Faulty goods and postage refunds

Hi all, this is my first 'newbie' post so hopefully someone can help me with my problem. I recently purchased an ipod dock online and after opening the box and trying it out it was faulty. I sent the item back at my cost to the shop as this was stated in their conditions. They agreed the item was faulty and this was confirmed by the manufacturer as they sent the shop a new unit that they then posted to me. This unit is OK. I then asked the shop to refund my returning postage cost and they refused saying thhis is down to the customer. I quoted the Sales act, DSR etc and they told me to put it in writing. I did this and they still refused. I then contacted Consumer direct who tell me this is not correct and the shop should refund my costs. I then sent another email to the shop who point blank refused and said they have quoted the following:

However our Terms and conditions are an agreed and reasonable variation to
the existing law and are the terms and condition which you signed and agreed
too before proceeding with the sale.

Our position remains the same.

Our position cannot be considered as unreasonable as the item which you
purchased, was priced well below the competition and is also a great deal
cheaper than the manufacturers list price, even with the inclusion of the
return carriage, which have incurred.

We have also paid for the carriage to you and then back to you with the new
unit.

This is just adding insult to injury! Can anyone suggest the next response? This is supposedly a reputable shop selling major brands.
All suggestions welcome
thanks
Dave

Thanks Tony

I'll keep you posted

Hi Tony

I finally got my refund although it took the intervention of the manufacturer to get my refund resolved
By posting here and on other forums It turns out that I am not the only case so as they say 'buyer beware'!

Cheers
Dave