People don't always carry their phones with them (if they're in athletic or formal wear that doesn't have convenient pockets). In those cases, they'll settle for whatever reduced internet-connected experience they can get, even if the ergonomics don't really make the full phone experience available.
Just like how yes, if you have your laptop on you, you'd almost always prefer to use that over your phone, but your phone can be with you in many more scenarios.
I think this is a very good point, thank you. I didn't intend to comment this but now I am reminded of the initial iPad release in which I believe a criticism was raised that there "was no use case for this device".
Sure, but those times (athletic and formal wear) are less than 10% of your life for 90% of all people. Probably less than 5% of your life for 50%+ of all people.
A product that sacrifices general utility in pursuit of a 5%-10% use case is a niche product. Nothing wrong with that, but Apple isn't looking to add a new niche product.
Now, obviously, if you could throw cell connectivity onto a watch for very little cost and very few compromises to the rest of the watch, then sure, you would. But in the real world, cellular connectivity for a watch would be an enormous additional cost both monetarily and to anything else you wanted the watch to do. It doesn't make sense for a product that's trying for mass appeal.
Just like how yes, if you have your laptop on you, you'd almost always prefer to use that over your phone, but your phone can be with you in many more scenarios.