The Bund Comes Back
Shanghai's swinging district gets a makeover
By Hannah Beech

COURTESY BUND 18 LURING LUXURY: Cartier is one of the many high-end retailers setting up shop in Shanghai

Spring 2005 Style & Design
Nothing epitomized Shanghai more in the swinging 1930s than the Bund, a neoclassical embankment built on the Huangpu River with the easy cash of foreigners and the hard sweat of the subjugated Chinese. An imposing row of banks, business headquarters and shipping offices lined the historic waterfront, while men and women of every nationality strolled past in their finest suits and gowns. Paris fashions were quickly and efficiently copied by the neighborhood's tailors, whose richly hued cloth and delicate stitching soon gained global renown. Then came the dark years following China's Communist revolution in 1949. Banks were boarded up as punishment for Shanghai's capitalist exuberance. Nightclubs were shuttered. Brocaded silk no longer graced women's necklines.

Now, after half a century of neglect, the Bund is blossoming anew. Historic buildings are being renovated by international investors and luxury labels are filling once-grimy windows with the latest in global chic. Just within the past year, Giorgio Armani, Ermenegildo Zegna, Cartier, Vivienne Tam and Yohji Yamamoto, among others, have set up shop on a desolate stretch that once boasted nothing more enticing than a Polish shipping company. Leading the Bund's renaissance are Three on the Bund and Bund 18, a former insurance building and bank headquarters, respectively, which have been fashioned into Shanghai's most exclusive retail meccas. "The Bund symbolizes Shanghai's East-meets-West past," says Sylvia Lee, chief marketing officer of Bund 18, referring to the city's history as a booming foreign-controlled metropolis on Chinese soil. "So it makes sense for top brands to want to locate themselves here."

The first to open up on Shanghai's wannabe Fifth Avenue was Three on the Bund, which underwent a complete makeover courtesy of architect Michael Graves. The American designer totally refurbished the former Union Assurance building with an intricate shell-like interior that was unveiled last April. Armani's 12,000 sq ft flagship anchors the building, complete with its own florist and chocolatier. Shoppers can stop by for a hot-stone massage at the Evian spa or a molten chocolate cake at the Jean-Georges Vongerichten eatery before hitting more retail space where Asian designers like Anna Sui and Rei Kawakubo jostle for attention. "You sort of feel like this building is giving the Bund back what it deserves, which is splendor and style," says Handel Lee, an American lawyer who oversaw Three on the Bund's five-year renovation. "This place was once one of the design capitals of the world, and I wanted to make it known for that again."

Bund 18 followed six months later, a Taiwanese-funded project that focused less on renovation than on a meticulous $14 million restoration. Venetian architects, who used little stronger than baking soda to scour the 1923 edifice, painstakingly uncovered the original details of what was once the Chartered Bank of India, Australia and China. The building now hosts the 2,600 sq ft flagship store of Cartier, which threw open its doors in December to a packed-to-the-max crowd as a blimp advertising the French jeweler soared above the waterfront. A month later, Zegna unveiled its own three-story, 21,000 sq ft flagship in Bund 18, making it the Italian clothier's largest outlet in Asia. The building also houses a French restaurant run by twin three-Michelin-starred chefs and an exhibition space that has already hosted swank Swarovski and Christian Dior shows.

Yet the rush to set up shop on the Bund belies the fact that for now the Bund attracts far more wide-eyed Chinese peasants crowding the waterfront for a view across the river to the futuristic Pudong business district than bejeweled socialites. Indeed, the disparity between the hopeful influx of luxury firms and the reality of a still-dingy avenue where hawkers peddle grilled squid tentacles symbolizes the possible pitfalls of China's luxury market as a whole. Most international labels parrot the same line: China is the future of our business. Certainly, the country's expanding middle class and its appetite for fake designer goods already show the potential of the Chinese market. International luxury firms are therefore expanding heavily in China. Within weeks of its Shanghai launch, for instance, Cartier also unveiled six other stores across the nation. Armani plans to open 30 shops in the next four years, while Prada says it's investing 35 billion euros into more than a dozen new outlets this year. "The important thing is to get in early and gain brand recognition," says Christopher Zanardi-Landi, general manager of Louis Vuitton China, which oversees 15 stores. "We started off 12 years ago with a tiny store in a hotel lobby in Beijing. Now, everyone knows who we are."

But a China that reaps profits for luxury labels may be further away than many are willing to admit. A report by Morgan Stanley last year predicted that most luxury companies will not recoup their investments for at least another five years. Although the rapid growth of China's middle class continues to lure foreign capital, the report estimated that only 13 million people, or 1% of the nation's population, are currently able to afford any luxury goods at all. Even in Shanghai, the nation's glitziest city, disposable income averages less than $2,000—equal to one-tenth of a Cartier watch.

Another stumbling block in China is that luxury spending is driven by men, not women—the opposite of most other markets. That's good news for male-centric houses like Dunhill, Hugo Boss and Zegna that invested early in China; fifteen years and 50 stores later, for instance, Zegna reports that China is now its fifth-biggest market, and CEO Paolo Zegna forecasts that more than 10% of the clothier's sales could come from China within a decade's time. But most luxury brands focus far more on women's wear, which makes it tricky to market in China. Adding to the problem is a hefty Chinese luxury tax of 15-35% that propels many rich mainland Chinese to go on shopping sprees in nearby Hong Kong rather than spend at home.

Still, the sheer numbers make it hard not to bet on China. Industry analysts note that once per capita incomes hit the $2,500 markósomething many Chinese seaboard cities with populations equal to small European nations are likely to do in the next few yearsóspending on luxury goods tends to increase dramatically. Already, fashion houses in Paris are noticing that an Asian face no longer means a spendthrift Japanese customer, and Christian Dior, among others, has begun hiring Mandarin-speaking staff. For those Chinese who don't jetset to France, the Bund, located in a city that was once known as the Paris of the East, may offer a suitable alternative. And given the number of rags-to-riches tales the new China offers, who knows which peasants wandering past Bund 18 and Three on the Bund in their ill-fitting jackets and canvas sneakers may be joining the ranks of China's next millionaires? The path from Mao suits to Armani tuxes is surely shorter than the road that Shanghai's mighty Bund took from historic skyline to Communist skid rowóand back again.

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