Hi Wagada
I ran an online shoe shop for many years and we occasionally got sales from Australia - it was appealing of course as the seasons are opposite to ours, so selling boots in our summer would have been a massive boon. The other advantage, of course, is that there is no VAT for a UK company selling into Australia - (I'm not 100% certain that there wouldn't be if you breached a certain threshold but it was the case for us).
The problem for us was that our pages just did not rank at all in Google.com.au. When we tried marketing through Google AdWords, sales were terrible and we had to switch the ads off even though we were offering free shipping. When they saw the .co.uk floods of doubts about shipping time and reliability were clearly as an issue.
My view is this. If we had bought an Australian domain - .co.au then we would have started to rank for many of the products that we were attempting to sell over there. We couldn't have got around the shipping issue as it would still have taken 7-10 days to get the items there, but I'm certain our sales would have been substantially higher.
You can try a subdirectory that might work after a fashion. You could even try a subdomain like au.sitename.co.uk. (But frankly, if you are going to go that far I would set up a simple Australian website).
I think you know though that the only true way to appeal to the Australian market is to set up an Australian version of the site. Maybe you can get someone to build a simple Wordpress version, highly optimised for SEO?
So
1. Best way - set up an Australian version (you should own the domain name anyway as later the decision may be easier)
2. Compromise - sub-domain
3. Weakest way - sub-directory
Your biggest challenge is, of course, marketing the product - who am I to say that if the media picked up on it in Oz and you got a 'heap' of backlinks from Australian news agencies that your page wouldn't rank, it might... but then again...
Playing devil's advocate - if you lack the money to set up the Au site then that may suggest that you need to maximise sales in the UK first before thinking about tackling a country 10,000 miles away.
Regards
Nigel
Carousel Projects