Illustration: Lazaro Gamio/Axios

China’s take-no-prisoners Big Tech war is playing out in An Huang's little family grocery in Hangzhou, a three-hour drive southwest of Shanghai.

What’s going on: A year ago, Huang and his father had a visit from representatives of Alibaba, China's e-commerce giant. What did they think of transforming their dowdy place into a state-of-the-art, digitalized store, with all the bells and whistles, under Alibaba’s Tmall brand? According to Huang, it took him and his father only about five minutes to agree.

  • Today, as he stocks up on popular beer and snacks for the World Cup rush, he told Axios that revenue is up 30% in his spruced-up shop, equipped with artificial intelligence-backed apps and even a heat sensor to track foot traffic.

Why it matters: Alibaba says that over the last year, it has redone about 1 million mom and pop shops like the Huangs' across China. It has done the same with about a hundred superstores. Big and small, these outlets buy all their goods through Alibaba's platform and pay using its affiliate Alipay app.

An Huang with his Tmall app. Photo: Steve LeVine/Axios

A picture of the future: These stores are examples of an expanding battleground among China’s cutthroat tech giants, and petri-dishes of the future of business around the world.

  • Self-contained universes: What Alibaba and rivals like Tencent and JD.com are doing is corralling businesses into branded, self-contained, AI-infused universes in which only their affiliates capture the profit.
  • Moving across sectors: Acting rapidly at large scale, they are conceiving and trying out new business models not only in retail, but also investment, lending, payments, and logistics.

Among the central ideas is that in the future, shoppers will not view e-commerce and brick-and-mortar as distinct things, but as a single merged organism — as simply “commerce.” Alibaba regards this concept as so fundamental that only businesses that grasp it will survive.

  • By comparison, the West’s tech, retail and financial elite appear lumbering. Even Amazon and Walmart are well behind.
  • Many of these slow-moving Western companies risk being overrun by global business and economic trends already in motion.

The details: The cost was relatively low to join.

  • Huang paid $6,000 to $7,500 for the renovation, and about $620 a year to be a “super-member” of the program.
  • In addition, he committed to buy at least $1,500 of goods per month from the Tmall platform. Dressed in a red Tmall apron, he said these costs are “very low." “Most people will accept these," he said. "They are not asking for a share of the revenue.”

The bottom line: These examples of “digitalization in a box” are accelerating China’s evolution in the applied AI future. In effect, it is offering the operating system for going digital.

Alibaba’s competitors — Tencent, JD.com and others — are making similar moves.

  • JD calls its effort “retail as a service.” Chen Zhang, JD's chief technology officer, told visiting journalists last week, "We don't want to be just a retailer but to help all others run their business better."
  • As of now, there appears to be no similar initiative in the U.S. or Europe. Amazon and Walmart, the most advanced big western retailers, aren’t telling others how to get there, too.

By the numbers:

  • China’s e-commerce appetite is huge: Around 42% of global e-commerce transactions took place in China last year, "larger than in France, Germany, Japan, the United Kingdom, and the United States combined," according to McKinsey Global Institute.
  • They are using their phones: China had 772 million Internet users last year, and they spent $812 billion on merchandise using mobile pay apps, 11 times that of the U.S., McKinsey said.
  • Alibaba, Tencent and JD dominate. But this is not a friendly exercise: Alibaba and Tencent increasingly force loyalty on firms, requiring them to do business only with them and not their competitors. That practice extends to big foreign brands that wish to sell on Alibaba's platforms, the Associated Press reported earlier this year.

Go deeper

How "naked ballots" could upend mail-in voting in Pennsylvania

Trump signs in Olyphant, Penn. Photo: Eric Baradat/AFP via Getty Images

Pennsylvania's Supreme Court ordered state officials last week to throw out mail-in ballots submitted without a required inner "secrecy" envelope in November's election, the Philadelphia Inquirer reports.

The state of play: The decision went under the radar alongside the simultaneous decision to extend the time that mail-in ballots could be counted, but Philadelphia's top elections official warned state legislators this week that throwing out so-called "naked ballots" could bring "electoral chaos" to the state and cause "tens of thousands of votes" to be thrown out — potentially tipping the presidential election.

Commission releases topics for first presidential debate

Moderator Chris Wallace. Photo: Drew Angerer/Getty Images

Fox News anchor Chris Wallace has selected what topics he'll cover while moderating the first presidential debate between President Trump and former Vice President Joe Biden next week.

What to watch: Topics for the Sept. 29 debate will include Trump and Biden's records, the Supreme Court, COVID-19, economic policy, racism and the integrity of the election, the Commission for Presidential Debates announced on Tuesday. Each topic will receive 15 minutes of conversation and will be presented in no particular order.

Fed chair warns economy will feel the weight of expired stimulus

Treasury Secretary Steven Mnuchin and Fed Chair Jay Powell bump elbows before House hearing on Tuesday. Photo: Joshua Roberts/Pool/AFP via Getty Images

Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Tuesday that the expiration of Congress' coronavirus stimulus will weigh on the U.S. economy.

Why it matters: Powell warned that the effects of dried-up benefits are a looming risk to the economy, even if the consequences aren't yet visible.

Get Axios AM in your inbox

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Subscription failed
Thank you for subscribing!