Quite the thread.
First, I'll say Mack is a great Ebay seller. Have you folks read his ad copy in his Ebay listing. Mack is sort of a Manton of Ebay listings. He really makes the material interesting.
I saw a couple of posts recommending splitting the loss with the buyer. That sounds good, but after I gave it some thought, I feel that is not right to the buyer. He did nothing wrong and fulfilled his part of the contract. Why should he suffer a loss?
Have you thought of offering him a $40 credit, Mack? That might be better for you than a cash refund, and might be acceptable to the buyer.
I always think in terms of putting myself in the other mans shoes. I challenge anyone to buy an item, and then receive an empty package from the USPS, and think "Oh well, I'll just eat the loss!". I would not and don't think many others would either.
I guess in the future Mack, you might take a risk for lower priced sale items, and build in insurance costs for more expensive items.
As to a 100% Feedback rating, it is very nice but not absolutely imperative for a successful Ebay seller. Whenever I see a seller with a Feedback score above 1000, and a 100% rating, I think that the seller might likely have been the victim of Feedback extortion a time or two.
As an example, I'm not an Ebay seller but I have a couple of friends that are. One of them has a very high Feedback number with a 100% positive rating. He told me that once he sold someone a tie and the person said he didn't receive it. My friend noticed that the buyer had a history of this behavior (determined from reading the buyers Feedback). My friend had a signed receipt saying that the package had been received. Nevertheless, he offered to refund the purchase price. The buyer wanted his shipping cost refunded too, or threatened to leave negative Feedback. My friend refunded everything, and placed the "buyer", on his restricted buyer list.
Was my friend extorted? Yes. Was it the right thing to do? Who knows. It was to him, to maintain a 100% Feedback. I'm not recommending that you do this Mack, but I can assure you that there are sellers that do this.