Return requested when they haven't received the item?

My brain is fried after a really long day, so please bear with me.

 

I posted an item today and the buyer has requested a return citing that they found a better item.

 

The item was sent in a trackable envelope (small size).

 

I accept free change of mind returns, the entire transaction is under $10 so it's more the principle, but ...

 

If I click "accept the return and print a label", am I right in assuming it'll only allow me to print a package label (which is minimum $8.65?)

 

So therefore ... I should just refund the buyer, correct?

 

Thanks in advance.