Etsy doesn't have an option for local pickup/delivery only. If you'd like to do this, be as clear as you can in your listings and policies that your items are only for local pickup/delivery.
If a buyer outside of your local area purchases your item, you must either ship the order or refund and cancel the order. Failure to do so may result in the suspension of your selling privileges.
If you'd like to offer local pick-up in addition to shipping, be sure to clearly mention in your shop announcement, listings, and/or the FAQ section of your shop policies that items are available for pick-up.
The buyer can contact you before purchase to discuss this shipping option. If you both agree to pick-up, you can remove the shipping charges on the listing and then reserve it for the buyer.
If you agree to meet in person, keep in mind these personal safety tips.
In the unlikely event that something goes wrong with your transaction, we recommend that you have confirmation of pick-up or delivery. Confirmation may include a signed receipt, a photograph of the delivery, or a Message sent by the buyer confirming receipt of the order.