Professional Gem Sciences Laboratory report on the state of the market in 2019 and trends looking forward
What does the future hold for the jewelry industry as factory grown diamonds become more prevalent? Here at the PGS (Professional Gem Sciences) Laboratory we are seeing more of these stones coming through our offices with increasing frequency. Both consumers in the public asking us to appraise their jewelry and experts in the trade with fresh buys have seen a rise in these stones in their jewelry. We have been tracking the market over the past years and have put together this update summarizing the trends we’ve observed. We hope you’ll find it useful as you weigh whether to stock and sell lab-grown stones in your stores in the coming years.
The factory grown diamond market is in a state of active change. Over the past few years we have seen a stark change in the price of factory grown diamonds as they begin to appear in the marketplace in sizable quantities. Two years ago, a generic lab-grown stone was priced next to its natural counterpart, typically being sold in a retail environment for about 20-30% less than a natural diamond of like quality. Today, that number has fallen dramatically.
Spurring the fall was De Beers’ strategic decision to enter the business. In September 2018, DeBeers rolled out its new Lightbox line of lab-grown diamond jewelry marketing them as a fun, affordable product, and selling them directly to consumers for $800 per carat. Most of that line sold out within the first months and the company is ramping up production accordingly to fit that demand. They broke ground on a new facility in the U.S. and boast an output target of 200,000 carats of polished lab-grown stones annually. This comes in addition to the estimated 500,000 carats a year that already enter the pipeline annually.
Many industry insiders have suggested that De Beers’ decision to forge into the market was a calculated maneuver to push down their price and bolster the position of natural diamonds. It has certainly had that effect, but it may also be the industry giant hedging. A recent survey of 2000 Millennials in the U.S. indicated that approximately 55% of young women getting married would accept a laboratory-grown diamond engagement ring. The numbers are similar for young women in China and Japan. Millennials appear to be okay with synthetics. It’s no surprise given how lab-grown stones are typically marketed: as an eco-friendly, ethical alternative to mined diamonds. Regardless of whether this marketing is true, it fits a narrative that Millennials are all too eager to embrace.
De Beers is only the most recent actor to enter the market. Retailers like Brilliant Earth, Diamond Foundry and Rogers and Hollands have had a running head start, while Helzberg Diamonds and J.C. Penny have also waded into the waters. These companies do not subscribe to cheap pricing models and are hoping to buck the trend of falling prices. At the time of publication, the online retailer Miadonna has numerous five and six carat lab-grown diamonds listed for sale on their website for around $10,000 per carat. Complicating the picture are low-cost Chinese firms waiting in the fray, ready to scale production for growing U.S. and global demand.
Since diamond synthesis technology was first developed, production costs have dropped dramatically. In the early days the process cost thousands of dollars to produce a carat of polished diamond. Today, the same size stone can be produced for a few hundred dollars. There are dozens of companies factory growing diamonds in the U.S., India and China. As these companies scale production, expect the cost of producing a carat of diamond to fall further.
Grown diamonds have enjoyed a number of big wins that foreshadow a favorable legal framework for the future. The FTC agreed last year that they are diamonds as they are carbon crystalized in an isometric system; the word “natural” was removed from the official definition of a diamond and the term “synthetic” was removed from recommended language used to describe them. The GIA has dropped the terms natural and synthetic from their grading reports on colorless diamond. Now, the more consumer friendly term laboratory-grown is listed in its place. In addition, the GIA will grade grown diamonds on the equivalent scale as mined diamonds. Spurring on these successes has been the diligent lobbying efforts of the International Grown Diamond Association. This is the US-based advocacy group that growers have shrewdly created to champion their product legally and fine-tune their messaging to consumers. Backing the IGDA are large firms that have successfully raised hundreds of millions of dollars in venture capital and have their eyes set on large returns over the coming years.
Some people like to compare factory grown diamonds to the synthetic gemstone industry of the 20th century, but that may be a poor comparison. To be sure, the investments in grown diamonds are far more substantial than ever existed for synthetic gemstones. Most importantly, consumer demand is much stronger than ever existed for factory grown emerald, sapphire or ruby. This is where we find ourselves today: growing demand, falling prices, falling production costs, and stakeholders with big coffers for advertising and marketing. What should you take away from this?
Lab-grown diamonds are here to stay.
This product is not a passing fad. As production continues to scale up, more of these stones will continue to appear on the market. The retail demand has shown no signs of slowing and as Millennials and Generation Z begin getting engaged, factory grown diamonds will likely be on their mind when they consider what, if any, ring to propose with.
Invest in equipment and education.
The time when grown diamonds were rare anomalies is in the past. Much like our company you will see more and more coming into your businesses. Today, everyone should be investing in good quality equipment in order to identify these stones when they do appear. The wait-and-see period has passed and enough synthetics are entering the marketplace to justify the urgent need for tools that accurately detect them. In order to make an informed call on an appraisal, to know the proper amount you can loan, or the right price to pay for a piece of jewelry, you have to positively know what it is you are looking at. Make sure you and your staff know how to properly use that equipment so that you have complete confidence in the call you make.
Classes can also help you feel confident about your abilities. We offer the ability to work with lab-grown stones during our Diamonds 200 course.
Get Informed and Know Your Story.
If you are going to sell laboratory grown diamonds, have a clear reason why. Carry the marketing that will appeal to your clients. Similarly if you choose not to, that should be clearly articulated to your customers. Make sure you or your staff knows that policy and is able to explain it thoroughly.
While many forecast doom and gloom, history shows us that the industry will survive this epoch of change as it has done time and time again. There were similar periods of panic and an according adjustment following Cubic Zirconia and Synthetic Moissanite’s entrance to the market. When Rapaport began publishing prices, the trade recoiled that this would be the end of the diamond business as we know it. Glass-filled rubies, 14 karat gold plumb, beryllium enhancement, and so on and so on - each time the industry has proven to be resilient. When the dust settles these things found their niche and the market consolidated accordingly. The same will undoubtedly be true for lab-grown diamonds.
Half-day Synthetic Diamond Workshop in Chicago
Local midwesterners have requested to take part in the synthetic diamond seminars we host at conventions nationwide. We’ve heard you, and we are providing! Sunday, October 6th, 2019, 10:00 am-12:30 pm
PGS Lab is hosting a local Chicago half-day workshop all about synthetic diamonds, featuring: lab-grown diamonds, identification, state of the market trends and future trajectories, and of course hands-on samples of multiple generations of synthetics to show different technological advancements though the ages.
Originally established in 1980, Chicago-based Professional Gem Sciences Laboratory (PGSL) has been servicing the jewelry industry as expert gemologists for nearly 40 years. The company prides itself on high quality standards and integrity. Those standards have been the key to their longevity. PGSL is a reliable source for fast, consistent and accurate grading reports of quality that are used to determine the value of gemstones. For more information visit www.pgslaboratory.com or call 312-920-1541.