What happened

Shares of Shutterfly Inc. (SFLY) fell 11.1% in September, according to data from S&P Global Market Intelligence, after (AMZN -0.32%) quietly launched a competing photo printing service. 

So what

More specifically on Sept. 21, Jeff Bezos' brainchild launched Amazon Prints, describing it as a "new photo printing destination for Prime Photos and Amazon Drive customers."

Of course, Amazon already provides unlimited photo storage as a perk to its millions of Amazon Prime members. So it's a logical step for the online retail behemoth to also provide a compelling photo printing service. And Amazon Prints, for its part, offers 4-by-6 prints starting at just $0.09, 8-by-11 hard cover photo books for $19.99, and a variety of other products including invitations and cards, as well as wall calendars "coming soon."

Naturally, Shutterfly shares promptly plunged nearly 13% on the news, marking its biggest single-day drop in over eight years. 

Now what

Several analysts stepped out to defend Shutterfly in the wake of Amazon's launch. Robert W. Baird's Colin Sebastian and Ben Gaither, for example, argued the market was overreacting, stating, "Most Prime customers go to Amazon for the convenient and expedient shopping experience, whereas photobook curation tends to be a more time-consuming, customized transaction."

That's fair enough. And it wouldn't be the first time Amazon failed to disrupt an industry. Recall that Amazon similarly tried to shake up the credit card reader business with the launch of Amazon Local Register in 2014, only to kill the service earlier this year, after it failed to gain traction despite attractive fees and pricing that undercut competitors.

Nonetheless, I think most Shutterfly investors would agree that their company would be wise not to underestimate the influence Amazon Prints could have, especially given its captive audience with millions of Prime Photo users. So while Amazon's entrance into Shutterfly's niche hardly means doom for the smaller company, it was no surprise to see shares fall so hard last month.