Since Amazon.com said in April it would bring its marketplace for third-party sellers to Australia, shares of leading bricks-and-mortar retailers have tumbled on fears their growth prospects would be hit.
More than US$3 billion, or over 4 percent, has been wiped off the collective market value of six companies - Wesfarmers Ltd
But some fund managers, who have since increased their retail holdings, reckon the sell-down was overdone, and dire warnings in some media that the US$460 billion US e-commerce giant would "destroy" Australia's traditional retail industry were overblown.
That's largely based on Amazon making no mention - yet - of when it might sell its array of goods directly in Australia, let alone launch its star business: the US$99 a year subscription shopping club Prime, whose members, Amazon says, buy more goods, more often.
That contrasts with other countries, including Spain and Mexico, where Amazon launched many product categories and Marketplace at around the same time.
The logic of not initially introducing Prime to Australia seems straightforward, logistics experts say.
Prime's big selling point in most markets is that it guarantees delivery of ordered goods within 48 hours. Australia's sheer size puts this, literally, out of reach for now.
While most of the country's 24 million population live on the coastal fringes of an island almost the size of the United States, there's little infrastructure in place to deliver packages to the more remote western and northern states.
"Given they haven't set up yet, and Australians already use the internet quite a lot for some purchases, it's a bit of an over-reaction," said Anton Tagliaferro, investment director at Investors Mutual Ltd, which has since increased its stake in department store chain Myer.
Similarly, fund manager Martin Currie Australia has raised its stake in electronics retailer JB Hi-Fi to 7 percent after Amazon's announcement.
Companies like JB Hi-Fi "are very dominant, and profitable retailers in Australia with leverage to population growth and housing will be well placed when Amazon begins to operate," said Reece Birtles, the fund manager's chief investment officer.
Shares in Wesfarmers, which owns the Coles grocery chain, have slipped 8 percent since April amid concerns about the impact of Amazon's arrival on its Kmart and Target discount department stores. For grocery, Amazon has struggled to bring produce sales online in the United States.
James McGlew, executive director at Argonaut Ltd, which owns Wesfarmers stock, said there was "still a case to be made for owning Wesfarmers in the longer term, but we're cognitive of standing in front of trains and trying to stop them."
Wesfarmers, which last month cited market conditions for cancelling a spin-off listing of its Officeworks stationary business, has said its 4000-store network leaves it well placed for when Amazon arrives.
Myer chief executive Richard Umbers said in an email: "We are firmly focused on delivering the New Myer strategy, which we believe is the best response to any competitor," noting an emphasis on "memorable in-store experiences", popular brands and investment in a "strong growth" omnichannel offer.
A spokeswoman for JB Hi-Fi declined to comment.
Amazon, which is advertising dozens of jobs in Australia, referred to a statement it made in April that it was planning a retail business in the country with low prices and fast delivery, without offering more details.
Marketplace's appeal to third-party sellers is access to Amazon's vast pool of shoppers, who have been hooked on a large product catalogue and speedy shipping.
The two Australian freight firms seen most likely to deliver locally for Amazon - government-owned Australia Post and Japan Post's Toll Group - do not guarantee regular two-day parcel delivery to anywhere in Western Australia beyond the city of Perth, or to the Northern Territory. Those two areas, about the size of Western Europe, are home to 800,000 people who would have to be reached if Prime were launched nationwide.
"They don't have the infrastructure yet," said a former Amazon executive who didn't want to be named. "If I don't have any infrastructure there, to start with the hardest problem wouldn't make sense," the person said of last-mile delivery.
To deliver to Broome, a town of about 16,000 people in Western Australia, for example, a freight firm typically trucks or flies a package to Perth from a warehouse 2,736 km away on the other side of the country, then drives it another 2,253 km north.
Australia Post says it can fly a package from Sydney to Broome in a day, but its standard air freight time for that route, by plane and truck via Perth, is three days.
Toll and Australia Post declined to comment on Amazon.
"I can see exactly why any of those majors would be reticent to stump up a guarantee that they can do it in that (two-day) timeframe," said Brendan Richards, a logistics specialist at corporate restructuring firm Ferrier Hodgson. "It's a big country to service with not much infrastructure taking freight into the middle of it."
Amazon may get around that by offering an express delivery service to some cities but not others, said Scott Jacobson, a former Amazon Marketplace manager and now managing director of Madrona Venture Group.
"Historically, Amazon has opened new markets without Prime initially," Jacobson noted. "The products eligible for Prime, which tend to be the fastest selling items, can differ from market to market; and so part of launching a market is identifying the most important products to include."
The company has also shown it can bend its two-day rule for important markets, saying last year it would offer Prime in China with estimated shipping of 5-9 days.
If it wants to bring the shopping club to Australia without compromising its two-day guarantee, Amazon may need to open distribution centres on the west and north coasts, or pay for daily air deliveries, said Carl Hartmann, chief executive of logistics software maker Temando.
"If they're planning a true nationwide Prime offering, there's some cost considerations to do it carte blanche," he said. "There are challenges with the unit economics in that model which either challenge profitability or feasibility."
(Reporting by Byron Kaye and Jeffrey Dastin; Editing by Ian Geoghegan)