The fact that they (unlike most etsy stores) seem to be tied mostly to brick-and-mortar businesses may help them in this regard. I might, for example, try on a t-shirt at a store in my neighborhood, then go home and order one on their square store in a different color or as a gift to have shipped to someone.

Definitely a challenge for them but Airbnb seem to have done fairly well here.

Yes, by hiring a legion of professional photographers and offering their services for free. That's a hard model to sustain/emulate