Paying the Right Price for the Right Diamond
New York Fashion Week, and fall, are upon us. For those of us in the fashion industry, it’s a week where our favorite designers, jewelers and visionaries gather to share new ideas and display the latest, greatest trends.
Along with New York Fashion Week, this fall could also boast a long-anticipated announcement from the diamond industry — specifically the launch of Lightbox Jewelry’s new online store, which will bring much-needed transparency to the lab-grown diamond market and affordability to consumers of fashion jewelry.
This past May, De Beers — the world’s largest diamond mining company and a DPA member — announced that they would begin selling inexpensive lab-grown diamonds under the new Lightbox brand. This subsidiary will sell lab-grown diamonds for roughly 85 percent less than natural diamonds, or $800 for a 1.0-carat stone — compared to more than $6,500 for a natural diamond of similar quality.
This is an important development. Lightbox is the first synthetic diamond manufacturer to price its products based on actual value, rather than on natural diamond prices. They make a clear statement that lab-grown diamonds, while carrying the physical characteristics of diamonds, do not carry any of the attributes that make diamonds valuable. Their products are neither from the earth, nor billions of years old, unique or finite. In other words, they are not rare and they are not precious. Lab-grown diamonds are industrial products, which can be produced and reproduced at ever-decreasing costs. This does not mean they are not legitimate or beautiful in their own right, but they are not precious stones. Consumers should know that. The price of lab-grown diamonds should be based on the cost of production and the value-add of the brand and design, not on the illusion that they carry some of the intangible attributes that make diamonds precious.
As consumers begin to understand the true value of lab-grown diamonds, it will become increasingly difficult for the marketers of these products to charge the type of premium they have been charging until now — pretending that their product is as precious and valuable as a natural diamond. Of course, the lab-grown marketers might try to explain that Lightbox’s quality is lower, and that it’s producing mainly colored stones because it cannot get colorless stones right, but none of this is true. The reality is that lab-grown diamonds are pretty stones, increasingly standardized in quality — with production costs that continue to decrease as Chinese and Indian production capacity expands. Yet, they hold none of the attributes that make natural diamonds valuable. This truth is starting to sink in and will soon become obvious to all.
The implication of all of this is that the synthetic diamond market is going to become a two-tier market: brands like Lightbox and Swarovski will successfully build brand propositions around selling pretty, lab-grown diamonds for fashion jewelry, while it will be a race to the bottom for those with weak propositions or unknown brands, which will compete at ever-decreasing prices. As is the case with colored stones, such as synthetic rubies, sapphires and emeralds, lab-grown diamonds will settle at about 10 percent of the value of their natural counterparts; this will become the new normal.
So, what will the impact be on natural diamonds?
Our research shows that as lab-grown diamond prices decline, consumers consider them less and less for life’s most important moments — as these occasions call for a product that can symbolize the importance of a moment or relationship, and mirror its value. This is true in the U.S. and will be even more so in Europe, China or India. Only fine jewelry that deals with natural, precious or semi-precious stones will continue to serve for life’s most important moments.
In contrast, lab-grown diamonds will become increasingly attractive in the fashion jewelry segment for casual wear or less significant gifting occasions. It is important to understand that lab-grown diamonds today have a very small share of that market. Assuming that their sales are not fully incremental, the impact will be felt mostly on semi-precious stones and diamond simulants.
In our view, the only thing that could come to disrupt this scenario is consumer confusion surrounding diamond terminology. Lab-grown diamond marketers often use ambiguous terminology to blur the true nature of their products, which has led to rising concerns about consumer confusion between the two products. In this respect, the permissiveness of the revised FTC Jewelry Guides and the way it has already been widely breached by some unscrupulous players should concern us all. It should especially concern diamond owners who believe in the monetary and the emotional value of their product.
As the representative organization for diamond producers across the globe, the Diamond Producers Association (DPA) serves as an important advocate for consumers. Increasingly, we’ve heard concerns expressed from retailers and their customers about the potential for rising consumer confusion between the two products following the FTC’s Jewelry Guides.
Lightbox’s online debut later this fall will go a long way in helping to ensure that the differences between lab-grown and natural diamonds are mirrored in their cost and description in the marketplace. The result is a win for both the jewelry trade and consumers, as no solid business has ever been built on misrepresentations and illusions.
