Dive Brief:

• Etsy Inc shares tumbled last week and is having trouble recovering as investors panic about Amazon’s entry into the handmade-goods marketplace business.

• Amazon launched its Handmade at Amazon marketplace last week, with more strict rules than Etsy about sellers’ artisanal approach.

• Etsy’s waters have been severely muddied by the increasing number of mass-produced and even counterfeit goods on its site and its tax-minimizing efforts through its Etsy Ireland subsidiary, which are legal but have been challenged by some as contrary to the company's status as a B Corp.

Dive Insight:

Etsy is caught in a severe conundrum: As a public company it’s under pressure to scale, but moves that help scale its operations and boost its sales are corrupting its artisanal bent.

Because Amazon has another fully operating marketplace, it has the luxury of maintaining the kind of purity for its artisans and their wares, the area where Etsy initially staked its reputation. If Amazon finds that a seller is a little too factory or otherwise not artisanal enough, the seller is invited to join Amazon’s Marketplace. And regardless of which Amazon Marketplace a seller joins, the company has vast worldwide reach and fulfillment capabilities.

Even Amazon’s one disadvantage to artisans, its fees, could easily be changed.

Etsy, meanwhile, has a much more complex set of decisions in front of it. The moves it’s making to keep open its paths to profitability (and please its investors) are the ones scaring its investors away.