Two years ago, (NASDAQ:AMZN) launched its so-called Etsy (NASDAQ:ETSY) killer: Amazon Handmade. It promised a crafts marketplace of goods that were "handmade or hand-manufactured," with no factory-made products. 

Etsy continued to grow in the face of the new competition, but the e-commerce giant is making a renewed push into that niche market.

In October, it launched Amazon Handmade Gift Shop, an expansion of the previous Handmade platform: The site now includes 10 categories including jewelry, home and kitchen, and party supplies. 

Then, earlier this week, Amazon upped the stakes, announcing that Handmade items would be available with Prime Now one-hour and two-hour shipping in select cities, including New York, San Francisco, and Seattle, through the holiday season. 

A promotional sign featuring blank tags on beige background to advertise Etsy for Small Business Saturday

Image source: Etsy.

Hitting Etsy where it hurts

Amazon's brand is never going to match Etsy's in handcrafted products as Etsy's name is exclusively built on such items. However, Amazon can leverage its fulfillment system and Prime loyalty program to ensure quick delivery, and that is exactly what it's doing during this crucial gift-buying period.

Shipping speed has been a weakness for Etsy. As former CEO Chad Dickerson said two years ago, "The most important thing about Etsy is not about having the lowest price or the fastest shipping."  But his replacement, Josh Silverman, has acknowledged that shopping on the site drops off in mid-December just when it's peaking at its e-commerce peers, a sign that consumers don't trust Etsy to get them their Christmas orders on time. 

This year, the company has stepped up efforts to assist merchants during the holiday crush by helping last-minute shoppers find what they're looking for, and making fast and free shipping available. With Amazon's new offer to deliver Handmade items in as little as an hour, it's more important than ever for Etsy to execute on this front.

Still the leader

Despite Amazon's recent push, Etsy remains the clear leader in the handcrafted niche. As of a year ago, Amazon Handmade had 500,000 total products listed on its site, while Etsy adds millions of listings each month. 

In its most recent quarter, Etsy had 1.9 million active sellers and 31.7 million active buyers, and it's been a global company since its launch, while Handmade just recently expanded to Europe, its first major foray outside the U.S.

Perhaps most importantly, Etsy's seller fees are much lower than Handmade's. Amazon charges its merchants a 15% commission compared just a 3.5% commission and a $0.20 listing fee per item on Etsy. Amazon also charges a $39.99 monthly fee to sell on its Handmade site, though it has waived that through the end of the year. 

While some merchants sell on both sites, the evidence that Amazon Handmade is taking sellers away from Etsy is thin. As long as Handmade charges considerably higher fees, Etsy is likely to keep its lead. And considering Etsy's relatively small size -- it's on track for less than $500 million in revenue -- there seems little reason for Amazon to slash its fees to go after the handmade niche.

The man behind the curtain

Whenever Amazon enters a new retail sector, the stock prices of incumbents often fall. That was illustrated again this summer when grocery stocks crashed after Amazon acquired Whole Foods. Similarly, Etsy shares sold off when Amazon launched Handmade two years ago, and dipped again in October when it expanded the Handmade gift shop. However, the notion that Amazon "kills" competitors in any industry it enters is greatly exaggerated.

While Amazon's growth is a big reason behind the rash of store closings this year, brick-and-mortar chains that have fought it head on have often outperformed expectations. Shares of Best Buy, for example, have doubled over the past two years as the company has lowered prices and invested in training employees, responding to the so-called "showrooming" effect. Wal-Mart and Costco just reported better comparable-sales growth than they've had in years -- achieved right when Amazon was taking over Whole Foods and slashing some of its prices. Even Kroger just turned in a quarter with solid comp sales and profit growth.

Elsewhere, Amazon Business (the successor to AmazonSupply), failed to make a dent in the sales of home-improvement retailers Home Depot and Lowe's, and its efforts in music and video streaming have hardly affected leaders like NetflixPandora, Spotify, or Apple Music. Finally, the Amazon Webstore folded in the face of stiff competition from Shopify

Amazon does best when it launches headlong into emerging industries like e-commerce and cloud computing, which have delivered its greatest successes. Its "me-too" offerings have been more underwhelming, and the company has plenty of failures in its history to go along with its smashing successes.

Handmade seems like another one of those underwhelming, me-too initiatives. Etsy has a significant head start in the category, and its sellers aren't going to flee to a competitor that charges them higher fees. Even if Amazon can outexecute Etsy on fast shipping, the quirky nature of the category doesn't lend itself to Amazon's strengths like supply chain and pricing. At its core, Amazon's brand seems almost antithetical to the handmade ethos. Etsy's mission statement -- "Keep Commerce Human" -- sounds like the opposite of what Amazon stands for. 

Furthermore, Amazon is so big that it's not in the company's interest to slash fees to corner the market in a small, niche industry like hand-crafted goods. It simply won't move the needle. Amazon's recent offer to ship Handmade goods on Prime Now is a reminder to Etsy that it needs to get better at logistics, but considering the facts above, Amazon's competition isn't about to derail the leading craft marketplace's prospects.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Apple, Kroger, and Netflix. The Motley Fool owns shares of and recommends Amazon, Apple, Netflix, Pandora Media, and Shopify. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short January 2018 $170 calls on Home Depot, and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Costco Wholesale, Etsy, Home Depot, and Lowe's. The Motley Fool has a disclosure policy.