There has been a freebie explosion in SL lately. There's a bit of controversy over it, some shopkeepers throwing fits because people are taking their freebies but not buying.
You will never sell as much as you give away. It's just a simple fact, people will take things that are free, whether they like them or not. Some will try them once and throw them away because they don't like them, but there's no way for you to know that. Expecting to see the same number of sales as freebies is completely unreasonable.
Freebies can be a good marketing tool. I timed the stockings to my first clothing release, and more people came with the announcement of "hey, get the free stuff" to actually look at what I had, and yes, some people bought as well. I attracted people who would not have come to the store, including a few who did buy things, by pimping the free. Freebies also can get you blogged, so you have another chance of sticking out amongst the crowd- because there is an insane amount of competition in SL, as well as the world itself being so huge that people aren't going to know you exist. By adding more freebies irregularly during the season, I had a little bit more traffic trickle back, as well.
Comparing my sales (although it isn't a completely legitimate comparison, as many things converged in one case to all make it better), being blogged by a high profile fashion blog is better than freebies, but you can't count on that- I got an amazingly awesome review, and this one was cold because I found sending things off to reviewers didn't really work. However, the way for bloggers to find you if they aren't going to pay attention to their inventories is to see your name somewhere else. Grabbing attention with freebies gets your name out there!
Of course, there are a lot of people who simply won't put money into the system. New accounts start with 0 Lindens, which is pretty daunting, especially when you're talking the influx from CSI, people who aren't there for the SL experience, but for the TV tie in, who may be sucked in...but it may take a while. They get a lot of freebies to try to hold their interest! If good things are thrown at them, they may say "gee, this is neat, maybe I'll stick around" and eventually end up with money to spend, as well. But, there are people who won't buy things because they're cheap (or, very rarely). I don't buy things often, most of the clothing I wear cost me 10 Lindens a piece...for upload fees. This is for a number of reasons, partly Allegory is hard to outfit because she does have such a concrete style and attitude in my mind, but partly it's that whole DIY thing, I like making my own clothes (I also don't buy skins because I like Alle's ridiculously pale skin and wacky makeup whenever I get bored). I've often considered funneling money into an alt who could wear pretty dresses...but then, I spend a lot of my SL time building, not showing off.
The vast majority of people who would have bought your products, without all the freebies, still will. You are not losing out on a customer base. If you've got a lot of traffic and nothing is moving, maybe you should re-evaluate: is what I'm selling of a good enough quality people will want it? Is it universal appeal enough (and do I want to make things I don't want to make it be)? And, in one particular case: am I trying to sell things based upon my "celebrity" and then deciding people suck because they don't all run to throw money at me? The Paris Hilton phenomenon isn't as prevalent in SL, THANK GOD.