I am thinking of buying a watch in either Geneva or Zurich. Which city may have a better offer? How to claim the tax refund? If this is not my last destination in Europe I may not get the tax refund, am I correct?
I'd think about buying it elsewhere, as it's probably gonna be cheaper than Switzerland. What sort of watch?

The shop has to offer a program for VAT refund.
Ask direct the big sellers e.g. in Lucerne for the procedure : Guebelin or Bucherer or your tour operator when traveling in a group
You will not loose your VAT refund when going to Europe, you have to leave Switzerland with the goods and the respective papers stamped at the boarder.
Most of the land crossing points Switzerland to Europe do not have a 7/7 24/24 service.