I have an earlier blog posting about how to make an Etsy Treasury, take a look at it if you'd like to find out how to make one. It's on Monday, Nov. 9th in this blog.
How do they work as a promotional tool? That is difficult to fully answer, because a lot of promotional efforts are impossible to really define as far as how much traffic they bring to your shop, and how many sales result from that traffic. I operate under the assumption that getting your shop better known is always a plus. Treasuries are free, you can list one of your own items in them, and sometimes they're picked for the Etsy Front Page.
I wouldn't spend too much time on Treasuries, because there are better ways to promote your shop. But they're fun, you might get on the Front Page, and sometimes a person you put in your Treasury will reciprocate and put you in one of theirs. Taking really good pictures, using a tag to state the color of your item, and relisting often will get you in Treasuries. Of course, outside of making lovely things that people want, taking gorgeous pictures is the biggest thing in online promotions. The most beautiful bag or ring won't sell if you only have one blurry, badly lit photo of it at your shop.
I've only had one sale of an item while it was in a Treasury, and that Treasury was moved to the Front Page. But I've seen a slight increase in traffic, and gotten some hearts for an item while it was in a Treasury. In my opinion, Treasuries have value as a promotional tool, worthy of some time, but not a major source of traffic or sales. Treasuries are free, and you get the happiness of helping fellow Etsians by promoting their shops in your Treasury. And while putting one together, you'll have the happy experience of seeing a bit more of the beautiful handcrafted and vintage items on Etsy.
Thank you so much for stopping by, wishing you many sales, and happy times with your craft!
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