When I first set up shop on Etsy I had no idea really what I was going to sell. I liked making stuff and I looked at all these fantastic artists and crafters and how easy it was to set up shop and I thought "oooh, I could do that." I chose my username almost on a whim, set up my shop and filled it with a few hastily photographed crafty bits and pieces. I did make some sales, but it took me about 9 months of tinkering with my Etsy shop and trying out making lots of different things to sell before I began to find my own style and to have real confidence in my products and my shop's identity.
If you're happy to make a few things and see if they sell and use the money to make more things then you can carry on doing that forever (having a self-funding hobby is pretty cool). But if you're looking to build up a business and maybe eventually "quit your day job" you need to take a long hard look at the whole of your business, and that begins with your product.
It sounds a bit flippant, but essentially are you making something awesome and special that people want to buy? If a buyer finds your shop, why would they stay and shop when the whole internet and thousands of other crafty businesses are just a click away?
It can be hard as an artist or creative person to think about your works as "products", but it's well worth taking the time to think about your shop from a buyer's point of view and to start thinking about your shop as a "brand" with a distinct style of its own.
Be prepared to experiment, to try new things, to develop a new collection or offer a different option to your customers. E.g. if you're an artist you don't have to change your style or anything drastic like that but you could investigate selling your work as prints or on notecards or badges or branching out into things like making embroidery patterns from your illustrations.
Look at your competition and the market for the sort of things you sell. Is there a niche that hasn't been filled? The internet is very well suited to selling a niche product, e.g. you could specialise in fun jewellery aimed at computer geeks or knitters or book lovers via the internet, but you might have trouble finding lots of those customers at your local craft fair!
Try and make your shop as cohesive as possible. Variety is good and can help keep your shop fresh, but when a shopper clicks into your shop from search or seeing your work on a blog you want them to see more things they like and to think of you when they want to buy a certain type of item. Focus on a style (e.g. simple modern jewellery) or a product (e.g. pendants) or a customer (e.g. mums buying children's products) or an occasion (e.g. wedding jewellery and other bridal accessories).
Keep an eye on the trends, the fashionable colours and popular motifs but don't slavishly follow them or you'll be left without a saleable product when the fashion changes again. Also try to resist the urge to make something just because everyone else is - again, when the fashion changes you will lose out, and you'll just be one of many sellers jumping on a bandwagon and competing to sell the same items.
Perhaps most importantly, be honest with yourself when something isn't selling. Just because you love something doesn't mean there is a market for it. I quite often make new things that I'm super excited about, and then no-one buys them! :)