Look, when something fails like this the seller has a couple of options, they and refund and send you on your merry way, they can replace or repair, many times it is their option, especially after a period of time.
This depend on each state, some states allow you to return or terminate any sales agreement or contract within 72 hours with no questions ask. The problem is most online retailers are not aware of each states rules and technically when they sale in your home state they are automatically bound to that state's retail laws. But your State's Attorney General may times has no jurisdiction outside your state.
This is the problem when dealing with online retailer, you hope they will stand behind the products they are selling. Before buying from any of them I do as much checking as I can on them to make sure they are reputable and they are who they say they are. I found many of these online store are fronts and you have no ideal who owns then. try doing a whois on the web address and see if the lists owner is at the same street address as the business, and there are few other things you can do to make sure they are who they say they are.
However, to the op, good luck trying to sue or do any other sort of legal action against a business especially if it is not in your home state.
So relax, give the guy a chance to make it right and as long as he returns you a working watch why do you care how he did it. Also, sometime you can go directly to the manufacturer and they will make it right, many times manufacturers will tell you if it older than 30 days you should go directly to them.