Ebay is your best bet. They don't show up there very often but keep checking and you'll eventually find one. This is where you'll end up with the most competition (with possibility of the price going high) but you'll have the most luck here. You might want to try searching for something other than "watchimal" because if the watch and/or tag are missing, the seller may not know what it is. You could try searching for "hasbro softies", that is what the tag says. Or "butterfly watch", "dog watch", etc..

There are websites made by collectors who sell toys that they've maybe ended up with but don't collect. Also websites that are owned by vintage toy dealers. Now and then you will come across one with a Watchimal for sale. You can expect pretty fair prices here (from the collectors anyways, dealers might be a little more). To find these, just do an internet search. Try different search engines for better luck.

I personally, have never had much luck outside of ebay but some other places/methods you might try are:

Thrift stores
Antique stores with a toy section
Post a want ad in your local paper or internet want ads
Hang out on toy collector forums, you might eventually run into someone who has one to sell or trade.