Grown versus mined: the retail battleground

Avi Krawitz

The success of the synthetic and natural diamond markets depends largely on the narrative of the retail jeweler.

Is the growth in lab-created diamonds being driven by consumer desire or the retail jeweler’s sales pitch?

The question arose in a recent episode of the Rapaport Diamond Podcast, as well as in a webinar panel discussion Rapaport hosted earlier this year with lab-grown producers and marketers.

The podcast guest was Kieron Hodgson, managing director and research analyst for commodities and mining at UK investment bank Panmure Gordon. He called out jewelers for the narrative they were pushing about lab-grown versus natural goods.

How [synthetics] are being sold to consumers has left me dismayed at the level of mistruth being conveyed,” Hodgson lamented, reporting on a recent trip in which he visited various jewelry stores. “Retail outlets are willing to portray natural diamonds as something that is not a benefit to the industry, whereas lab-grown is that ethical alternative.”

He found himself “getting particularly annoyed because I have seen firsthand the benefit that mining operations bring to communities that otherwise have no form of income,” he continued. “The industry has allowed the mistruths to permeate through to the wider consumer, and that is difficult to reverse once it becomes embedded in the consumer psyche.”

Hodgson’s comments struck a chord with one listener, an executive at a major New York-based jeweler, who wrote in an email: “I thought the last few minutes [of the podcast] on the lack of messaging, or misinformation, as it relates to natural versus lab-grown, was so on point… The point by your guest on the consumer psyche is what is keeping me up at night.

The exchange highlighted the role that retail jewelers have played in the synthetic-diamond sector’s recent growth spurt. It is no secret that jewelers are seeing stronger margins from lab-grown than from natural. As such, they might be forgiven for pushing consumers toward the product in their sales pitches. As Marty Hurwitz, CEO of lab-grown-focused consultancy The MVEye, remarked in the July webinar: “That’s capitalism — when you have a willing seller and a willing buyer.”

Size matters

The webinar panelists argued that growth starts with the consumer; retail jewelers are simply responding to the rapidly rising awareness of, and interest in, the product.

If I look at the trajectory over the last five years, the socially, environmentally and economically conscious consumer now has a choice,” said Amish Shah, president of lab-grown brand Altr Created Diamonds. “They have a choice to get almost twice the size of a diamond for almost the same price or a little more.

Beryl Raff, the recently retired CEO of US jeweler Helzberg Diamonds, first highlighted that point at the Dubai Diamond Conference in March, declaring that “the 2-carat lab-grown diamond has become the new 1-carat mined diamond.” In 2021, Helzberg sold 50 times more 2-carat lab-grown diamond pieces than the same size in mined diamonds, she reported.

Those economics run contrary to the initial projections of how the lab-grown diamond market would develop. Rather than selling an equivalent diamond for less and saving the consumer money, jewelers are filling the customer’s budget with a larger stone — especially in America, “where it’s all about size,” Shah observed.

Melee challenges

The shift to larger lab-grown sizes at retail also contrasts with the earlier assumption that synthetics’ main growth opportunity lay in smaller stones, particularly since natural melee was facing a potential shortage due to the Ukraine-related sanctions on Alrosa goods.

However, there is currently no shortage of natural melee on the market, and jewelers are not shifting to synthetics for this category. Natural melee has a better look, and that’s enough to keep jewelers using it instead of small lab-grown goods, Hurwitz said. Acquiring a consistent supply of lab-grown melee is also a challenge, particularly for fashion jewelry, which uses this size heavily, he added.

Besides, the grower needs to decide what to do with the rough crystal during the growth process, and most prefer to manufacture larger stones, which are more economically viable.

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This article first appeared in the October issue of the Rapaport Research Report. Subscribe here

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