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Explaining the Benefits of Lab-Grown Diamonds to Retailers
Lab-grown diamonds have seen a huge explosion in popularity over the course of the past decade. As techniques for growth have been refined and word of their affordability and sustainability spread online, LGD have moved from a niche curiosity producing mostly industrial-grade diamonds to a major player in the jewelry industry. LGD’s total share of diamond sales rose to 22.9% in 1Q 2023, up from about 11% at the same time in 2022.
But retailers are still hesitant about the product. Many within the industry see LGD as a cheap alternative to the real thing, and as its market share grows, total revenue decreases as a lower-cost product takes market share from a more valuable one.
Despite retailers’ misgivings, LGD are proving to be wildly popular with consumers, especially younger ones who would have otherwise been unable to afford a diamond. And among those who can afford a mined diamond, LGD remains an attractive alternative that allows them to get more diamonds, or bigger diamonds, with their budget. Given their popularity, and major brands like Pandora moving to an all-lab-grown inventory, manufacturers and suppliers must do more to convince retailers that LGD are good for the industry. Here are a couple of reservations retailers might have and one major selling point in favor of LGD.
It’s true, LGD prices have been falling steadily since their introduction to the market, and owners of LGD are often disappointed to find that their diamond is worth far less today than it was when they bought it. But neither mined nor lab-grown diamonds should be treated as an investment in the first place. While mined diamonds are often touted as an investment, whether as an added incentive to buy diamond jewelry or as a primary reason to buy loose diamonds, the fact is, they are not commodities like precious metals. We’ve discussed this topic before in this newsletter and the subject certainly warrants a full article of its own to explore all of the details. Suffice it to say, if you’re looking for ROI and market stability, your customers would be better served putting that money into a stable commodity like gold.
Rather than sell diamonds as an investment, we should focus on the meaning of the diamond to the customer. A piece of jewelry is something beautiful, meaningful, and rare—most people only own a few pieces of truly valuable jewelry, and they are all tied to some important event or moment in life, even self-purchases.
Buyers either have those important pieces designed to their exact specifications, or they spend days searching for a piece that speaks to them. With LGD, customization options become endless and affordable, no matter the size, number of diamonds, or color of diamonds a customer wants. If a customer is looking to create a custom work of art that means something special to them, lab-grown diamonds allow them to achieve that dream affordably. We’re symbolizing relationships, life milestones, and the attainment of dreams that are meant to last a lifetime. Resale value doesn’t enter into it—you don’t sell your memories and emotional connections.
This ties into the “no resale value” argument. Prices are dropping, sometimes slowly, sometimes more rapidly. Could the inventory I buy today fall in value before I get a chance to sell it in a week, a month, six months from now?
This is a valid concern for retailers, for whom controlling inventory costs is an ongoing battle. Technology offers one solution. Jewelry industry technology designed for in-store use with customers allows retailers to show photos of suppliers’ inventory, and then order a diamond directly from the supplier or bring it in on memo.
Looking more long-term, the market seems to be settling down as brands segment into fashion, premium, and luxury LGD. As the market matures, lab-grown and mined diamonds will be seen as entirely separate products, not necessarily competitors. Branding, marketing, design, quality of cut, and proprietary growing methods and colors will all serve to elevate some lab-grown brands to luxury status. That may help retailers find a place for the product in the future, but for now, being able to quickly move LGD with the help of apps designed for that purpose is the retailer’s best bet.
Popularity With Consumers
Why bother convincing retailers to sell LGD? Because they are popular with consumers. Even back in 2018, 70% of Millennials said they would buy a lab-grown diamond. This popularity grew almost entirely by word of mouth, mainly through social media, with very little marketing done by LGD growers, suppliers, or retailers.
Millennial and Gen Z consumers gravitate toward choice, uniqueness, and customization. As mentioned above, LGD open up new personalization options that will satisfy these consumers. They also offer something different, with a story of their own: a perfect, pristine diamond, made in a laboratory rather than dug out of the ground.
There is also, of course, the sustainability angle. We have to be careful with this one. Pandora has mentioned sustainability as one of the reasons they are only selling LGD. The FTC has already cautioned sellers of LGD for making unsubstantiated claims like “sustainable” or “eco-friendly” without sufficiently backing those claims. Consumers are increasingly seeking out sustainable products, but in order to market your products as sustainable, those claims have to be supported. Even in the absence of sustainability claims, LGD still have a lot to offer consumers looking for something unique, personalized, and affordable.