A few years after the introduction of laboratory-grown diamonds in the US market, we can reflect on the strategies implemented by synthetic diamond manufacturers and marketers to assess the future of this ‘new’ category.
From the outset lab-grown diamond marketers have attempted to position their product in the consumer’s mind as the equivalent of a natural diamond albeit at a 20 per cent price discount to the real thing.
The product was said to be ‘identical to a diamond’ because of its chemical properties, and in some cases synthetic diamonds have claimed to be ‘even more rare’ because they are produced in smaller quantities! Other claims included ‘equally precious’ because they are expensive to produce, ‘better value’ because producers work on lower mark-ups, ‘ethical’ because they are non-conflict and sourced responsibly and, finally, lab-grown diamonds have been said to be ‘eco- friendly’ because they don’t involve mining.
The terms used to promote lab-grown diamonds were, and still are attempting to obscure their industrial origin and worse, bestow some natural or organic qualities they do not have.
Synthetic stones became ‘cultured’, ‘cultivated’, ‘hot-forged’, ‘above-ground’, or even ‘above-earth’ diamonds. The strategy was to take advantage of the mystique and esteem of natural diamonds, capture some of the extremely valuable heritage and equity of the category while, at the same time, denigrate the diamond industry and the very product it aimed to emulate. It is fair to say that this strategy was implemented with some success.
The ethical and eco-friendly narrative struck a chord with the media, as did the idea of a new technology disrupting an established industry that some believe has been left unchallenged for too long.
Scientists and experts were quick to claim that natural and synthetic diamonds are identical, the only difference being the origin, while some retailers viewed this as an opportunity to restore profitability by generating premium (larger) margins. As for consumers, they were – and still are – largely confused about the whole category: what is it really? Is it natural? Is it a diamond? What is it called? How much is it really worth?
There is a great deal of confusion in consumer minds, largely driven by inconsistent and misleading terminology and claims used by many laboratory-grown diamond marketers. However, a number of things are gradually becoming clear to consumers and the trade alike.
First, the category is here to stay. It is an attractive technology that has the potential to produce beautiful product in unlimited quantities at ever more attractive prices, which I am sure many brands will be able to use to their benefit.
There is no escaping the fact that a synthetic diamond is an artificial product with no inherent or resale value. As production capacities are brought on-line in low-energy-cost locations, we will see prices fall accordingly. In 2017, the price differential of natural and synthetic diamonds has increased by 70 per cent and, as we know, Element Six – De Beers’ synthetic diamond company – launched its Lightbox Jewelry range at US$800 per carat.
This pricing demonstrates that synthetic diamonds are around only 15 per cent of the value of a natural diamond.
There is no doubt that as capacity grows, all synthetic diamond prices will converge towards Lightbox Jewelry prices or lower. It might take a little while and, in the meantime, competitors will no doubt argue that their products are different from Lightbox when really they are not, and will attempt to take advantage of the lack of volumes to charge a premium.
However, in the end, just as surely as gravity exists, prices will meet at the marginal cost of production, unless supported by a strong consumer brand. This means that synthetic diamonds will serve a low-value, fashion jewellery category, clearly distinct from that filled by natural diamonds.
When well-informed, consumers will have a much clearer understanding about the differences between natural diamonds and synthetic diamonds. A 2018 US Harris Poll Survey conducted for the Diamond Producers Association (DPA) shows that 68 per cent of consumers believe a ‘real diamond’ is a diamond coming from the earth, a natural diamond. This speaks to the well-documented importance of authenticity for consumers when they consider a product.
Whether it is an organic product (naturalness), a work of art, a collectable, a vintage piece of furniture, or a precious stone, consumers attribute value to the notion of authenticity and to the story of the product. This is on top of the rarity value associated with a finite resource. In other words, ‘real’ matters to consumers and they give it a clear meaning when it comes to diamonds.
Numerous claims about ‘eco-friendliness’ made by synthetic diamond brands are now being challenged as unsubstantiated and in breach of the US Federal Trade Commission’s Green Guides. Some well-advertised brands operating in high-electricity-cost areas with no significant access to renewable energy claim a zero-carbon footprint through use of renewable energy, while in reality using questionable solar credits.
It is easy to establish that the carbon footprint of a 1-carat CVD diamond (most larger diamonds will be CVD diamonds) produced in Singapore is approximately 40 per cent higher than that of the equivalent natural diamond. The questionable claims by synthetic diamond factories are being increasingly exposed and are starting to sink in with consumers.
It is fair to say that while most lab-grown marketers claim a transparent, short supply chain, the original producer or even production origin is seldom disclosed to the consumer. This is not to say that the source is illegitimate, but it is clear that many synthetic diamond manufacturers and marketers are not being transparent, nor held to the same demanding standards as the highly scrutinised diamond industry.
Of course, not everything is perfect in the diamond industry, despite the significant progresses made over the past 15 years, and we should demand that our industry be held up to the light and demonstrate continuous improvement. Consumers have the right to demand transparency and integrity and we have a duty to deliver on this expectation.
While many in the industry work relentlessly on these issues, it is important for everyone to remember and remind our customers that the diamond sector directly and indirectly sustains about 10 million people worldwide in some of the most disadvantaged regions of the world. Entire regions and communities have been built, and become prosperous, thanks to the legitimate diamond trade.
This is cause for much pride and satisfaction for the natural diamond industry because, in the end, Real Matters.
'The Great Diamond Debate' Contents »