Did you download the entire folder from ThemeForest or just the installable theme file? Etch.zip will be directly inside the folder you downloaded from ThemeForest (make sure to download the entire folder and not just the theme).
You have two options for installing your theme:
1. FTP – Log into your site using your favorite FTP program and go your WordPress installation’s /wp-content/themes directory. Upload the unzipped ‘fusion’ folder into this directory.
2. WordPress Admin Upload – Log into the admin area of your WordPress site. Go to Appearance -> Themes. On this page click ‘Install Themes’ and select upload. Then choose etch.zip and submit.
And, I was able to unzip the file that I downloaded. The error message was for the SASS files and it would not work when I selected the “Try Again” option so I selected the “Skip” option which opened everything else.