Do I need to accept return and refund here?

[jewelfish2000]

I received a message from a recent buyer that the item is too small and she wants to return it for a refund. She won the item on 28 Sep, paid on 3 Oct, I posted it next day.

The listing includes the measurements of the dress and the return policy says 7 days. More than 7 days have passed presuming she received it 5 Oct (sent Express Post). Listing -

is http://www.ebay.com.au/itm/280977860287?ssPageName=STRK:MESOX:IT&_trksid=p3984.m1562.l2649

I may accept it and refund but want to know if it is my choice/goodwill or am I obliged to? There's nothing wrong with the dress, it is as stated, fir for purpose, meets description.

Would it be possible to offer her a choice from other items as exchange rather than refunding (as many shops do when you return an item)? Appreciate any advice you can offer.