Inceptions
Though it can happen rarely, sellers are responsible for keeping their items safely stored so this doesn't occur. You will be penalized (i.e. receive a defect) for not completing the sale. If the item is not in working order, then you need to either refrain from listing or take the item down before it can be sold.
Cancel the transaction using the reason that the item is out of stock or damaged.
You're not addressing eBay here, you are addressing the eBay community.
EVERY seller thinks they have a good reason for not receiving a defect on their account citing extenuating circumstances. The bottom line is, if you don't complete the transaction and cancel the order, it creates a bad experience for the buyer (whether the buyer is forgiving or not) and that costs buyers time and money and it costs eBay and other sellers damage to their reputations.
One defect won't hurt you, but more might, so it behooves you to make sure your items are in working order. The odds of an item working when you list it and then suddenly not working before you even ship it are slim, so this should be such a rare occurrence that it isn't worth thinking about. If an item is so fragile that it can become non-function, sitting on a shelf without being touched. It is too fragile to list on eBay...must less survive the shipping process.
You should also be aware that it's a policy violation for buyers to retract bids except under very specific circumstances (which don't include the one you mentioned), so please don't advise them to do that. Bid retractions are recorded on the buyer's record. You are the one who needs to cancel the bid. But again, this should be a rare occurrence.
