Etsy should go back at what they did initially and support the craftsmen instead of the china imports, maybe that would help bring them back on track.
Here's a contrarian point of view: What if they do embrace China imports, get acquired by Alibaba and become from a front of artistic goods made in China.
Your strategy would be to get full steam becoming a front for Alibaba, fooling your users for long enough so that eventually Alibaba buys you.
Problem is why would Alibaba do that ? By that stage you have a toxic brand: at any time, if a enough ripped off users make some noise, you are done forever.
The best move for Alibaba, assuming they are interesting in building a Chinese artisan store, is to simply destroy Etsy with "Cut out the middle man, buy Etsy chinese mass market stuff cheap directly at the source on Alibaba. Or if you are interested in the genuine chinese art, check out our new dedicated store. Click on the following link to see all the process and check we put in place to make sure it is genuine handmade, not found in a super market good."