In China’s most fashion-forward city, Diamond SA marries Western style with an Eastern clientele

At the Urban Planning Exhibition Center in the People’s Park district of Shanghai, a 100-foot-long model of the city circa 2020 depicts a sprawling urban metropolis set along the curling banks of the Huangpu River, skyscrapers teetering all around.

It’s a fitting model for Shanghai, which, like all boomtowns, radiates a palpable sense of the future, and not just at its museums. From the sleek restaurants and luxury retail emporiums lining the Bund—during the 1930s, considered “the Wall Street of the Far East”—to the Jetsons-like skyline of the Pudong district on the eastern banks of the Huangpu, China’s commercial and industrial capital is the best gauge of where the country, on the strength of its thriving economy, is headed. No wonder the World Expo is being staged here in 2010.

“I think the Shanghai market is potentially the world’s biggest,” says Eyal Bafri, an Israeli-South African who, in 2003, opened Diamond SA, a diamond jewelry boutique, in the heart of Huaihai Road, the city’s answer to Fifth Avenue. “Twelve years ago, people were wearing the same clothes day in and day out, either black or grey,” Bafri says. “Now it’s among the most fashionable cities in the world. Women are competing with each other in terms of style and design. This is the first generation to get into diamonds and the growth is phenomenal.”

Bafri is just 29 years old but in expat years, he’s an old-timer. He first came to Shanghai at the end of 2001 on a 10-day fact-finding mission; his plan to move to Miami quickly succumbed to the city’s seductive energy. “I said, ‘Well, the States isn’t going anywhere,’” he recalls.

Instead, he opened a wholesale diamond office in the Shanghai Diamond Exchange. With his father, Moti Bafri, handling the manufacturing and rough ends of the business from Johannesburg, the younger Bafri took the reins of the distribution and downstream marketing.

It wasn’t long before he realized his South African diamond company was a retail brand waiting to happen. “When people in China think of diamonds, they think of South Africa,” he says. With the help of a Chinese partner who he’s since bought out, Bafri launched the flagship location on Huaihai Road, one of Shanghai’s two major retail thoroughfares—the other being Nanjing West Road, where global brands come to roost.

The flagship is an intimate two-story boutique, elegantly appointed with mahogany wood cases, an African-inspired color scheme of chocolate browns and savannah beiges and a tasteful selection of knickknacks with a tribal touch: gilded ostrich eggs, elephant tusks, carved wooden warriors. “Without displays, it’s just another jewelry shop,” Bafri says. The merchandising scheme isn’t the only thing that sets Diamond SA apart. Unlike Shanghai’s Bulgari and Cartier outposts, it isn’t selling a homogenous vision of a luxury brand. And unlike Chow Tai Fook and Chow Sang Sang, Hong Kongbased brands that dominate China’s middle market, Bafri’s retail stores exude a fresh, young vibe. Only TSL, another Hong Kong-based company, comes close to Diamond SA’s ambience, but when it comes to product, the two diverge.

Bafri’s bread and butter—or dim sum and dumplings, if you prefer—is sophisticated diamond jewelry that doesn’t look especially “Chinese”: no clusters of tiny stones; no 22- karat gold to please the investment buyers; and plenty of design with a capital D, like a $30,000 Edwardian-inspired necklace with delicate, pear-shaped drops.

“We don’t see ourselves as a local brand,” says Marketing Director Josh Zhang, emphasizing the South African connection that permeates everything in the stores, down to the leopard print fabric on the office chairs. “The majority of our customers are Chinese people who appreciate foreign design and craftsmanship.” Manufactured largely in South Africa, with some work allocated to a small workshop in Shanghai, Diamond SA jewelry is almost exclusively house-branded. The Huaihai shop also sells Diamonds in the Rough (as does the store in Macau), the much-lauded rough diamond jewelry brand.

A second Shanghai store (there are four in total), located at the base of a tony residential complex called Richgate—footsteps away from Xintiandi, a 560,000-square-foot retail and dining complex whose bars, boutiques and restaurants are regularly touted in the pages of international travel magazines—caters to a slightly more conservative and wealthy Chinese crowd, as proven by its selection of high-end jade jewels, such as a watery-green dragon pendant that retails for around $50,000 (or 360,000 RMB, for Renminbi, literally “People’s currency”). Also outfitted with a second floor, the Richgate store includes a VIP room with a plush sofa and silk pillows. One can almost picture a wealthy Chinese power broker, or his equally powerful wife—for as Zhang insists, “not too many women in Shanghai are just wives”—taking a seat, surveying the merchandise and coolly ordering 10 of each item. China’s gift market is significant, and although Beijing, with its preponderance of bureaucrats, takes the majority of that business, no luxury retailer is a stranger to the practice.

All of Diamond SA’s stores eagerly court brides-to-be, a nascent but growing market. By Bafri’s reckoning, about 15 percent of the population is currently buying diamonds. “If by 2015 that grows to another 15 percent, that’s 400 million people buying diamonds,” he says. “We are on the verge of explosive growth.” He describes a typical purchase as a simple solitaire in a four- or sixclaw setting, set in platinum or 18-karat gold, in a size that’s “a bit smaller than what we do in Europe or the States.”

But even that’s changing. Zhang, who joined the company in 2003, says when Diamond SA first opened, “people tended to buy maximum half a carat, and best quality G-H for marriage. Now 50 percent of our sales goes to 1 carat.” He ticks off all the obvious reasons: a booming economy, a redhot property market, stocks that seem to know no bounds.

The excitement surrounding the business (not to mention the city, the culture and the entire Chinese economy) is generating so much momentum that in 2008, Bafri expects to open between five and 10 new stores in China. He’s also got grand plans for Macau, where he’s preparing to open at the Wynn resort.

Meanwhile, Zhang is spearheading the Chinese expansion. He’s just back from Yantai in Shandong Province, halfway to Beijing, but many other cities are on Diamond SA’s short list, including metropolitan areas that would dwarf their counterparts in Europe or the United States. Shenyang, Dalian, Hangzhou, Chengdu, Harbin—the company’s plans are mindboggling. Then again, so is the vast and vastly untapped marketplace. If, at 14 million people, you think Shanghai is big, consider Chongqing, China’s largest municipality: Its outskirts envelope a mass of humanity 30 million people strong.