Hi there,
I recently posted about a Facebook fan telling me she was copying my work and asked for advice on this awkward situation, so I completely understand how you're feeling right now!
You might want to take a look at the thread here:
http://www.etsy.com/teams/5002/etsy-success/discuss/8609463/page/1This article is particularly good:
http://artisansgalleryteam.blogspot.com/2011/06/inspiration-or-copy-where-is-line.htmland it was very helpful to get feedback from others on how to deal with it. In the end, I wrote a polite but firm response bringing the issues around copying - breach of Intellectual Property rights etc. - to her attention.
It might be worthwhile to contact the shop to let her know you've noticed the similarities and ask her to refrain from copying your work and remove those pieces from the shop, as there are Intellectual Property issues involved. Any crafts person worth their salt should understand the difference between being influenced by someone (taking an idea and developing it in a different direction) and just plain copying.
Here's what I've learned from all this:
Copying is not flattery - it's stealing.
The fact that people admire you're work enough to want to copy it means your ideas and designs work - this is good. You're the one with the design vision, so your copycat will always be one step behind.
Keep developing your work - the more complex and skilled it is, the less likely someone is to copy it. Competition pushes us to differentiate our work and establish our own individual niches.
I also took a look at your shop and the 'competition' and agree with other comments already made here - the quality of your work stands out a mile, so don't let another less talented person rob you of your energy or focus.
Keep moving forward and best of luck!
Angela x