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Opportunities created by Etsy's shortcomings:

1) Create an Etsy review site/blog/mailing list that points to the "good" merchants.

2) IndieHackers for Etsy. Do some interviews with legit Etsy owners who sell quality stuff and make a living on Etsy.

3) Independent review company that rates etsy sellers.

4) Hard mode: compete directly with Etsy and have some sort of verification process that you're not drop-shipping crap from China.

All but number 4 is completely reliant upon Etsy not getting their act together.

I would say the safest is actually #4 without taking VC or going public. Etsy already validated the hand crafted market, but imho it isn't a devour the world market. The desire for ever expanding growth has increasingly forced Etsy to effectively abandon this market, leaving a hole for you to step into.

I did say opportunity not viable long term businesses :)

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