Global diamond industry is facing numerous issues and going through a bad phase. Lab-grown diamonds with its unique value proposition can actually complement mined diamonds, address industry’s pain points and help capture the potential.
Growing acceptance of Lab-grown diamonds
Lab-grown diamonds have steadily found growing acceptance with consumers and some industry players alike. Millennials have started to romance Lab-grown diamonds like never before. Several jewelry retailers are now selling Lab-grown diamonds along with their existing mined diamonds portfolio and have shown the way of how Lab-grown diamonds can not only co-exist with but also complement mined diamonds. By targeting specific consumer segments, educating consumers, branding and marketing them separately and ensuring that Lab-grown diamonds do not substitute mined diamonds, adoption of Lab-grown diamonds along with the mined diamonds by retailers is a success story in the making.
Similar story as cultured pearls
When cultured pearls were introduced in the industry, natural pearls manufacturers had huge apprehensions. But the unique positioning of cultured pearls not only enabled it to coexist with the natural pearls but also helped the latter to increase its value.
Being considered as a threat, Lab-grown diamonds are ignored and neglected by the industry. Instead of getting threatened and downplaying Lab-grown diamonds, industry should consider them as a viable alternate choice for consumers. By getting together and charting a plan of action, industry can successfully adopt Lab-grown diamonds that can coexist with mined diamonds in perfect symbiosis, as illustrated by some jewelry retailers. Similar story of cultured pearls is the case with Lab-grown diamonds, which can help mined diamonds regain its glory and help the ailing diamond industry.
How lab-grown diamonds can help the industry and consumers
Production of rough diamonds have fallen from 177 million carats in 2005 to just 127 million carats in 2015. In 2013-14 itself, there was a 4% drop in global rough production. 30 major diamond mines will reach their End of Life by 2030 and rough production will fall by 50+ % by then, indicating that mined diamonds may run out sooner than one thinks. Adopting lab-grown diamonds will ensure that the falling diamond supplies are arrested and more diamonds are available for trading and sale, thus addressing a possible 278 million carats Demand-Supply gap by 2050.
Profitability across the entire value chain has either declined or at best remained stagnant in 2015. Diamond manufacturers (Cutting and Polishing sector) are the worst hit with profit margins shrinking to 0 – 3% and expected to fall further. Some of the mid-segment units are even operating at 5% losses. Owing to its low cost structure (being 30 – 80% cheaper), Lab-grown diamonds can help in increasing the industry’s profitability.
Due to uncertain supplies, changing trading dynamics and distribution companies’ practices among other reasons, diamond industry has seen high volatility and fluctuations making prices almost unpredictable.
By ensuring consistent supplies and smooth & fair practices, Lab-grown diamonds can help decrease volatility and reduce price fluctuations.
Regaining lost position in the luxury goods market
While, global luxury sales are increasing, jewelry no longer figures in people’s top wish list. A De Beers Insights report mentioned that jewelry was not in the Top 5 gift list of US women. Holiday, Electronics, Home furnishings, Spa ranked ahead of jewelry. Even among the youth (18 – 34 years), designer handbags and clothing takes precedence. As a post quoted “iPhones are the new way to say I love you”.
By giving timely choices and options to consumers, increasing awareness and marketing, Lab-grown diamonds can help the industry to re-attract and retain the consumers and regain diamond’s dominant position in the luxury goods segment.
Catering to rising aspirations
Despite the current slump, diamond jewelry growth is projected to be fueled by growth of middle-class in China and India. With its attractive pricing and unique proposition, Lab-grown diamonds can help cater to the rising demand from the emerging economies and help fulfill their youth’s aspirations.
Contributing to CSR and increasing industry’s image in social domain
Mined diamond industry is tainted with numerous curses including high environmental impact, human atrocities like child labor, slavery, dangerous working conditions, low wages etc., conflict diamonds, malpractices and frauds etc. Today’s consumers especially millennials are ethically and socially conscious.
Being environment friendly, 100% conflict-free and socially responsible, Lab-grown diamonds can help the industry to increase its respect and value in the social domain. By ensuring good practices for not only profits but people and planet, Lab-grown diamonds can help the industry in its contribution towards CSR.
Ensuring level-playing field for the industry
Big diamond miners have historically controlled the production and supply of diamonds and exerted their clout to marginalize and suppress other players in the industry. Lab-grown diamonds can help bring a level playing field in the industry, ensuring that smaller players are not repressed by some monopolizing companies.
Increasing consumer interest
By spreading awareness and giving true and factual information, Lab-grown diamonds can help to increase consumer’s interest in diamonds, thus benefiting the industry as a whole.
Adding a new complementary product in the portfolio
By adopting Lab-grown diamonds, industry will be adding a new complementary product in its portfolio, thus giving fillip to its innovation ambitions, and renewing its stagnating portfolio. Such an addition will only evince more enthusiasm and excitement among consumers and the industry.
Diamond industry, in its current form, is in a downward spiral, with humongous complexities and issues marring it. Lab-grown diamonds presents an opportunity of plenty value available to be shared in the pipeline, not only giving a panacea to industry’s problems but also helping it to go to a higher growth trajectory.