You can't tell consumers the raw manufacturing cost because people act weird when they are told it: they usually assume the "markup" is profits. They assume that they're getting ripped off because most people don't understand development costs or overheads and they always argue that any profit is too much. This problem can't be fixed.

Apart from the risk of scammers buying a watch to sell, saying it is broken, getting a replacement at cost and the scammer steals the markup/profit.

You can maybe think of ways to make it work, but they are likely to have excessive support costs or other hidden costs for the manufacturer or consumer.