I trade online too (nearly 7 years now), but in an unrelated industry to this. In the case of lost/stolen/damaged goods, we replace the order and claim the money from the delivery service. There is no point squabbling with customers. Either the documentation is legitimate (easily checked) or it's not. If it is, then the onus is on you as a seller to ensure that the customer gets and is happy with what they paid for. Laws in the EU are clear on this, and leave no room for error (the laws are tighter than brick and mortar sales).
I think the discrepancy in seller attitudes stems from our respective legal positions. Attitudes in much of China (my other half is Chinese if you're wondering) resemble attitudes in the EU before we had the DSR's introduced. Sellers would often be openly hostile and suspicious to complainants. After so many years though, sellers just grin and bear the pain of it. Arguing is pointless. Sellers lost the vast majority of any battle they tried to fight, whether they were in the right or not. Either the customer is happy or they're not. And its your job to make that happen.
No matter what Stepan, you will get either your watch or money back. So don't worry. Hopefully Josh will be in a more reconcillatory mood tommorrow! If he won't resolve it, well let Paypal adjudicate. They'll examine all documentation etc and know what to do.