Amazon takes aim at Etsy with its own marketplace for handicrafts

For an e-commerce giant as massive as Amazon, the company sure knows how to think small.

In a bid to challenge Etsy -- the online artisanal juggernaut for vintage homespun goods and handicrafts -- Amazon on Thursday launched Handmade at Amazon, its own incarnation of an arts-and-crafts marketplace that gives a major injection of scale to otherwise obscure, one-of-a-kind products.

The handmade goods category is entirely new for Amazon, but the strategy behind it is a familiar one. Amazon aims to sell everything to everyone, and over the years that's required the Seattle-based company to pick up new e-commerce skills along the way in order to meet consumer demands.

Thanks in large part to Etsy, there's now a sizable demand for handmade products sold over the Internet. When Etsy filed for its initial public offering, the company reported nearly $2 billion in annual sales.

So of course Amazon is stepping up for a piece of the action.

"Knowing an item has a unique story behind it creates a personal experience that customers have told us makes owning handmade items special," Peter Faricy, vice president for Amazon Marketplace, said in a statement.

Obvious likenesses aside, Handmade at Amazon does differ from Etsy in a few key areas, such as fee structure, seller qualifications and manufacturing policies.

At this point Amazon is requiring interested sellers to apply to Handmade in order to join the marketplace, whereas Etsy is open to anyone. While that does place limitations on the products Handmade can offer, it also may help Amazon sidestep some of the counterfeit issues that have plagued Etsy.

Handmade is currently home to 5,000 active sellers from 60 countries offering 80,000 items. Etsy, on the other hand, claims 1.5 million active sellers and 21.7 million active buyers. Still, Amazon's loyal base of more than 280 million shoppers trumps Etsy nearly ten-times over. Unsurprisingly, that reach will come at a cost.

In terms of fee structure, Amazon will take a 12 percent cut of a seller's sales, but allows them to list the items for free. Etsy charges 20 cents per listing, but takes a cut of just 3.5 percent for each transaction. Amazon says the higher fee covers all costs, including payment processing and fraud protection.

On the manufacturing front, Amazon is requiring Handmade sellers to certify their items are factory free and indeed, made by hand. Etsy is more lenient in this area and has allowed merchants to use manufacturers based on select criteria.

For now it's unclear what long-term impact Handmade at Amazon will have on Etsy, but it's almost certain to not be a positive one. Despite its buoyant Wall Street debut in April, Etsy's stock has been a huge disappointment for investors -- and it's only getting worse after today's Handmade debut.