric Arnault. The in-house development team has been expanded with a 60-strong team of engineers working in Paris on TAG Heuer Connected projects, including Web3. “I am bullish on the long term,” the CEO said categorically during our conversation. He also confirmed that the company is unfazed by the downturn in crypto and continues to invest. “The fact that the market has readjusted does not change our ambition and our investment in this space.”
Born on the Millennial/Gen-Z cusp, Arnault has his finger on the pulse. Among his many prized personal acquisitions, he can count a Bored Apes Yacht Club NFT, a Clone X PFP by Takashi Murakami, and an Invisible Friends. The first materialisation of a company strategy in this direction was attuning to the “collectors’ mentality”. “It’s always been the collectors – people who own and collect their assets. It is very similar in the world of NFTs,” he said.
So, where will this strategy take him next? “The next step is to collaborate with strong brands in the space, and to engage even more with an influential group amongst those who are passionate about the world of NFTs,” Arnault explained. “After that, we have different routes we could follow. One is connected watches - after the NFT viewer, we could go one step further and develop our own Web3 functions and services to enhance the watch and the collector experience. Another one is a natural trend and something we are working on. But I can’t say any more for now.”
There is also a plan “to create an identity card for each watch that is a single NFT”. This is perhaps unsurprising given that Aura – the certification blockchain platform dedicated to the luxury industry – was a brainchild of LVMH. LVMH stablemate Hublot has already used Aura in its first Web3 move.
For Arnault, the strategy is less about extending its existing customer base and more about talking to a new audience that is passionate about technology, and bringing them into the watch world. TAG Heuer is unabashedly out to recruit new customers within the Web3 and metaverse communities. “We see an overlap. But we can reach through to the ones who are not traditional customers,” said Arnault. “People are spending more and more time on their screens. They have digital identities. We need to position the brand in the digital ecosystem and landscape in the metaverse in a more engaging way.”
It may still be early days for Arnault to lay out how TAG Heuer will further invest in the metaverse. But if there’s one thing he’s certain of, it’s that TAG Heuer wants to own that space.