Etsy has Seller Protection that covers unlimited lost packages each year. Under this condition, you can suggest your buyers file a complaint with Etsy. Etsy will help deal with it and respond with the tracking number to the buyer, showing you are not responsible and then actually refund the buyer and you keep your sales as well.

Please read the full details on the protection program.

Some requirements to qualify for the protection program,

1- The order must have been under $250 total, it must have been shipped and scanned in on time, and tracking details* must have been entered at the time the order was marked complete. You must also have your policies (returns, cancelations, etc) completely filled out. Additionally, your shop cannot be in violation of Etsy’s policies.

If the order totals $250 or more, you will need to rely on your own insurance to cover loss or damage.

2- Please take your buyer through the normal procedures for a missing package, such as a missing mail search. After the order appears truly lost, encourage your buyer to open a case for “item not received.” Let them know that this is something Etsy has in place so neither the buyer nor the seller has to be out of pocket for a lost package!

If your buyer wants a replacement instead of a refund, you still need to walk them through this procedure to get a refund from Etsy, then they can place a new order with your shop for the replacement.

Hope this makes sense. Any questions, please feel free to contact us to clarify.