Updated from 10:09 a.m. to include additional comments from Amazon and an analyst.
NEW YORK (TheStreet) -- After much anticipation, Amazon(AMZN) - Get Report has finally launched Handmade, its platform for artisan-created products that has been touted as a new alternative to Etsy(ETSY) - Get Report .
Handmade at Amazon finally went live at 3 a.m. ET on Thursday after first reaching out to sellers in May. Sellers had been told to prepare their Handmade pages a couple weeks ago. As of launch, the site has more than 80,000 products from 5,000 sellers in 60 countries and across six categories -- home, jewelry, artwork, stationery and party supplies, kitchen and dining, and baby, according to The New York Times.
"You can think of it as a factory-free zone, a mass-produced-free zone," Amazon's head of Handmade Peter Faricy told The Times.
Faricy's comment hints at a touchy subject in the artisanal world. Many Etsy sellers have been feeling increasingly frustrated with Etsy's introduction of manufactured products on its site. These sellers are excited by Amazon's commitment to keep Handmade truly handmade.
"It's my hope that Amazon will help bring renewed confidence to buyers wanting truly handcrafted items," said M. Turner, one seller who has already set up her shop, PhoenixFire Designs, on Handmade. "Amazon has been doing it right so far and has really vetted sellers to ensure they are legitimately makers and not merely marketers."
According to a Wedbush survey of thirty prominent Etsy sellers, 90% would move products to Handmade or at least consider doing so. "The reason is they are upset over how Etsy has allowed manufactured goods to come in and compete with them and have been lax on counterfeit goods," Wedbush analyst Gil Luria said. "Now that they have another option of another platform to sell their goods on, it's likely many of them will shift their goods to the Amazon marketplace."
On top of concerns over manufacturing and counterfeiting, Etsy's traffic also pales in comparison to Amazon's. Through Handmade, sellers will be able to reach 285 million active customers, versus Etsy's 22 million. Amazon is also letting Handmade sellers partake in Prime and send their goods to Amazon fulfillment centers.
"We're always looking for ways to improve the shopping experience," an Amazon spokesperson said in an email. "Customers told us that they want a place for genuinely handmade items. That's why we created Handmade at Amazon."
If Amazon plays its cards right here, it could add a significant volume of sales to its business. According to Luria, Amazon could add $300 million to $400 million in revenue from Handmade. "Considering its marketplace profitability is likely 40-50%, the addition of [Handmade] will add significantly to Amazon's famously low profits," he said.
While Amazon Handmade is definitely posing some real challenges to Etsy, it's certainly not perfect.
Plus, the process for listing products on Handmade requires more details and is more time-consuming than on Etsy, according to Turner.
On top of that, it's hard to imagine handmade crafts fitting into Amazon's sweet spot of inexpensive products and fast delivery. "If you look at the core strategy for Amazon it's to provide consumers with a large variety of products at low prices with fast delivery," said Brean Capital analyst Tom Forte. "If you look at artisanal merchandise, it would definitely advance the large inventory, so I would give a checkbox there, but when I think about fast delivery and low prices, I don't think it's consistent with Amazon's core strategy."
Forte compares it to selling organic food in Whole Foods versus selling organic food in Walmart. He thinks that consumers will still go to Etsy for the artisanal experience.
On paper, Amazon looks like it could be a bit more expensive for sellers -- Etsy charges a 20-cent fee for each product listing plus a 3.5% cut of sales while Amazon will not charge a listing fee but will take 12% of sales. But according to Luria, Etsy sellers tend to pay around 11% at the end of the day, when they add shipping, payment processing, and marketing. Amazon just bundles all of those services under the 12% cost.
Starting on August 1, 2016, Handmade artisans that sell more than 40 non-handmade products in other Amazon categories will be charged $39.99 a month, but that shouldn't be a problem for handmade-only artisans.
"Big picture, yes, this is a very big problem for Etsy because Amazon is offering Etsy sellers a much better proposition," Luria said. "For basically the same fee they can get to ten times more customers and they can sell in an environment that's only handmade."
Luria added that "I would expect sellers to shift products to Amazon. As they do, Etsy's listing fees will diminish and their marketing revenue will diminish because more money will be spent on the Amazon platform."
The added challenge comes as Etsy shares have been going through a rough patch, with its share price down more than 50% from its IPO.
"We believe we are the best platform for creative entrepreneurs, empowering them to succeed on their own terms," Etsy CEO Chad Dickerson said in a statement today in response to Handmade's launch. "Etsy has a decade of experience understanding the needs of artists and sellers and supporting them in ways that no other marketplace can."