Photo by Bas van den Eijkhof on Unsplash
How Will Natural Diamonds Adapt to the Synthetic Diamond Shift?
Natural diamond prices are on a downward spiral due to economic instability in key markets, particularly in the U.S. and China. The reasons? Economic factors such as rising interest rates and persistent inflation have impacted luxury goods sales in the U.S. Meanwhile, China’s real estate industry downturn has similarly affected diamond demand. Consequently, De Beers had to reduce the prices of its rough diamonds by 5% to 15% in July 2023 and by up to 25% more recently. The company’s year-over-year sales of rough diamonds dropped by an alarming 80% in October, partially due to the rise of more affordable synthetic stones.
Major diamond miners like Anglo-American-owned De Beers source rough stones, which are then sent to polishing facilities globally. After that, trading companies purchase these polished gems. However, this industry flow has been disrupted.
In mid-December 2023, the internationally recognized F-color, VS1-clarity diamond was valued at approximately $9,200 per carat, the lowest price on record since 2009. This pricing is indicative of a staggering 24% drop from the diamond’s value in August 2022. Currently, compare that to the average 1-carat lab diamond cost of roughly $1,290, according to the New York Post.
“According to The Economist in 2016, lab-grown diamonds will make up 75% of gem-grade diamonds by 2050. However, the market has grown 500% in the last four years, so I think recent numbers show us this might happen much sooner.”
Scott Thompson, founder of Carat, via Professional Jeweller
Lab-grown diamonds are almost indistinguishable from their natural counterparts to the untrained eye, but they are considerably cheaper. These diamonds are 60% to 85% less expensive than naturally mined ones, per London-based jeweler Queensmith, and they also resonate with environmentally conscious consumers. They are considered much gentler on the planet than mined diamonds due to the environmentally friendly production process, and they’re benefitting from increased consumer awareness and endorsement from leading gemological labs.
Lab-grown diamonds haven’t always been in the limelight, but today, they’re disrupting the jewelry industry. Introduced commercially in the 1980s, these man-made gems are created by applying intense heat and pressure to pure carbon. The resulting diamonds are virtually identical to traditional mined diamonds, making them an attractive option for budget-conscious customers.
For years, fans of mined diamonds scoffed at the idea of these alternative gems. Traditionally, jewelry was categorized based on the materials used and the price tags associated. Diamonds, regarded as the ultimate symbol of luxury, were ruled by boutique businesses or giant brands like Tiffany and Cartier.
While brands have tried to differentiate between the two types of diamonds, price points often decide for the consumer. For example, a diamond tennis bracelet from Tiffany can cost over $20,000, while a similar one with lab-grown diamonds from Brilliant Earth costs only $3,450.
Data from February 2022 revealed an 80% increase in lab-grown diamond sales compared to the previous year. In contrast, mined diamond sales witnessed a 13% reduction. It’s clear that the dynamics of the diamond market are shifting rapidly. From a mere 1.5% of diamond sales in the U.S. by specialty retailers back in 2018, lab-grown diamonds now command over 17% of the worldwide market, according to diamond research firm Edahn Golan. Furthermore, Axios reported that “about 63% of independent jewelers in the U.S. sell lab diamonds, which is up from 58% a year ago, according to a recent survey by trade publication InStore.”
As times change, the diamond market is evolving with its retailers. The Diamond District on 47th Street in New York is renowned for its expansive range of gem shops and appraisers. However, 40 blocks south, Pandora, the leading jewelry retailer, recently showcased an alternative vision for the diamond industry with its inventive lab-grown diamonds.
During New York Fashion Week last year, Pandora hosted a glamorous party on Astor Place, where the company unveiled what it called the “lab-grown diamond district.” Pandora, previously not identified much with diamonds, built its brand on charm bracelets priced below $100. However, the rising allure of lab-grown diamonds, identical to mined ones but significantly cheaper, has offered brands like Pandora the opportunity to venture into the diamond space. The lab-grown diamond sector has seen a surge in sales, with brands like Brilliant Earth and Dorsey reporting significant revenue increases.
This shift toward lab-grown diamonds is not just a trend. According to industry analyst Paul Zimnisky, sales of these diamonds skyrocketed from less than $1 billion in 2016 to nearly $12 billion in 2022. This trend is accelerating, with lab-grown diamond sales surging by 38% from 2021 to 2022.
Interestingly, some companies embraced lab-grown diamonds long before they became trendy. Carat, for instance, chose to work with non-mined gemstones when the company was founded in 2003, and it is now enjoying the benefits of being an early adopter. In fact, the Carat group reports that these diamonds now represent around 12% of its global sales.
Other companies, like River Mounts, were initially more tentative. The idea of synthetic diamonds was rather daunting, mostly due to the safeguards the business had in place to keep its diamonds natural. However, River Mounts eventually adapted to the change, implementing stringent measures to keep lab-grown and natural diamonds separate in its supply chain.
As we step into an era of conscious consumption, lab-grown diamonds — with their affordability, environmental sustainability, and identical charm — are becoming a game-changer.
Discussion Questions
How can traditional diamond miners and retailers adapt to the growing trend of lab-grown diamonds to ensure viability and profitability? Do the economic and environmental benefits of lab-grown diamonds outweigh the cultural and symbolic values of natural diamonds, and how will this impact the perceived prestige of diamonds in the jewelry industry and among consumers? As lab-grown diamonds gain market share, how will this disrupt traditional valuation models for diamonds, and what new criteria might emerge in assessing the worth of both natural and lab-grown diamonds?
Poll
Loading …BrainTrust
Georganne Bender
Principal, KIZER & BENDER Speaking
Kai Clarke
CEO, President- American Retail Consultants
The problem here is that lab grown diamonds are identical to mined diamonds; they’re not chemically different, nor do they look different. As such, the supply of diamonds has been basically been increased at a time when demand is more lackluster. That’s why prices are falling. It is very hard to see how this process reverses itself given that the price of diamonds has traditionally been underpinned by relative scarcity. It may be possible to extract a premium from some consumers by stressing the authenticity of minded diamonds, but most of the market won’t be influenced by this.
As Mr Saunders noted — Lab Grown Diamonds ARE chemically and physically the SAME as Earth mined diamonds! That IS the meaning of Lab Created product! Another bonus is that they can be perfect! This allows the possibility of an “E-IF” –e grade –internally flawless — diamond atainable to people who previously would not even consider such a grade! Also Younger generations seem to be more interested in How stones are procured and reportedly lean towards lab created as the preferred option to avoid any possibility of harmful practices that may have been utlilized in obtaining those stones! The largest mine operators reportedly operate in an ethical manner however this seems to remain a concern to many everyday customers. Given that diamonds can be produced in the laboratory, without the possibility of harmful procurement, this may indicate that in the future these diamonds may become — The Standard! There WILL however ALWAYS remain desire for earth mined stones! I am certain that in the future Lab Created Diamonds will exist at the cost of Earth mined diamonds today, and earth mined diamonds will be sold at a premium and will end up MUCH More expensive! Looking at the history of the business, there will likely be price upheaval for a time and then the major players will work to secure their supremacy over the business as it always has been and we will end up with Expensive beautiful Lab Created diamonds and unaffordable —to the everyday customer— much more limited earth grown diamonds. I guess we should buy soon? Oh and Happy New Year to Everyone! Thank You All!
Lab grown diamonds and natural mined diamonds are the same, the only difference is in how they are created.
The diamond industry had the consumer boxed in for years. That whole “you need to spend two months salary on an engagement ring” nonsense came from a 1980s De Beers ad campaign and we all bought into it. Lab grown diamonds give couples a choice, not an ultimatum.
Completely agree with this! The tables have turned on the industry and they don’t like it! But that’s kind of tough!
The human and environmental abuses of diamond mining have generated an increasingly high profile in the last decade. As more people have become aware and with the development of lab-grown diamonds, why would the expectation of the sale of real diamonds not drop?
There is no turning this trend around. Further, there is no purpose for turning it around. The lab-grown stones provide the exact same purpose as the real thing. GEE, IT IS THE REAL-THING. It is a decoration, and nothing more.
Seems to me that the proverbial “jig is up” for DeBeers and others. With quality the same or better, lab grown diamonds have cost and environmental advantages (no more gaping holes in the Earth for example) that natural diamonds will not match.
The only potential impediment to lab grown diamonds are pricing and marketing. Get that right and the case study for natural diamonds will be similar to the history of natural ivory.
It’s odd that we aren’t talking about the history of blood diamonds in this discussion. Yes, lab grown and natural diamonds are chemically identical. However, those that purchase natural diamonds without a verifiable history also risk contributing to the blood diamond trade.
The World Diamond Council says that 99% of diamonds are now conflict-free. I’m guessing this stat refers to new diamonds, rather than those circulating in the market.
As consumers continue to prioritise the global impact of their purchases, I don’t foresee the demand for natural diamonds without a verifiable history growing any time soon. Synthetic for the win, for now.
This is a perfect example of adapt or perish. The traditional (read old) way of mining for diamonds is dangerous, expensive, ecologically bad, and minimizes availability while increasing price. The new, ecologically sound, lab-grown diamond results in the same end product, for a superior process, at a lower price. Add to this the springboard effect of rapidly increasing supply of diamonds that lab sourced diamonds provide, and you have the falling prices in the overall diamond market. Either the mining industry adapts its prices, or it will perish….
Here is the question I have- can my wife tell the different between lab grown and natural diamonds? I have seen lab grown diamond items go for a lot of money. Does it matter if it’s lab grown or natural????
This is now about choice, having options. A win-win for consumers. Some will want the exclusivity of diamonds created in nature, some will be excited to buy diamonds created in a lab, and at a discount. Like any retailer, they can offer a range of the best of both. But it will take education and experts to show them proof of sourcing, what value means, and make it an experience. The traditional diamond industry isn’t happy, but the cat’s out of the bag and there’s no going back now.