Basically, you've given the answer yourself in the question: handwatches were a very rare thing in Soviet Russia at the time and it is small wonder that they became the soldiers' favourite trophy, especially since handwatches were highly portable and could be kept by the soldier himself.
As to why handwatches were so rare in Russia - well, that was a special case of the exclusive focus of Soviet industry on military and dual-purpose hardware. This was a conscious decision, made by Stalin and laid into the cornerstone of the Five-Year Plans (especially the first one).
In other words: this was a deliberate choice by Stalin of guns over not only butter, but also over decent bread, so to speak. He was preparing full-steam for large-scale war - as early as 1928 (!) - at the conscious expense of the citizens' level of living.
This was debated at the 14th Communist Party Congress in 1925 during which Zinoviev and Sokolnikov proposed a more gradual development of Soviet industry, focusing on "light industry" and presumably a greater focus on consumer goods. Stalin however accused Zinoviev of being an imperialist agent bent on promoting the Dawes Plan and duly carried the day since he already had the party machine behind him.
Sokolnikov, shuffled from Finance Minister into an array of second-tier jobs tried to fight a read-guard action against Stalin's approach:
He told the Fifteenth Party Congress, in December 1927, that a two to
three year plan should be tried before a five year plan. He again
reminded the delegates that a real plan must rest on an agricultural
base and must take care of the people's welfare. He predicted problems,
especially in terms of consumer deprivation. (source)
So one sees the handwatches were just the tip of the iceberg. Interestingly, wikipedia has a special article on this - Consumer goods in the Soviet Union which makes for interesting reading. One quote:
The First Five-Year plan caused the closure of all artisan methods of
consumer goods production, such as small private factories and
workshops. In the mid-1930s, these methods of production were allowed
to return on a small scale.
Returning to watches, I found a Russian blog post which deals extensively with Soviet watches (for example, during 1930-1935 there was just one factory (bought wholesale from a bankrupt US enterprise) in the whole SU, making 50,000 units per year, distributed to cadres - everybody else just had to make do somehow) and with trophies. It points out that trophy watches were not always appropriated by the soldiers acting on their own. Often, the commanders would hand out watches acts for exceptional bravery and these were, the story goes, often prized more than medals.
The blog also claims that a Selza warehouse was taken by the Soviet troops in Berlin with 17,000 watches. Perhaps the watches in the picture were from there. (I was not able to find independent corroboration for the Selza claim).