Editor's Pick: Originally Published Wednesday, Dec. 23

When Amazon (AMZN) launched its own marketplace for handcrafted goods in October, many thought this could only mean the end was near for Etsy (ETSY) . But while Handmade at Amazon was at first labeled the "Etsy Killer," it's not so clear that this is the case.

Nearly three months after Handmade's official launch, the response from sellers has been mixed, and analysts are not counting out Etsy, either.

During the company's third-quarter call, Etsy CEO Chad Dickerson responded to a question about Handmade, saying that he has no reason to believe they are having an impact on Etsy.

"We know our sellers extremely, extremely well," he said. "We've been working with them for a decade, and we believe that Etsy is the best platform for them to be creative entrepreneurs and build businesses on their own terms. We also know that half of our sellers sell in multiple venues, and that Etsy is the primary source of income for those sellers who sell in multiple venues."

That line of thinking has been supported by feedback from a number of sellers who are selling on both Etsy and Handmade.

One seller who has her products on both Handmade and Etsy told TheStreet that since Handmade launched she had sold 43 products on Etsy and only four on Handmade. And in that same period she had more than 10,200 views on Etsy and 1,100 on Handmade.

She also said that many sellers were upset to learn that Martha Stewart's products would be featured on Handmade and "getting prime search spots for all categories."

"Amazon just has dropped the ball on this," she said. "Unless things turn around real quick, I won't be there in August when they start charging $39.99 to list there. There just isn't any reason to."

Another seller, who has five times the amount of sales on Etsy as on Handmade, said he views Etsy as his "primary focus" and Handmade as "a supplementary source of income," a common take among the sellers we spoke with.

While he hasn't yet decided if he'll continue selling on Handmade once the fees set in, he's sure he'll continue selling on Etsy. "Etsy has been a really good fit for me and despite its problems, it is still the place that most people associate with handmade goods."

ETSY Chart
Etsy's drop since Handmade launched on Oct. 8

Sure, it's still early days for Handmade, and it has been growing incredibly fast--increasing its selection to 200,000 products (from its initial 80,000 at launch) and doubling the number of artisans to more than 10,000. But that doesn't exclude Etsy, which has more than 30 million products on its site, from the picture.

"For general merchandise you can go to eBay (EBAY) or Amazon," said Wedbush analyst Gil Luria. "There's no reason that for handmade [products] you won't be able to go to Etsy as well as Amazon."

Yes, Etsy went from the main player in its space to one of two, but that doesn't mean Amazon will kick it out entirely.

"I don't think [Handmade is] that threatening to Etsy if Etsy finds its way," said Max Wolff, Chief Economist at Manhattan Venture Partners, a bank that brokers shares in privately-held companies. "In a weird way, it could help Etsy because it should rule out the strategy they were going to do, which is just hit quarterly growth numbers and sell a wide range of products. That was a long shot and not a good idea, but now trying to do that against Amazon is straight up nuts."   

Wolff was referring to the perceived shift at Etsy as it has grown from a small artisan-focused community to a public company trying to appease Wall Street. Moves such as allowing manufactured goods on the site and cutting deals with companies like Macy's (M) have been raising concerns that Etsy was losing its ethos, and according to Wolff, the entry from Amazon could be a wakeup call for Etsy to revert to its roots. 

Part of the issue is that Etsy IPO-ed with a lot of hype and an unreasonable valuation. Handmade helped lower that valuation, and the current stock price could be more appropriate for the niche company.

"The stock is down very considerably, so [the threat from Handmade is] somewhat reflected in the share price," Luria said. "It seems like Etsy's valuation is more reasonable."