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Internet retailer Amazon.com Inc. (AMZN - Analyst Report) is facing strong competition from Overstock.com (OSTK - Snapshot Report).

Headquartered in Cottonwood Heights, Utah, Overstock.com is an American online retailer best known for selling products other than books. Recently, however, the company entered the realm of print titles and has even slashed prices considerably.

The company has announced to match Amazon's prices on all its printed books. Additionally, 15% rebates on book purchases will be given to members of its $20-annual free-shipping loyalty club.

Over the past year, Amazon has been taking every possible step to expand its catalog and remains one of the favorite players for book lovers in the fast-growing ecommerce market. However, Overstock, not widely known for its book offerings, is trying to change the scenario by beating Amazon at price. Starting late July, Overstock.com offered books at 10% lower price than Amazon.

To counter the move, Amazon also lowered the prices on many titles which again prompted Overstock to lower their prices, leading to a big price war. With huge discounts being offered by Overstock.com, Amazon needs to put in its best efforts to have a successful business with high quality books in its list.

However, the book business is changing rapidly due to the increased customer adoption of Kindles, iPads and other devices that are making e-books more attractive than hardcovers. Amazon with its Kindle Fire has strongly penetrated the market and has now more than 60% market share in e-readers due to its attractive pricing.

According to a report from PwC (PricewaterhouseCoopers), the trade eBooks (excluding educational publications) will reach $8.2 billion in sales by 2017, while printed book sales are expected to fall from $11.9 billion in 2012 to $7.9 billion in 2017.

Though Amazon remains one of the leading players in the fast-growing ecommerce market, it reported a loss of 1 cent in the first quarter, which missed the Zacks Consensus Estimate by 5 cents. Also, revenues of $15.70 billionwere down 2.3% sequentiallybutup 22.4% from the year-ago quarter.

Amazon has a Zacks Rank #5 (Strong Sell). Other stocks that are performing well at current levels include SanDisk (SNDK - Analyst Report) and Silicom Ltd. (SILC), all carrying a Zacks Rank #1 (Strong Buy).

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