According to Etsy's blog, the service will only be available to participating sellers within the New York City area, and is working hand-in-hand with a logistics company that has been operational since 2011, Postmates.

This on-demand delivery service appears to be Etsy's strategy to keep up with the current trend observed among online retailers who are battling to win the hearts of customers who prefer express deliveries during the Holidays.

The artisan company calls their service Etsy ASAP, which provides buyers more than 5,000 products to choose from - from jewelry pieces to Halloween costumes.

According to Etsy, the company expects the majority of buyers to use their ASAP service for last-minute gifts. This may be due to the steep charges for the service, which is currently priced at $20.

Etsy is not the only company pushing to get an edge in the on-demand delivery area.

CNBC recently reported on Uber's new service called UberRUSH, which is designed to cater to merchants who have not been able to offer deliveries previously. With Uber's new delivery option, small businesses in NYC are given a fighting chance against larger establishments, which in turn will boost the overall economy.

As reported in an article released by TechCrunch, Postmates has not revealed the exact terms of its partnership with Etsy but does admit to getting a 3.5% share on the listed prices from the online retailer's merchants.

With services like Etsy ASAP and UberRUSH, Amazon faces a new set of challenges in the on-demand delivery arena as fresh competition are slowly appearing.

It's too early to tell whether or not Etsy's ASAP service will be a hit with customers. The $20 on-demand delivery charge may force people to search for other options, especially if competitors offer a $5 or $7 alternative, which is what Uber charges for their RUSH service.