By Tom Westbrook and Swati Pandey
SYDNEY (Reuters) - Amazon.com Inc (O:AMZN) said on Thursday it would stop blocking Australians from shopping on its U.S. site after a customer backlash, unwinding a move which has tarnished the e-commerce giant's launch in the world's 12th-largest economy.
The reversal relieved shoppers who had complained since July about being locked out of the much larger range of offerings they had grown accustomed to on the U.S. site following the opening of Amazon's local platform a year ago.
But it also raised questions about why Amazon had cited Australian tax laws to explain the initial block - an issue rival eBay Inc (O:EBAY) had managed to resolve without locking Australians out of its U.S. site.
"It's a very quick backtrack on a decision that obviously hasn't benefited them," said Daniel Mueller, an analyst at Vertium Asset Management.
"It's probably a reflection on the Amazon Australia website not being great ... I think to bolster the Australian website they've had to do this."
The world's second-largest company had prevented Australians from placing any orders on its U.S. website after Australia applied a 10 percent tax on imported online goods worth less than A$1,000 (£568).
At least 32 U.S. states have passed or are soon expected to pass similar taxes, but Australia had been the first market where Amazon responded by shutting out customers based on where they lived.
On the eve of its Black Friday sales, Amazon said it had figured a way to levy the tax without blocking access to the U.S. site.
One Amazon shopper said he had already given up on the Australian site. Paul Boon, who runs a home-entertainment installation business, said the wall brackets he had bought from the U.S. site were either unavailable or too expensive on Amazon's Australian platform.
"They sort of lost a sale there I guess. Maybe I'll have another look next time I have to do an order, but you just move on," he said.
An Amazon spokesman said that after listening to customer feedback, the retailer had built the "complex infrastructure needed to enable exports of low-value goods to Australia and remain compliant with (Australian) laws".
The move only covered products sold by Amazon and is yet to be extended to third-party sales, he added.
The launch of Amazon's Australian website a year ago triggered a steep selldown in traditional retail stocks such as Harvey Norman Holdings Ltd (AX:HVN), JB Hi-Fi Ltd (AX:JBH) and Myer Holdings Ltd (AX:MYR).
Although Amazon does not disclose sales figures in Australia, National Australia Bank (AX:NAB) research shows online sales growth slowing over the 12 months to September, and comprising just under 9 percent of the broader retail market.
EBay, which also does not disclose its Australian sales, said it found the transition complex but was able to collect and remit taxes without changes for customers.
"We want our buyers to be able to buy what they want," said eBay Australia and New Zealand Managing Director Tim MacKinnon.