Sold an item, shipped it, buyer reporting item hasn't arrived.

Used ebay shipping label so it comes with tracking number. I looked up where the item is at and it shows it's in transit at a major city and has not moved. It was supposed to be delivered by June 30 the latest. I went to the post office to see if they know whats going on but said item doesn't shown scanned. Buyer wants refund.

What are my options, am I at loss?