"New" is in the original retail packaging, as if you walked into a regular store and bought the item. All I can find on other sites of the item is the stock photo you used (a big mistake listing it that way in the first place), so I couldn't see the packaging. Especially looking at the crate, I find it very hard to believe it would appear in the store like that and wouldn't be in a box marked up and tagged so it could be sold on a store shelf.
So if you just shipped the plain crate to the buyer, then it would be an INAD and the buyer has every right to a refund because it was misrepresented. Once it comes out of the original box or packaging (whether it's pretty and printed up or just a plain shipping container), it ceases becoming a New item. You would receive a much lower price as a result, but that's the cost of selling a Used item versus a new one. As a collector's item, the buyer clearly expected it to be represented as New and arrive in that condition, including the box.
To wit, when I come across items that qualify as "New", I definitely have a reticence to list them, especially since I don't know what the boxes contain and if the item still works correctly and isn't broken or how long the item has been sitting and in what conditions. As much as I'd like to open the box up just to take pictures of the item so the buyer can more clearly see what the item is and test it, doing that is going to strip the "New" from them. So all I can really do is present items as they appear in the original packaging.
As it looks like this is going to be an expensive lesson, all you can really do is learn how to do it better next time. Silver lining: You should still be able to sell the individual records without a problem. At least I would hope.
