First, request photos of the damage. This doesn't have to be done it a way that says "prove it" - simply say something like "if you would be so kind as to send along a couple of pictures of the damage, this will help me assess both the quality of remaining stock (if you have multiples etc) as well as determine the most appropriate resolution for you.

The buyer has a right to a refund if the bag is faulty. If the bag is too badly damaged to re-sell, or so anything else with, there's no need to require its return, IMHO, and I would just provide full refund. For items that I could still use in some way, I would refund the original payment and pay for return shipping. (Buyers only pay return shipping for my items for things like change of mind returns).