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The Future of Lab-Grown Diamonds
In 2019, Bain & Company were predicting drastic drops in diamond prices and global sales. The pandemic, however, led to an increase in personal luxury spending, especially in the jewelry sector, as luxury consumers were unable to spend that discretionary income on vacations and fine dining. As of 2023, the pandemic bubble seems to have burst, and diamond sales are once again trending downward. There is one sector of the jewelry industry that is bucking this trend, though: lab-grown diamonds.
As of June, 2023, “Diamond prices are down 18% from their all-time highs in February 2022, and are lower 6.5% year-to-date, according to one Global Rough Diamond Price Index,” CNBC reports. At the same time, LGD are increasing their share of the market, up from 2.4% in 2020 to 9.3% in 2023, according to the same CNBC article.
Sales of mined diamonds are falling while sales of lab-grown diamonds are increasing. But lab-grown diamonds still account for just a fraction of diamond sales. Will they ever overtake mined diamonds, and if so, when?
Lab-grown diamonds have begun making inroads on mined diamond sales, particularly after De Beers introduced Lightbox, their affordable LGD brand, in 2018. In 2019, Millennials surpassed Baby Boomers as the largest adult generation. The rising purchasing power of Millennials, is also a factor, as Millennials tend to value ethical and environmentally friendly consumption over other concerns. Though the diamond industry has made great strides in cleaning up its act over the past two decades, negative consumer perceptions of mining and the diamond trade remain, and LGD marketing focused on environmental benefits stepped into serve environmentally conscious consumers.
Will Lab-Grown Diamond Sales Ever Surpass Mined Diamonds?
Industry analyst Paul Ziminsky predicts that LGD production will reach 25 million carats by 2030, but even that number will still pale in comparison to the more than 100 million carats of mined diamonds produced per year. While 25 million carats seems like a substantial market share, keep in mind that some 90% of that production ends up in industrial applications. Meanwhile, 20-30% of mined diamonds end up in jewelry. However, the low cost of LGD means we could see more of them used in industry and comparatively fewer mined diamonds used for that purpose. While higher production and greater affordability will help increase LGD market share, it is unlikely that they will crowd mined diamonds out completely any time soon.
What the Future Holds for Lab-Grown Diamonds
While LGD won’t outright replace mined diamonds, they are already carving out a niche for themselves. Ziminsky predicts that the quality of LGD will increase to the point that grading reports will become obsolete. The lack of grading reports will further depress LGD prices. One diamond won’t be superior to another identical, mass-produced diamond, and the costs saved from skipping the grading report can be passed onto the consumer.
The assumption that grading reports for LGD will become obsolete raises one question: what about cut, perhaps the most important, but most overlooked of the 4Cs? While all LGD might have equal color and clarity, two identical roughs can have wildly different values based on the quality of the cut: a superior cut creates better optical qualities and can result in greater carat weight as it will preserve more of the rough. On top of that, an expertly cut diamond can actually look larger than a larger, poorly cut diamond. Who cut a particular diamond may become a selling point for LGD.
Another factor that will boost the value of a lab-grown diamond amid falling prices is branding. Any diamond sold by a luxury brand will have that luxury cachet. To compare the implications of this to another industry, we live in an era where anyone can release music onto the internet. Some of it is very good, but some is very bad. Most of it is some shade of mediocrity in between. The role of record labels, then, is to serve as a sort of gatekeeper of quality. An album released on a label will signal a certain level of quality, a certain style, or a certain audience.
Luxury brands may soon serve the same purpose for lab-grown diamonds, functioning as a sort of seal of approval or guarantee of quality, style, or social message for consumers. While consumers are generally less brand-loyal than they used to be, they still tend to trust brand names over a name they’ve never heard before. LGD incorporated into luxury designs will still carry the value, and values, associated with a brand name.
We should also expect to see a greater segmentation of the market. We are already seeing segmentation between unbranded fashion LGD and brand-name luxury LGD, but we will also see the rise of premium brand LGD. Premium brands can take the form of more affordable versions of luxury brands, or more upscale versions of fashion brands. Either way, they will serve the same market purpose: occupying the middle ground between fashion and luxury. We will also see proprietary growing methods, particularly for colors not found in nature, as another selling point for luxury LGD.
Diamonds Are Forever—And For Everyone
The rise of LGD might bring diamond prices down across the board, but the amount of labor and the specialized skill it takes to get any kind of diamond to market suggest that prices won’t fall below a certain threshold. The ubiquity of LGD in fashion jewelry might further devalue the mystique of the diamond, but industry-wide controls on supply, luxury branding, proprietary growing methods and colors, unique designs, and expert cuts that push the boundaries of what is possible will elevate some LGD above others and maintain the product’s value and status.