Since hosting DMCC’s inaugural lab-grown diamond symposium earlier this year, speculation over the position, pricing and outlook of the industry have continued to occupy headlines. While the ongoing depreciation of diamonds has also caused a feeling of uncertainty amongst stakeholders.
With natural diamonds falling approximately 18 per cent from all-time highs in February 2022 and lab-grown down approximately 60 per cent since May 2022, stakeholders are speculating what the future of trade looks like. And how value can be identified and added during a period of technological innovation and geopolitical and economic uncertainty.
The undercurrent of uncertainty is being driven by a series of multifaceted elements. For example, while people still consider diamonds as a go-to for engagement rings, the rapid growth of lab-grown within the sector has meant a decline in natural, while fashion and fine jewellery is still very much dominated by natural by around 85 per cent.
This is supported by World Diamond Council data affirming that women consumers in the US and China still regard natural diamonds amongst the Top 3 desired categories. As an aggregate result, companies that previously had no association with diamonds are entering the lab-grown market creating more pressure for competition, while the burgeoning middle-classes of Asia, particularly India, will likely create an entirely new consumer market within just a few years.
At the same time, the tech industry is on the cusp of developing new products that would greatly benefit from the physical attributes of lab-grown diamonds in areas such as semiconductors, and quantum computing, where they can operate in temperatures five-times higher than their silicon counterparts.
What does this mean for both classes of diamonds, and how can stakeholders adapt to capitalise on these changing conditions.
When it comes to engagement rings, the consumer experience remains a top priority. According to BriteCo, “In-person sales of engagement rings at retail still dominate with 81 per cent buying directly in person from a jewellery store or department store. Only 9 per cent of respondents purchased their ring through an online-only jewellery website with another 11 per cent buying through a retail jewellery store’s website.”
Additionally, respondents also ranked an engagement ring as the number one biggest purchase outside of a home or car for 38 per cent of respondents, meaning demand is likely to remain unchanged. However, it appears there are mixed responses from the diamond industry’s most established retailers.
Shifting stands on lab grown
Cartier has two positions. On one hand, President and Chief Executive Cyrille Vigneron stated: “The problem with lab-grown diamonds is that, despite having the same molecular structure as those found in the earth, lab-grown diamonds don’t have any [history]. They were made two days before.”
On the other hand, the brand’s great-great grandson, Jean Dousset stated, “One of the most common consumer misconceptions about lab-grown diamonds is that they are ‘fake’. Pointed messaging as well as high profile designer brands adopting and legitimizing lab growns will eventually overcome that.”
Diamond industry titan De Beers reversed its original policy that it wouldn’t get involved in the lab-grown industry, before deciding ‘to call time on offering lab-grown diamonds for engagement rings’ citing plunging prices with further falls expected based on increasing supply.
The LVMH-owned Fred is providing private appointments for clients at its Paris flagship to showcase its high-end, lab-grown diamonds. When asked if LVMH could broaden its use of lab-created stones at Tiffany, finance chief Jean-Jacques Guiony said: "Is it a long-term trend that we could develop elsewhere? It's too early to say". And noting that the group's bets on man-made stones must be ‘weighed and assessed carefully’.
As brands with serious heritage and clout, it appears the decision to incorporate lab-grown diamonds is divisive, and only time will tell how successful these decisions will be. Certainly, one thing the lab-grown retailers can learn from these brands is the art of the experience.
Romanticised in pop culture the world over, institutional fine jewellers have mastered the art of making consumers feel special, whether through the prestigious addresses of Rue de La Paix, Bond Street or Fifth Avenue. It is the customer experience that makes tough competition for brands that are likely younger than the fiancés they are marketing to, with products that are, at best, months old.
Design will make it special
Speaking on the Paul Zimnisky Diamond Analytics podcast, Amish Shah, founder, and CEO of ALTR Created Diamonds and J’EVAR said that for the brands of the future, design will play the biggest role.
In highlighting the potential for LGDs to create something unique, he emphasised the opportunity to design diamonds and not just jewellery. As an additional option, Shah also highlighted the comparison to Apple computers, whose latest service offering in New York City includes a two-hour delivery time for new products.
Ultimately, the repositioning of lab-grown diamonds as a part of the fine jewellery experience will also be a critical part of challenging perceptions and providing a distinct difference between two worlds. In continuing to benchmark the comparisons between old and new, and how previously unassociated businesses are now seeking to capitalise on their consumer base, Shah said: “They [lab-grown retailers] are seeing this as a very big opportunity. Diamonds are for everyone. They are going on a wider market approach just like the Apple watch, which came out in 2015.
“By 2019, they sold four times more watches than the entire Swiss watch industry. Did that mean the Swiss watch industry died? No. They have their own business. What Swarovski and Pandora are doing is going after it with a design approach, they’re marketing is far better. It’s real marketing and branding.”
Weighing in on both demand and future potential uses, Diamond Foundry’s General Manager Toby Cruse said, “We continue to see significant adoption of LGD by the trade and downstream driven by consumers enjoying the value for money that the product delivers. Large, high quality and colour lab grown diamonds are desired and affordable.
We are also on the tipping point of a technological revolution - diamond is the ultimate material for thermal management and semiconductor applications. Grown at scale, and in never-before-seen sizes [4-inch wafers], new tech products will emerge that will change the world.
How variable can prices get?
Coming from a country synonymous with a historic pearling industry, often considered the oldest valuable gem known to mankind, precious stones could stand to learn a thing or two about the variable value of commodities. And that high prices yesterday are no guarantee of higher prices tomorrow.
Historically, once considered the pinnacle of decorative jewellery, strands worth millions of dollars (adjusted to today’s value) were commonplace.
While some rarer pieces can still fetch a high asking price, case in point Marie Antoinette’s pearl and diamond pendant which sold for $36 million in 2018, the value of the industry has slowly levelled out since the beginning of the 20th century, providing a more stable market where prices are dictated by collectables, customer experience, brand prestige and quality.
In the same way the diamond industry is still in the process of adapting to a new era of fluctuating demands, it will only be a matter of time before the same characteristics create a more stable and predictable industry that encompasses all aspects of what diamonds are fully capable of.
After all, people pay for the art, not the paint…