Edahn Golan Takes Detailed Look at Synthetic Diamond Retail Figures

In-depth
20/04/2016 10:07

Diamond industry analyst Edahn Golan draws back the veil of rhetoric concerning synthetic and natural diamonds to reveal what has been missing from the debate thus far: hard numbers. "Just how many such items were bought by consumers, in what sizes and shapes, in what sales patterns, and most importantly, what do they represent in terms of share of market?" To this end, Golan has been developing a service called the Diamond Tracker that gathers data from a representative cross-section of US specialty jewelers, 3,950 in total, to provide a snapshot of all their loose diamond retail activity - i.e. not diamond jewelry with stones already set, which makes the choice of natural or synthetic much more deliberate - and includes specific details about the diamonds themselves. His initial report covers the 13 months from January 2015 - January 2016. The results are highly informative.

Three particular assessments are very telling about the retail trends of synthetic diamonds: First, adduced from what times of the year they are sold, Golan suggests that, "When diamond jewelry items were purchased as gifts for others or as a high-ticket engagement/bridal item, consumers had a preference for natural diamonds." In other words, for significant purchases that have great personal meaning, natural diamonds are preferred. "Lab-grown stones are viewed as more of a fashion item than a luxury item." Particularly when it comes to diamonds as a symbol of love, Golan clearly states that, "Engagement rings are a tradition, and diamonds are strongly associated with this tradition. It appears that lab-grown goods are not viewed, at least not yet, as a substitute to the traditional natural diamond engagement ring. Brides-to-be make a strong distinction between the two categories and view them differently."

Second, the range of synthetic items that consumers are buying is very narrow, with nearly 100% being of Round or Princess shapes, more than a third of J color, and nearly a third of SI1 clarity. Nevertheless, this range is located, "at the heart of natural diamond demand (HIJ/SI, Round/Princess, 0.50-2 carats)", and the natural industry had better take notice of this. Third, market share/price: starting from almost zero, demand for synthetic diamonds grew steadily, topping out at 0.9% of market share and levelling out at 0.5% average for the year. As for cost, Golan writes that, "On average, loose lab-grown goods cost retailers a little under 40% less than comparable natural diamonds. This is a big difference, and it is larger than many had estimated the wholesale difference. Retailers sold these goods at prices of a little less than 30% below natural diamonds, making them an enticing option for budget-conscious consumers."

Golan's conclusion in this regard is that, "From a retailer standpoint, lab-grown presents a very interesting prospect. First, they seized the opportunity and kept some of the cost difference for themselves and improved their margins. Next, in the last two years, American retailers have reported a shift to lower priced diamond options. Consumers either bought smaller, lower color or lower clarity diamonds. A jewelry item set with lower priced lab-grown gives retailers the opportunity to cater to this shift in consumer behavior and improve their turnover, as well as to increase their margins ... Combined, these are very enticing reasons for specialty jewelry retailers to add lab-grown gems to their offerings and, as such, pose a certain competition to natural diamonds. I stress “certain” because lab-grown still have a long way to go." Still, the data is there; the playing field is clear.