Laboratory Grown Diamonds: A coming of age...

02 Aug 2022

Love them or hate them… everyone has an opinion on the fastest expanding category in the jewellery business in years. Not least, this year’s JCK jewellery fair in Las Vegas was unofficially dubbed “the lab grown diamond show” - in view of LMVH’s ground-breaking double-digit million-dollar investment in the Israeli grower LUSIX.

The explosive growth of the lab grown diamond industry is a curious phenomenon. In direct contrast with the powerful natural diamond lobby, such as the Natural Diamond Council and beyond, there has been no industry-wide coordinated sales and marketing campaign by the laboratory grown diamond industry. Rather, it has all been consumer-driven.

This can be attributed to a confluence of drivers; the step-change to digital selling during the pandemic, the growing sensibilities of consumers to sustainable consumption, the proliferation of consumer press reporting on lab grown diamonds, the increased supply and last but not least, favourable perceptions of price and value. Arguably, the most influential of all these factors is consumer education and understanding of the lab grown product, leading to trust and long-term adoption.

With this in mind, CHELSEA ROCKS Laboratory Grown Diamonds commissioned an online survey of global retailers to separate the fact from the fiction about marketing and selling laboratory grown diamonds. The demographic polled were in the geographic spread of the UK, (predominantly), EU and the USA. Typically, the respondents were the President or VP of sales and respondents were largely composed of independent, bricks-and-mortar retailers, and to a lesser extent, online stores were represented. 50% of respondents had a single store, 25% with more than 100 stores and 25% with between 2-10 stores.

Interestingly, over 43% of respondents sold only laboratory grown diamonds, and from this, we can infer that the survey results can be construed as reflecting the views of this cohort in particular, with only 14% selling just mined stones and an equal number (14%) opting to take both categories head-to-head - selling both laboratory grown diamonds and natural.

Most insightfully, over 60% of those polled agreed the customer profile for laboratory grown diamond consumers is fundamentally different. This category continues to be a strong millennial and Gen Z trend, with a focus on environmental appeal. The typical laboratory grown diamond customer would spend between 2-5,000 pounds on jewellery and represented a strong uplift for overall revenues for jewellers active in this category.

Over 40% of respondents agreed that they had to utilize different retail marketing narratives to promote this category compared with natural goods, with particular reference to sustainability, traceability - and to a slightly lesser extent, the chance to upsell a “bigger and better stone”, for the same budget one might spend in the mined segment.

As one respondent commented,

"Our customers are really focused on sustainability and ethics. They understand climate change and really want to have an impact."

While much has been made of the eco-positive claims about of laboratory grown diamonds in the past, the transparent and accurate handling of this topic continues to be a concern for retailers. Perhaps the biggest impediment to selling laboratory grown diamonds is the potential for greenwashing, followed by a perceived lack of consumer awareness about the category and the complexities of peaceful coexistence with mined inventory. In contrast with the greater opportunity for interpersonal communication in-store, respondents identified an increased demand online for the provision of consumer information and education about the relative merits of laboratory grown diamonds and further quantification of sustainable credentials to engender consumer confidence. Across the board, it was felt that laboratory grown diamonds had met their promise with regards to gemmological quality, but that could be greater scope in the future for more innovative design, quality of manufacturing and further revenue potential for the category.

Overall, when asked, “What information provision would help you sell laboratory grown diamonds?” it has become clear that the laboratory grown diamond industry is reaching a new chapter in its growth and maturity. While some growing pains continue around the benchmarking of pricing and perceptions of value beyond the transactional or misguided attempts to peg laboratory grown diamonds with the mined Rappaport pricelist at a discount - there is an increased sense of self-assuredness for this category.

Implicit in their responses, retailers are poised to grow this segment but need to formalize their offerings in terms of staff training, consumer “explainers”, and celebrity endorsement. Such actions and campaigns will further enable the laboratory grown diamond segment to stand confidently in its own power, seeking neither to be compared qualitatively nor in pricing with their natural counterparts. Or, indeed, to denigrate the very competition which created the entire global diamond market. A more positive marketing narrative is not to critique either camp negatively but rather to celebrate difference, customer choice and the opportunity to match the right product with a customer’s unique expectations, budget, taste and lifestyle.

Instead, with this ‘coming of age', laboratory grown diamonds will be able to further differentiate their rightful place within the wider luxury market - no longer seek to justify their existence defensively, as now that they are shoulder to should with the likes of Louis Vuitton. As a famous supermodel once said that she would “… not get out of bed for less than $10,000 dollars a day”, so the global lab grown industry must further unite to ensure there is not further competitive price erosion and safeguard the special status of a diamond as a “Veblen good”.  (Much like expensive lawyers, diamonds are an example of Veblen goods – where our perceptions of high value are not linked to utility or function, but rather a psychological association with desirability as price increases exponentially – think Chanel handbags or Ferraris…).

Furthermore, projecting forward on the existential requirements of the industry, it might be considered analogous to WW2 when during the aerial bombardment, the government could build the aeroplanes quicker than it could produce and train the pilots. In a similar way, the laboratory grown diamond industry must continue to secure continuity and consistency of supply and trace provenance with equal rigour, if not more so, than mined diamonds. As with the bomber pilots, the industry must ensure that it can meet the future challenges presented by AI, NFTs and Crypto – but crucially, that it has skilled engineers who can grow diamonds in accordance with technical brilliance and sustainable compliance.

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Source: Joanna Park-Tonks (Chelsea Rocks)