Unlocking iPhone with Apple Watch

You need to have WiFi enabled on the iPhone and the Apple Watch. You do NOT need to be connected to a WiFi network.

That is to say when you are in a store, the Apple Watch and the iPhone will create their own ad-hoc WiFi connection. You do not need to hook up to the stores WiFi.

If by "unlock" you mean unpair, I assume it is because Apple needs to remove the watch from your account and needs a WI-FI connection to do that.

Read here;

Unlock your iPhone with Apple Watch when you're wearing a face mask - Apple Support

Yes.