Although diamond mining giant De Beers’ launch of a range of lab-grown diamond (LGD) engagement rings on its Lightbox website in June was low key, it nonetheless showed many in the industry where the company is heading. Furthermore, it also provided proof that the LGD market is here to stay – and certain to grow even further. Despite the constant decline in LGD prices, as manufacturing at scale increases, buyers are voting with their pocketbooks and dismissing the natural diamond sector’s claims that LGDs are largely worthless.
De Beers’ first move into LGDs came in 2018 with a fashion jewelry launch and a tagline that synthetics were simply fun, affordable pieces and not for those important lifetime events. If you lost a Lightbox jewelry piece on the beach, it was no disaster, compared with a mislaid natural diamond ring.
Despite the claim by De Beers that it is currently simply staging a “small in-market test of consumer preferences,” there is a feeling in the industry that this is simply the next step in its move to capture a share of the LGD market. It may be aiming to check if it can charge a premium for De Beers synthetic stones. It is also noticeable that the company is spreading its wings in the important engagement ring sector which accounts for around a quarter of all diamond jewelry sales.
Given the company’s famous history as a diamond miner, and its ongoing operations in some of the most important mining countries, such as Botswana, Namibia and South Africa, its growing involvement in the LGD market is all the more surprising.
But should we be surprised? The firm clearly understands that mining is hugely expensive and uncertain – and comes with a range of other issues, such as environmental concerns – while creating stones in a lab allows it to slash costs and produce only what the market needs while having the capability of boosting production when needed.
The Latest Developments in LGDs
The natural diamond industry has been worried about the pace of growth of LGDs and their increasing popularity over the last five years. On the one hand, the far lower price points of LGDs cause a huge dent in the natural diamond market. On the other hand, some industry players believe that LGDs help to increase the overall size of the diamond market and that factory-made stone buyers will, in time, step up to buy natural diamond jewelry.
A recent sign of the growing importance and acceptance of the LGD sector was witnessed with the signing by the World Jewellery Confederation (CIBJO) and the International Grown Diamond Association (IGDA) to work together to protect consumer confidence in synthetic stones. They signed a memorandum of understanding to develop standards, operating principles and terminology for lab-grown diamonds. As CIBJO President Gaetano Cavalieri stated: “Over the past several years, the LGD sector has grown into a large and a prominent part of our industry, and we all have a vested interest in each other’s success.”
Another powerful indicator of the growing importance of the sector came with the presentation by Indian Prime Minister Narendra Modi of a 7.5-carat lab-grown diamond to US First Lady Jill Biden during a state visit to the U.S. in June. The gift was surprising given that India cuts and polishes 90% of the world’s natural diamonds by volume and is a critical trading center. But the country is also a huge producer of LGDs and was among the first of the major diamond hubs to recognize global diamond consumers’ attraction to the stones.
Earlier this year, the Indian government abolished its import tax on synthetic-diamond seeds. There will no longer be customs duties on the seeds used by growers to create synthetic rough. Previously, it was 5%. In addition, the central government promised more money to develop the country’s lab-grown industry.
Another major diamond center, Dubai, is also moving ahead to both highlight the LGD sector and take advantage of attracting manufacturers and traders to the country. The first LGD Symposium was held in Dubai in July and looked at the unique challenges faced by LGDs and how to create an action plan for global long-term growth.
U.S. Retailers Moving Ahead with LGD Initiatives
While industry organizations have been debating the issues, the retail sector – particularly in the United States – has wasted no time in providing options for customers, particularly those under 40. This generation has a different outlook to that of their parents which believed in the ‘A diamond is forever’ slogan and the associated marketing efforts by De Beers which were so successful.
One powerful example is an initiative by Signet Jewelers, the largest jewelry retailer in the United States, which is launching a jewelry-rental initiative at its Zales stores allowing consumers to borrow and return a maximum of 36 lab-grown diamond pieces for special events.
Called Zales x Rocksbox, the program features necklaces, bracelets, earrings and rings ranging from $1,000 to $10,000 in price, and will start off in 28 stores, with plans to expand to more locations this summer and fall. Signet also owns the Kay Jewelers, Jared and online giant James Allen retail brands and may roll it out at those stores if the Zales pilot scheme is successful.
Customers can hire an item for two weeks at a cost of 10% of the retail price. If they want to keep it, there is a purchase option, with the rental cost reduced from the purchase price. Signet believes the program could create a new customer base for its various chains.
Meanwhile, U.S. jewelry retailer Brilliant Earth has launched two LGD jewelry collections but adds the claim they are produced using 100% renewable energy. One line takes advantage of “carbon-capture” technology, which it says is a first, to produce diamonds. The second collection uses renewable energy, mostly during the growing of the diamonds, from wind and solar farms. The bold stroke encapsulates two vital elements to appeal to younger buyers: providing fine-quality LGDs at a price significantly lower than natural stones and emphasizing they were produced in an environmentally friendly way.
What Does the Future Hold for Lab-Grown Diamonds?
Despite the increasing popularity of LGDs, boosted by various initiatives at the retail level, the lab-grown sector certainly faces challenges. Prices are on a continuous spiral downward, and the market is flooded with synthetic diamonds due to the hasty charge to get into market as demand took off. A four-carat diamond for less than $2,000? No problem.
Is there a way of branding LGDs to encourage potential buyers to pay the asking price? The results of the De Beers’ aforementioned initiative will give us a good indication.
Will the synthetic and natural diamond sectors find a way of working together? Based on past experience, the answer appears to be negative.
Will LGDs persuade customers that synthetic diamonds are just another commodity with a consequent effect on natural diamonds? That is also a strong possibility, unfortunately.
Time will tell, as it always does. But does the global industry have the time?
Abraham Dayan for Rough&Polished
