What happens if you sell small items that you cannot supply tracking for?

Can someone please tell me how you are suppose to send small cheap items that can be sent for $2.20 etc in a padded envelope when they are not eligible to be tracked and the letter envelopes with tracking cannot be used? The total cost for this item is $7.95 free shipping. 

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Most of our items are low value and sent untracked.

 

We sell in a category in which most buyers seem to be honest, and have had very few items not arrive over the years.

 

The funds hold doesn't apply to items listed with the postage as untracked letters, so we haven't changed anything we do, and there have been no problems for us.