During your first encounter with Sandman, avoid attacking him. Instead, just try to stay close to him. Counter-attack him several times on various levels to finally battle him. You need the Black suit to damage him. Keep hitting him until you are prompted to give him a bath. Repeat until you defeat him.
The second battle with Sandman is simple. Just dodge when your Spidey senses alert you and run to the yellow circles that appear. Complete the prompts to throw TNT barrels at Sandman. Harry will eventually kill him.