Braving Beijing's morning traffic of buses, cement mixers and old men delivering mountains of cargo by pedicab, deliveryman Kuo Fuquan maneuvers a dark-green sport-utility vehicle to the office of the day's first customer. "This is so convenient. I don't have to leave home, plus the prices are better," says 26-year-old Liu Xin, who shells out $14 for a computer game ordered online two days before.

It is a mundane transaction, and a revolution of sorts. Founded in April, 8848.net - named after the height in meters of Mt. Everest - is selling $1 million a month in software, books and consumer electronics to customers around China. Working out of a white-tile building in Beijing's gritty Haidian district, in sky-blue office cubicles with fold-out beds for hardworking employees, 8848.net's youthful staff belie the conventional wisdom: That it will be years before e-commerce takes off in China.

E-commerce companies everywhere seek to outmaneuver traditional retailers by cutting costs and offering convenience. But the gap between online and physical transactions in China is far wider than in countries with more efficient distribution and payment systems, helping a pioneer such as 8848.net pick up business fast. The very headaches of selling goods in China, from fragmented distribution to nonexistent credit systems, work to the company's advantage.

"In China, we're going directly from mom-and-pop stores to us. The margins are huge," says company founder Charles Xue, 46, a Chinese native who spent two decades in the U.S. The company enjoys average gross margins of 20 per cent and is seeking a listing on the Nasdaq Stock Market next year.

The company is still losing money, because of its heavy spending on advertising and marketing. And China's online population is estimated at a mere six million, limiting the company's potential customer base to the equivalent of a midsize Chinese city.

Still, going virtual allows 8848.net to bypass many of the bad habits and backwardness that dog China's retail landscape. China's state banks, for example, have issued a gaggle of popular debit cards, though many can be used only in the city in which they were issued. But 8848.net has signed agreements with most major banks to accept online payments nationwide. It talked the postal service into handling cut rate express deliveries and accepting cash payments from 8848.net's customers, a service the postal department had never offered before. Some of the negotiations took two painstaking years.

"When we started, they had no idea what we were talking about," says Chairman Wang Juntao. "But you go back week after week and slowly they understand."

Operating in a new industry brings other benefits. China's antiquated publishing laws ban bookstores from buying straight from publishers, which sends the average book through four pairs of hands before reaching the consumer, say company executives. Not so with 8848.net, which buys books direct from the publisher at a fraction of the retail price.

Initially established with $2 million mainly from founder Mr. Xue and Boston computer-industry publisher International Data Group, 8848.net started out selling software through a partnership with Federal Software, a Chinese concern that owns a minority stake in the company. That gave it its first sale base - Federal's existing customers, a technically savvy group that already knew the Federal brand name and were willing to experiment with shopping online. Federal also provided the first piece of 8848.net's distribution network, through 260 software stores around the country.

From there, 8848.net cobbled together a distribution network city by city, piggy-backing wherever possible off existing modes of delivery. In Beijing, it contracts a handful of express delivery services and has three trucks for oversized orders. In Shanghai, it is considering setting up its own network of trucks, motorcycles or bicycles. Elsewhere, it relies on a combination of manufacturers' own delivery networks, chain stores it has signed up as partners and the postal service.

It is a strung-together, seat-of-the-pants business model that most retailers still shy away from. Beijing Books Center, China's largest bookstore, launched its online business in March, shortly before 8848.net was born. More than half of its online customers still pay in person at their local post office; the company isn't considering using the national bookstore network of Xinhua, China's official news agency and the store's biggest shareholder, to expedite deliveries. "We are retailers, we're not in the delivery business," says Bai Xiaowei, deputy chief engineer, at the bookstore.

For now, that leaves a wide space for 8848.net's growing ranks of customers, drawn to the company's competitive prices and the convenience of shopping online. "It's much more efficient than going to the shops, which takes up so much time and energy," says Bai Yihui, a systems engineer, surveying his just-delivered new translation software with satisfaction. "And I like to be at the forefront of things."