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News, Feature Stories, The Great Diamond Debate













Don't poke the bear!

ABE SHERMAN says bogus claims and overpriced products from synthetic manufacturers probably ‘forced’ De Beer’s into the lab-grown market.

The first text came in at 3:43am Las Vegas time. It was a press release from De Beers announcing the launch of Lightbox Jewelry, the company’s new collection of synthetic diamonds. The irony is so thick in that I was at Newark airport fewer than 24 hours earlier, where someone who works for one of the laboratory-grown companies was telling me they now own 200 reactors and that business was great.

The discussion motivated me to become more knowledgeable about what synthetic diamonds actually cost to grow and I had been researching the costs. How expensive is a reactor? What are their growth rates and labour costs?

I concluded that the cost to produce these goods is far below what the current sellers are claiming. In fact, my friend at the airport told me the cost of their laboratory-grown crystals was twice what it cost them for mined diamonds.

“So let me get this straight,” I said. “The goods cost twice as much yet you’re able to sell them for 30 per cent less than natural diamonds?!” I told him that prices would eventually drop because the goods aren’t worth what the trade is asking. I added that retailers would get hurt in the process. He told me I didn’t know what I was talking about.

Then at 3:43am the announcement came that De Beers was going to start selling one-carat synthetic diamonds for US$800 retail … Mic Drop!

"While De Beers has opted to label its brand as laboratory-grown rather than synthetic, it is putting an easy identifier inside the stones that can be seen with an eye-loupe and are pricing the goods as a stand-alone product based on their value and not as a discounted competitor of natural diamond."

There are three things that have irked me about the emergence of the man-made diamond market.

Firstly, manufacturers and wholesalers have refused to label them as what they truly are – synthetic diamonds. Secondly, the industry has not found a way to easily differentiate synthetic product from natural diamonds. Thirdly, these same manufacturers have priced their goods at a discount from natural diamonds.

While De Beers has opted to label its brand as laboratory-grown rather than synthetic, it is putting an easy identifier inside the stones that can be seen with an eye-loupe and are pricing the goods as a stand-alone product based on their value and not as a discounted competitor of natural diamond.

Despite what sellers of synthetic diamonds say, there is no difference in rarity between a half-carat and a two-carat laboratory-grown synthetic diamond; the cost to produce them is simply a linear equation where time in the reactor equals the size of the cube.

So now what?

Unfortunately, retailers are already entrenched in the laboratory-grown category at very high prices. As the news spreads – and this is very newsworthy given the hype that other laboratory-grown companies have generated over the past year – consumers are going to be very angry about the prices they paid for their synthetic stones. I don’t have any wisdom for how to address these conversations and I’m concerned about how it will affect reputations, especially at retail level.

Industry responses

Some of the retailers and suppliers think De Beers is cannibalising its own product – natural diamonds. Others think De Beers is screwing the industry by selling directly to consumers as the first step in its omni-channel distribution plans – one woman even shouted this out during the De Beers presentation at JCK.

Let me say that those companies that have gone ‘all-in’ on synthetics and are understandably upset that their world has been rocked should have seen this coming. This is especially true of the growers who know what synthetic diamonds cost to produce and have dug their own holes regarding the wholesale and retail ‘value’ of their goods.

Note to lab-grown manufacturers

To the manufacturers of synthetic diamonds, who tied their wholesale prices to the prices of natural diamonds, this is your fault.

For those of you who have had your synthetic diamonds graded as if they deserve the same value determinations as a natural diamond, this is your fault.

For those of you who have told your customers that lab-grown diamonds are a) not synthetic, and b) identical to natural diamonds, this is your fault.

Through its Element Six division, De Beers knows more about growing synthetic diamonds than anyone else in the world but I don’t believe it even considered producing this material for jewellery until the synthetic manufacturers entered the marketplace with your bogus claims and overpriced product.

You have no one else to blame but yourselves so stop it already. Stop telling the jewellers that Lightbox diamonds are brown, that Lightbox won’t be able to keep up with production and that De Beers is running out of diamonds.

Stop telling consumers that Lightbox won’t be able to consistently produce the qualities it has already demonstrated, that this is a publicity stunt and that De Beers has opted against providing grading reports because of poor quality.

Shock and awe

I have been writing about synthetic diamonds over the past few years and, although I had no idea that De Beers would use an all-out assault on the rhetoric spewed by synthetic growers and sellers, the result is the battle should be over.

This was simply a rout on all fronts but instead of hearing that the synthetic diamond companies will lower their prices immediately and stop the nonsense that they are the same as natural diamonds, they appear to be doubling down.

Denials about the quality of Lightbox goods and the scope of Lightbox’s production capabilities are as embarrassing as declarations that De Beers is selling directly to consumers to screw the industry… and retailers are parroting this drivel.

The marketplace

The new market will be pink, blue and white CVD lab-grown diamonds up to one carat at US$800 retail plus setting. Any consumer looking for an alternative to a natural diamond will be aware of these goods and their prices.

I am hoping Lightbox is made available to retailers offering lab-grown diamonds at realistic prices. Anyone selling lab-grown diamonds today must take this information into consideration regarding how they represent the goods they are selling and how much they are selling for.

The introduction of lab-grown diamonds has forced US retailers to purchase expensive testing equipment to check every item of diamond jewellery that passes through their inventory and also each item coming in for repair. The burden of testing for lab-grown goods has fallen on the retail jeweller who must protect themselves and their customers.

As for how to deal with customers who have already purchased lab-grown at high prices, I remain open to ideas.

 


 

'The Great Diamond Debate' Contents » 

Innovation vs Disruption: Spectators don't win games
Coleby Nicholson, managing editor of Jeweller
 
Diamonds and Youth: Millennials and Gen Z drive sales
Predicting a synthetic future
Garry Holloway, owner Holloway Diamonds
Lab-created diamond jewellery market to grow to US$15B by 2035
Paul Zimnisky, paulzimnisky.com - indepdendent analyst

 











ABOUT THE AUTHOR
Abe Sherman

CEO • Buyers Intelligence Group


Abe Sherman is CEO Buyers Intelligence Group, a jewellery buying group, merchandising consulting and market-research firm that supports retailers and suppliers. He writes extensively on developments within the jewellery and diamond industries. Visit: bigjewelers.com









Sunday, 16 December, 2018 08:09am
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