Do I need to refund a buyer who claims an item has not arrived?

Hi, a buyer is claiming an item has not arrived. I posted it on the 22/12/14. I told them to wait long enough to see if the item is returned to me (around another week) but they have now sent at least a few messages telling me they have not received the item. I am confused about whether they are asking for a refund, but I am assuming that is what they want.

 

Do you have to refund automatically if a buyer claims an item is not received? I feel this is really unfair as not only have I lost out on the value of the item, but also the postage. The item had free standard postage (not registered) and it stated no refunds on the listing.

 

TIA

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