Go offline. I mean, don't just find ways to advertise your shop offline, but find other places to sell your items. Etsy is nice, but there's a HUGE segment of the population who have never and WILL never shop on-line.
I find that when I can show people my work in person, or in a store, I get 300% more sales than I ever do here. I've only ever had about 60 Etsy sales, but I've done so very much more than that selling to friends, family and in stores/craft fairs.
I think it just has to do with the attitude of shoppers, especially since the economy is bad. People want to make absolutely sure it's something they want or need before they enter their credit card info, or PayPal address. In a store, it's so much easier to see something, think, "Oh I love this, I have to have it!" and walk out with the item. Impulse buys, or just touching fabric or seeing a texture that catches your eye. Product photography rarely does that.
Craft fairs, artisan's festivals, local boutiques and stores, consignment shops, bookstores, you name it. Look locally and you may find you sell more in person than you ever did on Etsy.