Hi, Lusine!
First let me say that you have such a cute product! You just need to work on presenting it in the best light possible - and I mean that literally! :)
I highly recommend making yourself an inexpensive light box out of cardboard and tissue paper, and getting some inexpensive goose neck lamps for the two sides and top using true daylight spectrum bulbs. I made mine for under $15.00 - I bought everything at Walmart and I used this tutorial:
http://digital-photography-school.com/how-to-make-a-inexpensive-light-tentI tell this story about my shop all the time ~ when I first started out, I had no idea how important photographs were. Here are some examples of my early days:
https://www.etsy.com/transaction/16332153?Kind of blurry...busy background...very dark.
Then I tried a plain background with a flash:
https://www.etsy.com/transaction/23661770?then I tried outside:
https://www.etsy.com/transaction/23277783?Still dark...still a terrible background...still kind of blurry
The first 18 months I was open, I only sold 99 items. Finally, some other sellers gave me a very detailed critique, and every one of them said, "It's your pictures!!!!"
So I built the light box and stopped using a flash, read the manual that came with my camera and learned how to use macro, and started to take new pics.
Now they look like this:
https://www.etsy.com/listing/125719008/american-girl-doll-18-inch-dolls-short?The month before I made the switch, I sold $36 worth of merchandise. The month AFTER I started using the light box, I sold $552 in merchandise, and in fact, in the next 18 months I sold 965 items. 965 items in 18 months vs. 99 items in the first 18 months. See how important that is?
Did you also notice my last photo is not a full shot of the item? That's called the teaser shot, and I highly recommend that as well. A good, clear, up close shot of a corner of the item will intrigue someone to actually click on the item and enter your shop. It really works. My views shot up tremendously when I started making this the first pic in the series of pics.
It's also important to use all 5 photos. A close-up, the set together, back, stacked, an angle, etc.
I also want to address your shipping and return policies. It's important to know that you are responsible for getting the product to the customer without damage. Insurance protects you, not the customer. No matter what your policy says: if the customer received it damaged, or doesn't receive it - PayPal or their CC company will take the funds and refund the customer. Best thing is to pare down your lengthy policies into a more customer friendly sounding and reasonable policy.
If it's buyers remorse - they don't like it or changed their mind, then yes, I would require them to pay for return shipping. That is the industry standard. But if it's damaged or they didn't receive it, you should refund shipping as well.
If you are worried about breakage, always include insurance in your shipping and handling costs, or up the price of your items a bit to self insure.
Also, as is often stated in the forums by buyers, if you don't have the international shipping listed, most people will pass your item by and not bother to contact you for a shipping price. Best to research the costs and list it in your individual listings. Also important is to have a statement that international customers are responsible for their country's customs/VAT fees.
You can't correct everything all at once. Take one thing at a time, and work through your listings as you go. I would start with Titles and tags, as relevancy is so important here on Etsy. Then start retaking your photos...etc.
Good luck - and feel free to ask more questions if you have any.