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Celebrated every February 14, Valentine’s Day is the holiday set aside for romance. Named for the martyred Saint Valentine who was executed around 269 A.D. by the Roman emperor Claudius.
Valentine was imprisoned because he continued marrying Christian couples in secret after Claudius issued an edict banning marriage ceremonies. He was condemned thereafter when he refused to embrace paganism.
It is said while in prison, St. Valentine restored the sight of his jailer’s blind daughter and signed a note to her “From your Valentine” before he was executed. So the tradition of sending Valentine’s gifts was born.
As the official lover’s holiday, it is no surprise that Valentine’s Day is the second most popular day for couples to get engaged, after Christmas, according to Wedding Wire.
Valentine’s Day is also a prime gifting holiday, with the NRF projecting some $20.7 billion will be spent this year on lover’s gifts. While percentage wise more gifters will celebrate with candy (52%) and flowers (35%), they will spend the most on jewelry, nearly $4 billion worth.
Combine these two facts together and it looks like a lot of diamonds will exchange hands this February 14. And while the vast majority of those diamonds will be sourced from the earth, a rapidly growing share of engagement diamond rings will be ethically and sustainably grown under laboratory conditions.
Demand exceeds supply
Demand for laboratory-grown diamonds is growing rapidly, according to a new study published by the International Grown Diamond Association (IGDA) entitled A Diamond Choice: Lab-Grown Diamonds and The Future of the Diamond Industry.
Lab-grown’s appeal is clear. When consumers buy a mined diamond, it comes with a high price in collateral environmental damage. Mined diamonds represent,“seven times the level of impact as compared to lab-grown diamonds. There is negligible soil displacement and no irreversible environmental damage,” the report states from a Frost & Sullivan environmental impact analysis.
Once consumers hear that lab-grown diamonds are legitimate, authentic and chemically, visually and structurally identical to mined diamonds, not to mention less expensive and less damaging to the environment, people want them.
Of note, the Diamond Producers Association says there are physical growth structure differences between laboratory-created diamonds and mined diamonds that are detectable with commercially-available testing equipment.
When given a choice between a 1.9-carat lab-grown diamond and a 1.4-carat mined diamond at the same price, nearly two-thirds (63%) of consumers selected the man-made alternative, according to the IGDA survey among nearly 2,000 recent jewelry purchasers conducted by the research firm MVI.
Further more millennials (66%) who were actively shopping for an engagement ring said they would consider a lab-grown diamond and 23% said they would definitely buy a ring with a lab-grown center stone.
On the other hand, the DPA offers its own recent survey that found 44% of diamond purchasers were unaware of differences in value, rarity, physical growth structure and origin. “When diamond purchasers became aware of these differences, they were at least 71% more likely to purchase a natural diamond,” the association CEO Jean-Marc Lieberherr said in a statement to me.
Despite attempts by jewelry brands to make diamonds a self-purchasing choice for women, engagement rings remain the bread-and-butter of the diamond industry.
In the U.S. the diamond bridal market is estimated to be about $18 billion, and by all accounts lab-grown diamonds only make up 3% of that or ~$540 million, though MVI’s Marty Hurwitz estimates their share will double by year end 2019.
What has held back lab-grown’s market impact is first, it is new technology that is only now beginning to ramp up to meet growing demand particularly for larger center-quality stones. “Supply struggles to keep up with demand, although the current finite supply levels will impede the rate of growth in the industry,” the report states.
But second, retailers have been slow to recognize the sales and profit potential represented by this new jewelry category. The jewelry industry remains wedded to tradition, as noted in the report.
“Ruled by a supply chain and an industry that has historically been resistant to change and slow to adapt, it’s now struggling to evolve itself and its offering as new consumer segments have emerged with attitudes and demands that are inconsistent and at times at odds with the traditional mined-diamond philosophies and business practices,” Richard Garard, secretary general of IGDA, writes.
Jewelers need the buzz that lab-grown diamonds can bring
A major thrust of the IDGA study is the potential positive impact lab-grown diamonds can have at retail. “Many in the industry have needed a lifeline to survive, especially at the retail level,” Garard shared with me. “We believe lab-grown diamonds offer that lifeline. Lab diamonds provide a positive value choice, at a lower price for the customer and typically at a better margin for the retailers.”
The attraction of this new stone to consumers is compelling. “Consumers are attracted by the environmental and social responsibility elements of the lab-grown diamond story, but appear most compelled by their ability to trade up in diamond size and quality for the same price as smaller mined diamonds,” the report states.
Jewelry retailers desperately need such a hot rock to offer customers, but too few have awakened to the possibilities. The MVI survey found that 54% of the engagement-ring shoppers surveyed said they were not shown lab-grown diamonds when shopping. However, over one-third (34%) said they would have bought one if it was available, and 47% said they’d consider it.
Being able to close that sale on the spot will give jewelry retailers a powerful shot in the arm. Industry trade research cited in the study found, “ Retailers report a closing ratio of 60% to 80% once customers understand the unique story of lab-grown diamonds. ”
It’s the story that sells lab-grown diamonds to customers, and most especially to millennials who are in their comfort zone breaking traditions, believes Beth Gerstein, co-founder and CEO of Brilliant Earth, a major player offering ethically-sourced lab-grown jewelry online and in seven showrooms across the country.
“Many of our customers are attracted to lab diamonds as they represent a forward-thinking technological advancement, but they are also a sustainable and cost-effective option,” she says.
“We’ve seen an increasing selection in larger, higher-quality diamonds, including those over two carats, with higher color and clarity characteristics and fancy shapes,” Gerstein says, adding that these qualities have contributed to a large increase in sales of engagement rings with lab diamonds for her company.
Lab-grown diamonds are for lovers
It remains hard today for customers to find lab diamonds at retail, with only about 25% to 35% of independent retailers carrying the stones. But things are beginning to change, as MVI’s trade research suggests more than 50% of independents will offer this alternative to customers by year end.
Beyond independents, the major players are just beginning to tap their potential. Swarovski and DeBeers now offer lab-grown diamond jewelry product lines. Berkshire Hathaway’s Helzberg Diamonds, with more than 200 retail locations, currently stocks lab-grown loose, bridal and fashion jewelry. And its Richline jewelry manufacturing company is testing a Grown with Love bridal collection in Macy’s and J.C. Penney.
“I’ve been in the business many years, and I have never seen a category come in with such newness and freshness,” Michael Milgrom, senior vice president of product development at Richline said in an interview with industry trade publication JCK. “The jewelry industry is predictable. This is unpredictable.”
In addition, the report states that Signet Jewelers, the world’s largest retailer of diamond jewelry with more than 2,900 stores in the U.S., including Kay Jewelers, Jared and Zales, is expected to test the lab-grown concept in 2019, though “no official announcement has been made.”
And Bill Koefoed, CFO of online diamond retailer Blue Nile, told JCK, “We sell what customers want to buy. We are evaluating it. We don’t do any lab-grown diamonds at this point, but it wouldn’t be too complicated for us to pivot there.”
Only direction is up
While the IGDA report provides a dizzying array of market size and growth projections from many reliable sources, I think the one from independent diamond-industry analyst Paul Zimnisky offers the most actionable assessment.
Looking at just jewelry made with polished lab-grown diamonds, as opposed to raw-stone production, Zimnisky estimates the lab-grown jewelry market reached $1.9 billion in 2018. Further the industry will grow 22% annually to exceed $5.2 billion by 2023 .
By comparison the global diamond jewelry market grew 2% in 2017 and diamond jewelry spending has remained stable relative to GDP over the past five years, according to Bain & Company’s The Global Diamond Report 2018.
Lab-grown diamonds are a fresh, bold concept for the jewelry industry and perfectly in tune with the zeitgeist of the millennials looking for more ethical, sustainable and environmentally-sound options in the products they buy.
“A diamond is a diamond, whether it is lab-grown or mined from the ground. The big difference is in their origin story and what the consumer values,” says Martin Roscheisen, CEO of Diamond Foundry.
Note: The Diamond Producers Association comments were added after posting. Statements made by Milgrom and Koefoed in the report were sourced from JCK.
See also: Diamonds Disrupted: How Man-Made Diamonds Will Disrupt The Mined-Diamond Industry
See also: Tiffany's New Mined Diamond Policy Ignores All That Luxury Customers Want: A Man-Made Alternative
See also: Why Are Jewelry Retailers Saying 'I Don't' To Lab-Grown Diamonds If Millennials Want Them?
