By Deborah A. Yonick
Lab-grown diamonds aren’t going anywhere. These laboratory creations have demonstrated steady growth driven by consumer demand that has organically developed over the past decade. And according to industry experts, that growth is only going to continue.
In its long-term outlook for the diamond industry through 2030, global consultancy Bain & Co. expects lab-grown diamonds to be within 5 to 15 percent of diamond market share in the next decade. It comes to this expectation based on insights from lab-grown and natural sapphires.
“Lab-grown and natural sapphires have remained separate markets for more than 20 years, and synthetic sapphires account for 15 percent of the total gem-quality market in volume,” the company cited in its ninth annual Global Diamond Report for the Antwerp World Diamond Centre, which was released in December 2019. (As of presstime, Bain had not released a tenth edition.)
The current market size for lab-grown diamonds is difficult to assess given the rapidly changing dynamics and emergence of new growers and brands, said Marty Hurwitz, CEO of MVI Marketing and The MVEye in Austin, Texas, who has been studying and monitoring this category since 2004.
But Hurwitz estimates that lab-grown diamonds could capture up to 5 percent market share of gem-quality diamonds today. To get to 15 percent of the diamond market, Hurwitz says that an enormous number of stones would need to be produced—something that is not easy or cheap to do.
“The capital is available to acquire the chambers, but the technology is not easy to master,” Hurwitz said. “The biggest challenge facing growers is a shortage of scientists who can fine-tune the technology to grow diamonds of consistent size and quality, and then scale production.”
He notes that already few growers can satisfy current demand. As a result, prices of these stones are rising. However, despite increasing prices, Hurwitz believes that a price differential between lab-grown and mined diamonds will always remain. He also finds it implausible that prices for lab-grown diamonds will drastically drop, as the capacity for growing them can’t meet the demand of the diamond industry.
Hurwitz also notes that as with mined diamonds, many retailers aren’t selling lab-grown diamond inventory that they own. Rather, they are calling up a database to show product they can get from their vendor in a day or two. While that may be fine for now, Hurwitz expects that sooner rather than later consumers will demand a faster turnaround time. He said major retailers are now stocking it. “Independents will have to buy inventory and possess it.”
While exact market share for lab-grown diamonds is uncertain, it’s undeniable that awareness, attitudes, purchase interest, and sales are steadily rising, especially in the last two years, as The MVEye’s latest study revealed. Sponsored by the International Grown Diamond Association (IGDA) and Instore Magazine, the study surveyed 1,027 jewelry consumers between Sept. 21 and Oct. 23.
Among the respondents, consumer awareness of lab-grown diamonds reached 80 percent, across age groups, genders, and incomes, escalating from 9 percent awareness a decade ago, and without major marketing investment fueling the growth.
Not only is awareness high, 8 percent of jewelry consumers report owning or having purchased lab-grown diamonds in the recent past.
Jewelry consumers also are asking for lab-grown diamonds. In fact, in a separate trade survey conducted last fall, 62 percent of the 138 retail respondents (both brick-and-mortar and online stores of various sizes) found that anywhere from 5 percent to 50 percent of their customers ask about lab-grown diamonds.
Moreover, consumers expect the product to be among the fine jewelry offerings where they shop, with 37 percent expecting salespeople to automatically include lab-grown diamonds in their presentation of diamond product options.
Nearly one third of jewelry consumers surveyed said they learned about lab-grown diamonds from retail jewelers (both in-store and online), and nearly a quarter reported social media their information source, with Facebook, Instagram, and YouTube the most cited platforms. Retailers echoed similar sentiments.
Current research finds consumers are most drawn to the size-to-value equation, said Hurwitz. “Shopping with a budget in mind, as most consumers do, when shown both mined and lab-grown diamonds, the bigger stone of the same quality in lab-grown diamond appears to be the winning proposition for most couples getting engaged. With eco-friendliness the icing on their diamond cake, especially for Millennials.”
Lab-grown diamond attributes that resonate most for nearly a third of jewelry consumers is that lab-grown diamond jewelry can cost 30 percent less than jewelry set with mined diamonds, and also that they can get a 30 percent larger sized lab-grown diamond for the same price as a smaller mined diamond.
Also attractive to a quarter of jewelry consumers is that lab-grown diamonds are identical to mined diamonds in appearance, quality, strength, and optical finish. More than a quarter perceive lab-grown diamonds to be more sustainable for the long-term, and 17 percent like that they can come with a grading certificate.
The biggest drivers for the majority of retail respondents selling lab-grown diamonds is that it allows them to offer consumers a bigger diamond for a lower price, has better margins than mined diamonds, and consumers are asking for the stones.
Most surveyed retailers who sell lab-grown diamonds feature them in the bridal category—in both finished pieces and loose for semi-mounts. In fact, more than half reported engagement and wedding rings to be their best-selling products in this category. They reported mainly stocking loose, 1-carat plus stones, in D-I color and VVS2-SI2 clarity, a wider range of offerings in color and clarity than retailers reported in a similar 2018 trade survey (G-H, VS2-SI1).
Theresa Namie, merchandise manager of Ostbye in Minneapolis, which offers both mined and lab-grown diamonds, finds couples are open to choosing lab-grown diamond centers to keep expenses down, perhaps later replacing it with a mined diamond.
When it comes to fashion jewelry, Namie expects to see growth for lab-grown diamonds in wardrobe staples, as more self-purchasing women see the value in buying them for everyday wear.
Cora-Lee Colaizzi, director of marketing and catalogs and senior merchandiser for Quality Gold in Fairfield, Ohio, concurs, citing several categories beyond bridal showing demand and growth. “The basics are growing, like stud earrings, solitaire necklaces, and tennis bracelets set with lab-grown diamonds. And, men’s jewelry, both fashion and wedding bands, has a lot of potential in this category.”
More than half of surveyed retailers selling lab-grown diamonds said they plan to stock more lab-grown diamond jewelry in the next two years, including earrings, pendants and necklaces, bracelets, and fashion rings. The study found that the retail sweet spot for lab-grown diamond bridal is $2,000-$4,000; for lab-grown diamond fashion jewelry it is $800-$1,000.
During a webinar hosted by IGDA and Instore to discuss the study results, Liz Chatelain, president of MVI Marketing, said that there are currently no issues with sourcing loose lab-grown diamonds and mounted bridal. However, she cited a shortage of fashion product available in the category, which could be a result of lab-grown diamonds initially being marketed as engagement ring center stones.
“Now that shoppers are ‘sold’ on the idea of lab-grown diamond jewelry, they want to see it in both bridal and fashion jewelry,” says Chatelain. “With fashion diamond jewelry, they want selection, new looks, and more stones. Retailers and manufacturers will have to catch up to the shopper’s interest level.”
Of the 59 percent of retailers surveyed who sell lab-grown diamonds, 60 percent said they present the features of both mined diamonds and lab-grown diamonds when talking about diamond jewelry. The remaining 40 percent wait for the customer to ask for lab-grown diamonds or show resistance to mined diamonds before presenting lab-grown diamond options.
David Arnold, general manager of Daniel’s Jewelers in Kileen, Texas, and a proponent of lab-grown diamonds, said he has a wall of loose diamonds, lab-grown and earth-mined, side-by-side, well labeled, and lets his customers decide what to buy. “That’s the aha-moment,” said Arnold, who served as a retail panelist during the webinar. “Let the customer decide with their pocketbook, social awareness, or whatever inspires them to say yes to something.”
The key, Arnold said, is to not give the impression that lab-grown diamonds are ‘other’ by keeping them separate, but instead incorporate them in the diamond presentation.
“Having everything on equal footing is the best way to introduce it. I want consumers to have the full breadth of diamonds so that when they look at me and see how comfortable I am, they’re comfortable. We set the tone.”
However jewelers opt to present the stones, it’s recommended that they forge the right partnerships with lab-grown diamond suppliers that can help them build their business. More than a third of retailers surveyed by The MVEye said that sales training and point-of-purchase material are critical tools they need from suppliers to sell lab-grown diamonds. Three-quarters of retailers reported that they train sales staff about the product, providing one-on-one training, incorporating supplier material and industry information.