Question for sellers - if a package gets lost in the mail and Mercari lets me cancel the order do you lose money?

I ordered something from a seller and I do believe that they shipped it (they seem legit, have a lot of good reviews, had a discussion with me about the item before I decided to buy it). But I got hit with the never ending "item is in transit, arriving late" update in the tracker. I reached out to USPS (that's how they shipped it) and they basically said it was lost and that I need to file a claim with the insurance and stuff like that.

Mercari offered me the chance to cancel the order since it hasn't been delivered, but I feel bad, because wouldn't that mean the seller basically loses both the item and the money? Has anyone had this issue before? I don't want to waste my money on nothing but I also don't want to punish the seller for something outside of their control...