Reflecting back over the last 12 months, it must be clear to everyone active in the diamond trade that no subject has gained more attention than that of synthetic, or lab-grown, diamonds, in the future market and how consumers can differentiate this product from the real thing.
AUTHOR: Ernie Blom, President, World Federation of Diamond Bourses
In June 2018, De Beers introduced its Lightbox jewelry range set with lab-grown stones, which was perceived by many in the industry as a game-changer.
Whilst synthetic diamonds are a small fraction of the market at the moment, industry experts such as Paul Zimnisky have forecast that the lab-grown jewelry market will grow by 22% annually.
This growth, it is believed, will be driven by continued advancement in technology which should improve production economics and thus further push down prices.
What is more impressive is that some experts claim that lab-grown diamond sales, as a percentage of all diamond sales, increased eight-fold over the past 18 months.
The World Federation of Diamond Bourses, at a strategic meeting of the Executive Committee in Ramat Gan, carried out an in-depth brain-storming session on how the midstream should address this issue.
Is the presence of synthetic diamonds an existential threat as some people claim?
Or will it just be a side-product where both products, naturals and lab-growns, will live peacefully together and will not interfere in each other’s market?
The latter is the argument put forward by De Beers, which is now offering both products to consumers.
There are several observations to be made in this regard
There are many reasons why prices of rough goods below $250 have shown a substantial decline since June 2018. Goods costing around, or slightly above, $100 per carat have been seriously hit with price decreases of more than 15%.
The Lightbox brand was exclusively launched for fun fashion and not for engagement rings, which are the core of the diamond business, and that brings us back to our first question: how will consumers react to being offered diamonds on the one hand, and the lab-grown alternative on the other?
At the end of the day, I believe that money matters.
What distinguishes diamonds from lab-created diamonds, apart from the whole love element, is that diamonds are a non-renewable resource. The supply of diamonds is limited by nature.
Importantly, more expensive diamonds have historically maintained their resale value after purchase which is tied to the inherent rarity of higher-quality diamonds.
Martin Rapaport, in an in-depth analysis of the matter, came to the conclusion that retailers are currently gaining a substantial added value in selling labgrown diamonds compared to naturals — this obviously relates to the issue of size.
People being offered a diamond twice the size for the same price could be tempted to go for the synthetic alternative. This is also confirmed by a survey done by the IGDA among nearly 2,000 jewelry purchases conducted by the research firm MVI.
Do you want it real or do you want it big?
Size indeed matters.
Being confronted with this existential question, the diamond trade should unite around a campaign to stress as much as possible the rarity of diamonds and the best way to express the rarity argument is related to the issue of the resale price.
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As production of lab-grown diamonds is abundant, the price can never be sustained. This means that buying a lab-grown diamond will never give you back the same amount when you later try to resell it or when your children try to do the same.
Synthetic diamonds will not hold value – natural diamonds will
If the diamond industry can relay this message as massively as possible to consumers, there is no doubt in my mind that they will think twice before purchasing a lab-grown diamond as an adornment.
For important moments in life, they will go for the natural product. It is incumbent upon us, as representatives of the midstream of the diamond trade, to take up this matter and communicate it to retailers and consumers at large.
The World Federation of Diamond Bourses has a mission to contribute as much as possible to this extremely important matter. And, at the Presidents Meeting of the WFDB and International Diamond Manufacturer Association in Dubai next month, we will be taking an in-depth look at the subject of synthetic diamonds with a panel discussion dedicated to the issue featuring industry experts.
In the coming months, diamond bourses around the world will bring about initiatives to share this message on a broad scale.
This is not a time for complacency, and all should work together to get a unified message spread as widely as possible.