Hi shonargaon,
I'm not sure exactly how many sellers do this but I do know of a few that offer insurance for products that costs $100 and up. Oftentimes it is given as an option to the buyer, its usually a small fraction of the entire shipping cost.
You might consider offering shipping insurance for the rest of your products to avoid what has happened.
You're right about being worried that the buyer may and might leave you a negative feedback especially since he received a broken product, I'm not sure if it would be wise to offer s refund at this point but you may want to consider it.
You can try the following to help you drive more traffic to your store:
• Submit your product listings to Google product search (fast and free way to get more traffic) Link hidden: Login to view
• Optimize your site for the search engines. Traffic Travis a good free tool to help you do this Link hidden: Login to view
• Set up a blog on your site and create some unique and interesting content. This is also an important part of search engine optimization.
• Leverage traffic from eBay, Amazon or other auction sites. Set up an account with the username the same as your business name and list a few items at attractive prices. Put your website URL in your email signature tags and insert into template eBay emails. Set up an About Me page with photos of your business, yourself and of course, your URL.
• Use Google Adwords – although this can end up being expensive if you don’t do it properly. We recommend the free training site Link hidden: Login to view to learn more.
• Set up an email newsletter on your website. Keeping in touch with existing customers encourages repeat sales.
• Set up an affiliate program.
Also you might like to read erika-garnica's blog post on how to make your listings more attractive to customers:
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Hope this helps :)