Why Shuttle emailed you about a return policy
Shuttle emails you when Etsy refuses to change your listings because your Etsy shop has no return policy. Etsy requires a return policy on every physical listing before it will accept changes to it. That includes taking a listing down when it sells out.
Shuttle does not create a return policy for you, because a return policy is a promise to your buyers. Only you can decide what it says.
While the problem lasts, Shuttle sends this email at most once a week.
Why a sold-out listing stays live on Etsy without a return policy
A sold-out listing can stay live on Etsy, and buyers can still order it, while your Etsy shop has no return policy. Etsy does not accept a listing with no stock at all. So when every variant of a product sells out, Shuttle leaves a quantity of 1 on the Etsy listing and takes the listing down.
Without a return policy, Etsy refuses the takedown. The listing stays live with a quantity of 1, so a buyer can still order an item you no longer have.
The same applies the other way round. If a listing has no return policy and comes back into stock, Etsy can refuse to put it back up.
Add a return policy to your Etsy shop
Adding a return policy in Etsy is the only fix. You don't need to change anything in Shuttle.
In Etsy, open your shop settings and go to your shop policies.
Add a return policy. It can say that you do not accept returns or exchanges. Shuttle accepts that kind of policy too.
Save the policy in Etsy.
Shuttle finds the new policy the next time it changes one of your listings.
Check sold-out listings after adding a return policy
Sold-out listings that stayed live while your shop had no return policy are not taken down right away. Shuttle takes a sold-out listing down the next time it updates that listing's stock.
To avoid orders for items you don't have, look through your sold-out products on Etsy. Deactivate in Etsy any that are still live.
Choose which return policy Shuttle uses
You don't have to choose a return policy in Shuttle. If you leave the setting on Select a return policy, Shuttle uses the first return policy it finds in your Etsy shop. If you have more than one return policy, you can pick the one Shuttle uses:
Go to Settings > Products > Shopify → Etsy.
In the About Listing section, find Return policy.
Choose a policy from the list. Each policy is named after what it accepts, for example Returns and exchanges or No returns or exchanges, plus the return window in days.
Click Save.
The Return policy setting only appears once your Etsy shop has at least one return policy.
Shuttle gives your chosen policy to every product it transfers to Etsy. Existing listings that already have a return policy on Etsy keep it. For an existing listing with no return policy, Shuttle uses your chosen one when it takes the listing down or puts it back up.