On any other problem whatsoever, people would readily grant that having the developers understand the problem domain confers an advantage. I don't see why this should be any different.
I am not convinced that males are incapable of understanding whatever it is that Etsy's clients want. After all - we don't look for programmers who are doctors for medical programs, etc.
I'd actually posit that in majority of cases (ie all enterprise software), programmers actually have much less of clue as to what they are working on than in the case of consumer site like this.
Actually, you do end up needing a degree of domain-specific knowledge. Do you not think that programmers of medical software don't pick up a ton of medical knowledge while they're working? And that people who are programmers who were, say, pre-med or bio students or whatever wouldn't have an edge? As someone who happens to work in a science/bioinformatics environment with no education on the topic, I can definitely say that I make decisions based on the domain (what I've learned since joining) and the behaviors of our end-users, scientists.
When programmers lack domain knowledge, they're likely to make bad assumptions that will hurt them later. Of course you have to know intended use when you're writing software, it can help you design it properly. A very simple hypothetical: Designing a database to efficiently receive some data set. What if Etsy's users aren't interested in that data? And they care more about something else, which would merit designing it differently? Maybe having a female voice to bring that up would be helpful. Obviously, it's purely conjecture, but I think it's a reasonable scenario.
