Following Etsy's (ETSY -1.75%) surprising accelerating growth in its second and third quarters, (AMZN -0.68%) apparently doesn't want to miss out on positive trends in handmade goods. The e-commerce giant is stepping up its game in handmade products this holiday season, announcing Tuesday that its Prime Now delivery is teaming up with Amazon Handmade, its Etsy-like online destination for buying and selling handcrafted items. Amazon will offer last-minute one- and two-hour delivery of items for sell on its handmade marketplace up until Christmas Eve in some large cities.

"This marks the first time Amazon Handmade Artisans are leveraging the company's fastest delivery method yet to extend their selling season through Christmas Eve on Prime Now," Amazon said. It also marks a significant step to compete with Etsy -- and it signals Amazon's growing ambitions in handcrafted goods.

Handmade soap

Image source: Getty Images.

Doubling down on the holiday season

In Amazon's Tuesday announcement, the company said the fast-shipping service for Handmade is available in Austin, Brooklyn, Manhattan, Minneapolis, Phoenix, Portland, Raleigh, San Diego, the San Francisco Bay Area, and Seattle through the holiday season, beginning today.

Prime Now comes in two varieties: two-hour delivery for free or one-hour delivery for a fee. Customers will be able to order handmade products for Prime Now delivery until 11:59 p.m. on Christmas Eve.

Of course, Amazon isn't alone in its efforts to double down on the holiday season with its handmade goods. Etsy also realized the importance of staying competitive with traditional retail as Christmas approaches. In its third-quarter earnings call, CEO Josh Silverman said the company is putting initiatives in place to counteract Etsy's typical trend of slowing sales in mid-December as consumers turn to e-commerce companies normally with more competitive shipping promotions.

A carpenter cutting wood in his workshop

Image source: Getty Images.

Here are some of the actions Silverman said Etsy is taking to avoid slowing sales after Dec. 15:

  • Coordinating its holiday sale across sellers on its platform
  • Launched a tool for sellers to offer free shipping on specific items
  • Launched a feature enabling buyers to search for items with free shipping
  • Providing more transparency about ship times, enabling buyers to more easily find ready-to-ship items
  • Offering a way for sellers to easily offer gift wrapping as an add-on
  • Introduced a gift finder search

Highlighting Etsy's compelling market

While Amazon's aggressive move to bring Prime Now to nine cities for Amazon Handmade means Etsy will have tough competition in those areas, it also puts the spotlight on how promising Etsy's market of artisan products is.

A recent study by Etsy confirmed a strong trend this holiday season for thoughtful, personalized gifts. In the study, 40% of survey respondents said they expect to either give or receive a personalized or handmade gift during the holidays. In addition, the survey found that 70% of millennials are willing to pay more for gifts that are personalized or bespoke. And Etsy also noted that millennial customers are "growing up," with 52% of them saying they are buying more gifts than they were two years ago, compared to 36% of "general consumers" who were surveyed. 

Amazon is clearly betting aggressively on the growing trend of handmade goods. While it wasn't clear at the outset just how aggressively Amazon would push Amazon Handmade after its launch in 2015, there's no doubt about Amazon's plan to compete fiercely with Etsy now. Handmade now includes 10 categories, such as jewelry, home and kitchen, and party supplies, and offers hundreds of thousands of handcrafted products in over 30 countries. Amazon's decision to bring Prime Now to the holiday season also shows that the e-commerce giant is willing to invest in shipping in a similar manner as it is for its core marketplace.