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DeBeers' lab-created diamonds: direct to consumers – it was always going to happen

De Beers recently announced that it will now sell loose lab-created diamonds direct to consumers. ANGELA HAN explores further challenges that lie ahead for both retailers and suppliers.

It was more than two years ago, on 29 May 2018, when De Beers Group stunned the jewellery industry with its announcement that it was entering the lab-created diamond market with a range they described as “high-quality, fashion jewellery designs at lower prices than existing lab-grown diamond offerings."

The jewellery was to be manufactured and marketed by a new, stand-alone company called Lightbox Jewelry, with sales of earrings and necklaces beginning on 27 September that year. Naturally, all diamonds for the Lightbox collection would be sourced from De Beers’ own Element Six manufacturing facility.

"De Beers’ latest announcement to offer lab-created diamonds directly to consumers simply follows an inevitable path towards an evolving business model."

As if the unexpected move wasn’t enough, the announcement was made just prior to the opening of the JCK Las Vegas Show, in what many said was a well-timed attack on its competitors.

Before the incumbent lab-created diamond suppliers had an opportunity to create a stable market for their product, DeBeers sought to create doubt and instability. The pricing model of the Lightbox diamonds flew in the face of all accepted pricing ‘standards’ and ‘models’ for both natural and other lab-created diamonds.

De Beers used Lightbox to create a ‘transparent’ and ‘affordable’ linear pricing model at US$800 (AU$1,350) per carat regardless of whether the piece of jewellery consisted of a one-carat diamond or two half carats, or even four-quarter carat stones. Recently, it introduced loose diamonds under the same linear model, but now with a 2-carat stone being priced at US$1,600 (AU$2,650).

While De Beers’ unorthodox pricing was said to be another attack on competitors as a way to create upheaval in diamond pricing, its logic was more rational – all stones are manufactured under state-of-the art conditions so they are all identical, therefore the pricing is identical.

Sally Morrison, chief marketing officer, Lightbox Jewelry told Jeweller in December 2018: “Our reasoning is simple: this is a manufactured product and we firmly believe lab-grown stones should be priced based on cost of manufacture, not as a discount from natural diamond pricing, which is defined by relative rarity.”

Following the Lightbox announcement, a 2018 Bain & Co report commissioned by the Antwerp World Diamond Centre, revealed that the manufacturing cost for a one-carat CVD-created diamond was US$300 to US$500 per carat, compared with US$4,000 per carat in 2008. 

De Beers used Lightbox to create a ‘transparent’ and ‘affordable’ linear pricing model at US$800 (AU$1,350) per carat regardless of whether the piece of jewellery consisted of a one-carat diamond or two half carats, or even four-quarter carat stones.
De Beers used Lightbox to create a ‘transparent’ and ‘affordable’ linear pricing model at US$800 (AU$1,350) per carat regardless of whether the piece of jewellery consisted of a one-carat diamond or two half carats, or even four-quarter carat stones.

Unlike other lab-created diamond suppliers offering loose stones, the Lightbox branded diamonds were only available in set jewellery.

But even blind Freddy could see what was coming!

And so it was last month, almost two years later, the announcement was made for “the launch of Lightbox Loose Stones, a new purchase format that gives consumers the ability to buy individual high-quality Lightbox lab-grown diamonds at its industry-leading price of $800 per carat.”

Surprise? Not really!

You see, De Beers entering the lab-created market was no surprise to Jeweller. In fact, in 2018 when Lightbox was launched, we asked: “Why did it take so long?”

Indeed, 13 years earlier in 2005, Jeweller's editorial stated: “De Beers should begin manufacturing synthetic diamonds... Rather than fighting the inevitable, perhaps the company would be best to embrace it.”

After all, the diamond behemoth had an enormous income stream to protect, so it wasn’t a matter of if but when it would begin selling lab-created diamonds. The reasoning was simple: you can’t win a game you’re not playing – have you ever seen a game won by a spectator?

De Beers’ latest announcement to offer lab-created diamonds directly to consumers simply follows an inevitable path towards an evolving business model.

If we accept this logic, then we are left with another question: was all this a strategic move to ensure that other lab-created diamond innovators didn’t become a blanket disruption to the natural diamond market, or was it because De Beers finally realised that lab-created diamonds are not a serious threat after all?

Jeweller first raised this question in 2018 in our Great Diamond Debate – Natural Vs Synthetic where we concluded that it might be both, or perhaps it didn't matter at all!

Recently, Lightbox introduced loose diamonds under the same linear model, but now with a 2-carat stone being priced at US$1,600 (AU$2,650).
Recently, Lightbox introduced loose diamonds under the same linear model, but now with a 2-carat stone being priced at US$1,600 (AU$2,650).

The debate then quickly moved on; cool heads prevailed and the lab-created diamond manufacturers learned to live with competitionfrom the De Beers-backed Lightbox just as De Beers had come to realise lab-created diamonds were here to stay.

The next debate became Fact vs Fiction as both sides fought a marketing jargon battle. Sure, the winners were the consumers who now had more choice. However, could they really make an informed decision in the midst of a marketing barrage about the pros and cons of natural versus lab-created diamonds?

Away from the battlefields of marketing and jargon, both retailers and suppliers are now faced with other dilemmas. Mass-manufacturing facilities can’t stop manufacturing. In order to keep the business operating and doors open, it must keep producing, at which point supply will outstrip demand; thus prices drop.

With such a volatile model, retailers may be less likely to keep stock of lab-created diamonds in the same way they do with their natural counterparts.

"When prices are driven so low to a point where no one in the supply chain makes a profit, something somewhere along the way has got to give."

Fortunately for lab-created manufacturers, the product’s application ranges far and wide across technology in semiconductors, medical equipment etc, and which continues to be its highest potential for profitability and long-term sustainability.

Increasingly, with the price of lab-created diamonds falling and suppliers selling loose stones direct to the public becoming the preferred model, this could further impact retailer diamond sales. When prices are driven so low to a point where no one in the supply chain makes a profit, something somewhere along the way has got to give.

De Beers executive vice president Stephen Lussier told JCK in March, “Wholesale prices are declining. They are probably down some 20 per cent in the fourth quarter of 2020 alone. The supply of lab-grown is increasing. We know that the China capacity is likely to come on. If you look at India, the imports are rising faster than the exports. That means the prices will keep going down.”

A diminishing margin could further propel lab-created manufacturers to stray from traditional supply channels and go direct to the consumer. For retailers, whose natural diamond sales have been challenged by online platforms for the past decade, lab-created diamonds could also prove to further undercut their overall diamond sales.

The dust has yet to settle in this battle, but one thing is for sure: the market for gem- quality lab-created diamonds is there and continues to grow – but the supply channel still has a way to go.

 

THE GREAT DIAMOND DEBATE

The Great Diamond Debate is a collection of special edition publications covering the international diamond market. They have attained enormous readership and respect worldwide - the digital versions have achieved more than 90k impressions, in addition to the print editions.

• Read: The Great Diamond Debate I: Natural vs Synthetic »
• Read: The Great Diamond Debate II: Fact vs Fiction » 

 











ABOUT THE AUTHOR
Angela Han

Publisher  • Jeweller Magazine


Angela Han has more than a decade’s experience in the jewellery and luxury goods industry, having worked in all sectors from retail and manufacturing to design and supply. She has been with Jeweller for over ten years and has extensive experience in print and digital media publishing, business-to-business communications and strategy. 

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