I am by no means an expert, but have been on Etsy for a few years now and picked up lots of advice along the way. Now it's time for me to share that advice with you.
1. Put together a plan. To have a successful shop you need a banner / avatar, shop policies, products listed, promotion, packaging ideas, and shipping plans. Rather than tackle this all at once, set goals for yourself and then break those down into mini goals. Finishing your mini goals will give yourself a sense of accomplishment and keep you on track. Consider actually writing down your goals and mini goals. Being able to physically cross them off can be extremely motivating.
2. Capitalize on what you're good at. If you are a good photographer, focus on photographs that will make your products stand out in a search and get you on the Front Page. If you have impressive graphic design skills, focus on a striking shop design, professional packaging, and eye catching promotional materials that will create a strong brand identity. If you are a social butterfly, attend craft shows and talk up potential customers, utilize Twitter, Facebook, and other social networking sites, and approach store owners about carrying your products.
3. Know when to ask others for help. You will save money by doing everything yourself, but be honest with yourself. You probably don't have the time and talent to successful accomplish everything - graphic design, photography, promotion, taxes... I knew I needed help with my shop banner / avatar. I found a graphic designer on Etsy, gave her my ideas, and she created the design for a very reasonable fee. Knowing it was time to reach out to others saved me a lot of time and gave my shop a more professional appearance.
4. Create a brand. Branding isn't something that should only be left to the big box stores. Jot down words that represent the products you want to sell and the feeling you want to portray. Incorporate this style into all aspects of your shop - banner / avatar, photography styling, packaging, and promotional materials. Consistency is key.
5. Deliver a pretty package. Some might not agree with me, but one of the reasons I shop on Etsy is knowing my order will be packaged with care and will be pretty! I am more likely to purchase from a shop (and pay a little extra) if I know my order will come looking professional and like the owner put in some effort. For me this is what sets independent shops apart from the big box stores. This is especially true now, when I am starting to look for gifts to give at the holidays. It doesn't have to take a lot of money to make your packages look good. I wrap all of my orders with kraft tissue paper, red baker's twine, and a red label. Simple, but reflects my brand and looks better than just thrown in a bubble mailer.
6. Communicate with your customers. Answer questions promptly. Acknowledge custom order requests, regardless of whether you can fill them or not. Thank customers for their order and let them know when it will ship. This may seem like common sense advice, but I cannot tell you how many times I have placed an order and never heard from the shop owner. I have even contacted a shop about purchasing an item from their Sold Section, was told she could likely accommodate the request and needed to check on her supplies, and then never heard back. That is an easy way to lose a customer that was ready to purchase from you.
7. Ship quickly. This is another simple one. Think about how you feel when you place an online order. You are probably anxious to receive your products, and might need them by a certain date to use as a gift. Try to get all of your orders in the mail within a couple of days. You can utilize Paypal and automatic shipping centers at the post office to lessen the burden. If you know it will take you awhile to ship your orders, be clear and up front with your customers. Be sure to let them know how long it will take to ship in your Shop Announcement and Product Descriptions to avoid disappointed and frustrated customers.
8. Listen to what others are doing, but stick with what works for you. It is a good idea to take into consideration what has and hasn't work for others. The vast majority of sellers will say paying to be in a Showcase did not produce extra sales so save your $7. (Sorry, Etsy!) However, just because a seller in the forums reports $500 in sales after sending out a newsletter doesn't mean you should rush to put out your own newsletter. There is a long list of reasons why a newsletter may have worked from them, but won't work for you - long list of newsletter recipients, many repeat customers, certain price point, experience with newsletter design... Think about your shop and your customers, and the best ways to reach them. It may take some trial and error.
9. Make yourself visible. Unfortunately you can't just set up your shop, list your products, and watch the sales roll in. You can easily be lost in the sea of Etsy shops if you don't work hard to be seen. Spread out your listings over a few days so you will be closer to the front of searches. Email blog owners whose blogs you enjoy reading to introduce your shop for a possible feature. Pass out business cards to friends and family, and ask they pass them on to others who might enjoy your shop. This is something you will have to continue to do to continue growing your shop and customer base.
10. Be professional. Some people are a little apprehensive to shop on sites like Etsy because they don't know what to expect. Make sure to include all relevant information in your Product Descriptions - measurements, materials used, care instructions, and such. Clearly list your shipping times and method of delivery. Explain your return policy if a product arrives damaged or the customer simply doesn't like it. These are the little details that aren't always fun, but will relax your customers' possible fears.
That should certainly give you a starting point, but definitely isn't all the tips / tricks / advice out there. If you have your own Etsy shop, or just like to shop on Etsy, please share your own words of wisdom and what makes you return to a certain shop over and over!