Swarovski Enters Synthetic Diamond Arena: “Game Changer” Says Even-Zohar

Retail and Consumer Confidence
12/05/2016 23:14

The world's leading crystal jewelry company Swarovski, with a presence in approximately 170 countries and annual revenue estimated at over $3.3 billion, is now selling synthetic diamonds, reports diamond journalist Chaim Even-Zohar. The jewelry brand has launched Diama, its first lab-grown diamond line, marking a shift for a company that has traditionally sold diamond simulants. Its foray into the synthetic diamond business "was planned and executed in utmost secrecy." Swarovski Created Diamonds are now making their debut in a test phase in the U.S. Even-Zohar launches his analysis by acknowledging that, "For the diamond market, Swarovski's new brand represents a welcome game changer as the company can potentially provide the ethical, legal and moral leadership in the man-made diamond market," whereas other synthetic producers attempt to acquire market share by "delegitimizing" natural diamonds.

So why is this development different and welcome? For starters, Swarovski has the reputation, market scope and generational depth to gradually enter the waters without requiring immediate returns or needing to attack natural diamond producers. "It will slowly, consistently and cautiously develop a sustainable business for the future." If successful, and if large-scale cheap supply emerges to the point that satifies the price-points of Swarovski consumers, this could theoretically defuse the conflict between the synthetic and natural diamond market: synthetic purchasers head to Swarovski, natural afficiandos head to the local jeweler. "If the company chooses to enter the market with its Swarovski Created Diamond branch through the existing Swarovski network ... it would not compete with natural diamond jewelry." But this is getting ahead of the story. At present, the issue is one of supply, as Swarovski to this point does not create its own synthetics, though it might in future.

"Swarovski conducted proacted negotiations with De Beers' Element Six, which it has (correctly) identified as, potentially, its most reliable long-term gem-quality rough synthetics supplier." These discussions broke down, yet are a clear signal that De Beers intends to enter the synthetics market soon. Even-Zohar seems confident that China will step in to supply the cheap rough synthetics needed. It appears that, "Swarovski seems to be betting on Chinese supplies", and that competition in China will eventually drive prices down. "In the end, the diamond industry gets a breath of fresh air due to lower prices for the pipeline and consumers", and at least one industry source suggests that this will create a huge market in China and India. Even-Zohar concludes that, "From a natural diamond industry perspective, the importance of the Element Six talks with Swarovski is not its outcome, but rather the fact that it took place."