If push came to shove, I think you would have some legal legs to stand on. She should treat you the same as all her suppliers. If someone ripped of a string of beads, does she not pay the wholesaler for those beads? Your situation could be different if it were considered a consignment arrangement. As others pointed out, it may not be worth the money to pursue. However.....
She can charge higher prices than you charge her because she has overhead. That overhead includes theft, among many other things. And, as was pointed out, if the inventory showed a quantity of 0, then someone removed it from inventory, and that should be sufficient for you to get paid unless other arrangements have been made.
I would also ask about what insurance she has. If she is covered for the sales price of the item, and then not paying you your piece of the price, she could be committing fraud by insuring the piece at more than it would cost her to replace it. (Ie, say the watch was $100 and insured as such. The retailer could steal the watch, be out nothing and pocket $100 since she isn't paying you. Or without insurance she migh realize a $100 loss on their taxes for the theft, when she isn't really out anything unless she pays you). If she has any small business loans, I would think they would require her to insure her goods. At the least, I'd talk to other people who have pieces in her shop and ask them if this has happened to them to see if there is any signs of trouble.
Finally, if you decide to stay, you need to shore up that agreement and find out what steps she is taking to keep this from happening again. If I were a store owner, I'd be appalled and mad that this happened in my store. If she seems to eager to just shrug it off, then something is not right.
Good luck... hopefully this retailer sets it all right for you without too much of a hassle.
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Jim