Here's my take on Etsy v.s. WordPress for selling hand crafted items.
Etsy:
Etsy is a really great website you can use to create an online store in the form of a an Etsy profile. Etsy makes money by charging a listing fee of 20 cents for each item listed (per 1 item) and getting 3.5% of every sale. There are many Etsy alternatives, but I'm only going to cover WordPress.
WordPress:
WordPress (on a hosting account) is the best blog option and website CMS option there is. With the help of the plugin Jigoshop and PayPal, WordPress is also the best shopping cart website available to date. True Zencart, OsCommerce and other eCommerce solutions have more shipping options, but they're slow, inferior SEO wise, lack a blog, and are buggy. PayPal charges 2.9% of every sale. When you have a hosting WordPress account you will have to pay for a ~$10.00/year domain fee and a $5.00/month web hosting fee.
Etsy is a better way to sell items if you're not planning to grow and turn into a business. It's a great way to plop an item online and instantly have a crowd of potential customers (etsy users) already looking at your item. A hosted WordPress website with an active blog will generate more customers in the long run because it's superior SEO wise. Google respects websites with their own domain and IP address over a website profile like Etsy. Also a hosted WordPress website gives you the option to grow a business large or small.
Another plus about WordPress is that it has more options. The online world is full of trends and the 'open' nature of WordPress means it will always be ahead of the game especially profile websites like what Etsy offers. When I say trends I mean things like the 'Google +1' button, Facebook 'Like' button, Flicker plugins, Twitter feed plugins, etc.
A WordPress cart website is also cheaper if you ever start to sell a lot of products. The cost of an Etsy profile website will start to cost more then a WordPress website after your monthly revenue reaches ~$600/month or more.
Conclusion
So My conclusion is that Etsy is a better option if you plan to just sell a handcrafted item once a week online. If you are internet savy, or plan to grow, A regular WordPress cart website will suit you much better.
