If the sale was 'by way of trade', then all of the consumer protection laws, which apply when you purchase from a High Street shop, are still applicable.
Since the item was new, rather than secondhand, it seems likely that the sale was 'by way of trade'. In this case, you have the right to demand that the seller rectifies the problem. As it's likely that the point where you were deemed to have legally 'accepted' the goods has passed, the seller has the discretion to choose whether he has the item repaired or whether he provides a replacement. (He can, of course, give you a full refund but you can't claim this as a legal entitlement).
Chris