* Amazon will take responsibility for packing, shipping
* The company opened in Australia in December
* Amazon expected to open more distribution warehouses - analysts (Recasts throughout, adds Amazon quote, analyst quotes, shares)
By Byron Kaye and Jeffrey Dastin
SYDNEY/SAN FRANCISCO, Feb 27 (Reuters) - Amazon.com Inc began selling its in-house delivery service to third-party vendors in Australia on Tuesday, taking on a major logistical challenge in the continent that invented the expression "tyranny of distance".
Three months after opening in Australia, the world's No. 1 online retailer said merchants could pay it to pack and ship their products through its new Fulfillment by Amazon (FBA) programme. Its fast-shipping paid subscription club for shoppers, Prime, would follow by the middle of the year.
That means Amazon, not its thousands of Australian vendors, takes responsibility for meeting delivery estimates in a country of 24 million people spread over an island the size of the mainland United States, with little inland transport infrastructure.
Some Amazon shoppers in remote Outback settlements - places where doctors make house calls by airplane - have already complained about slower delivery times than suggested by the company's website.
Though Amazon takes responsibility for FBA shipping, its main delivery partner is government-run Australia Post.
Australia Post declined to comment. The service has said it had its busiest month in December, when Amazon started in the world's 12th-largest economy.
Amazon said its FBA service saved businesses time "as they will no longer need to individually purchase shipping materials, individually pack orders, and make multiple trips to the post office".
So far, Amazon has run its Australian business from a single warehouse outside Melbourne city, on the country's east coast where most of the population lives.
As with Canada, where it also launched its fulfillment service with only one warehouse, analysts now expect Amazon to open more warehouses to service far-flung Australian communities.
"Australia is big. It's a signal that they're going to build more," Wedbush Securities analyst Michael Pachter said.
Marc Wulfraat, president of Montreal-based logistics consultancy MWPVL International Inc, said it made sense for Amazon to open depots in Sydney, the country's most populous city, and Perth on the west coast.
"The logic is that Sydney and Perth will follow," he said.
Subscription fees from Prime would help offset any shipping losses that Amazon incurred, he added.
Shares of Australian brick-and-mortar non-food retailers were higher in mid-session trading, in line with the broader market.
Shares of the country's biggest stand-alone online retailer, Kogan.com Ltd, were down 4 percent. (Reporting by Jeffrey Dastin in San Francisco and Byron Kaye in Sydney; Editing by Stephen Coates)