(Yicai) Sept. 17 -- JD.Com does not seek to squeeze the profit margins of hospitality firms nor harm the sector’s ecosystem through a price war as the Chinese online retail and logistics giant expands into the hotel and travel services business, founder Richard Liu has said.

“We don't want to drag the hospitality industry into a price war, forcing practitioners to further lower service prices and choose between e-commerce platforms,” Liu, who is also JD.Com’s chairman, said at a company event late yesterday. “Because once profit margins are squeezed, the entire industry ecosystem will be damaged.”

Price wars have become a defining feature of China’s consumer landscape, with companies in sectors ranging from e-commerce and food delivery to auto production and hotels slashing prices so as to gain market share. This has resulted in a government campaign to stamp out involution, or neijuan as it is called in Chinese, a self-defeating cycle of ever-intensifying competition that yields diminishing returns.

JD.Com is expanding into the hotel and tourism sector, pledging to use its supply chain strengths to cut hospitality costs by up to two-thirds while offering hotels up to three years of zero commissions through its new JD Hotel Plus program. The move, announced in June, followed the Beijing-based company’s entry into food delivery earlier this year.

Whether it is the food delivery, hospitality, or tourism sectors, competition should not leave suppliers struggling while platforms pocket all the profits, Liu also said yesterday, adding that JD.Com favors rivalry built on quality, fair prices, and safety. He urged platforms to show restraint so the whole industry can grow on a win-win basis.

JD.Com will launch a new hotel development model before the end of this year to promote the development of the entire sector, Liu said.

All of JD’s businesses revolve around the "supply chain," he noted. The vast supply chain behind hotels and caterers is fragmented and costly, so the company aims to introduce a new business model to provide hotel clients with high-quality supply chain services, optimize costs, and help reduce operating costs in the sector, he said.

Liu drew a parallel with JD.Com’s entry into the home appliances business. When it launched online appliance sales in 2006, almost all investors opposed the move, arguing that even Amazon had failed to sell major appliances successfully online in the United States, he said.

But at the time, appliance retailers had gross margins as high as 18 percent, while their brands were left with net margins of only about 1 percent, an imbalance that created an opportunity for JD.Com to enter the market, he said.

Regarding profitability in new industries, Liu said that if JD.Com has the chance to earn CNY1 (14 US cents) of profit, it will only take 70 percent and leave the rest for its partners. Half of the company's profit will go to its workers and half will be used for sustained development, he added.

Editors: Tang Shihua, Martin Kadiev