The Future Star in Gems? Can Lab-Grown Diamonds Add Value to Luxury Brands?

Philippe Mihailovich，Caroline Taylor，Alane Brunschweiger

(1.INSEEC, Paris and Rennes School of Business, France; 2.HAUTeLUXE, London, UK, and Paris, France; 3. School of Economics and Management, China University of Geosciences, Wuhan 430074, China)

Abstract：The purpose of this paper is to determine if lab-grown diamonds can add value to fine jewellery and luxury brands.We evaluate the current consumer trends in the diamond market as well as industry developments to see if they support lab-grown diamonds.Through these observations as well as our own dipstick research, we find that synthetic diamonds, even though having the same crystal structure as natural ones, are still perceived as inauthentic by a significant number of consumers and jewellers(in this paper we use the term synthetic because lab-grown diamonds are often referred to as synthetic diamonds or nature identical as opposed to simulant diamonds which refer to cube zirconia, moissanite, YAG.)Furthermore, they retain little to no value over time and don’t have a compelling enough story, which are prominent issues for luxury consumers.Our findings conclude that while lab-grown diamonds may add value to premium fashion and mass-market jewellery brands, the high luxury houses fear that these stones will totally devalue and damage their brands and are unlikely to ever be investment pieces.There remains a place for both to live side by side with each other.

Key words: lab-grown; diamond; value; luxury

INTRODUCTION

This paper considers the consumer branding opportunities and pitfalls that are emerging in the western world’s diamond market as a result of lab-grown diamonds competing as gems.It reviews two coinciding trends: Affordable lab-grown diamonds being perceived as planet-friendly and conflict-free, and investors moving towards rare, geological diamonds of natural colour.The latter of which is setting new bidding records in the global auction houses.What is the downside of such trends, and to which extent can lab-grown ever become investment diamonds? Some brands may be enhanced by lab-grown, while others could be destroyed.

Gref Campbell’s powerful book,BloodDiamonds(2004)followed by Edward Zwick’s 2006 Hollywood shockingly violent blockbuster film,BloodDiamond, set in 1999 Sierra Leone starring Leonardo DiCaprio, was a game changer.Consequently, “diamond” emerged as a negative word associated with war, child soldiers and numerous human rights abuses in conflict zones.“What I wanted to create in(movie-goers’)minds is consciousness”, said Zwick.

Already the term “mining” had been historically stained somewhat due to negative practices since its early beginnings in India’s Golconda region, on the old alluvial fields of Borneo, and in Brazil.Dr.Tijl Vanneste, the Lisbon-based economic, social-cultural historian and author who continuously investigates the diamond trade, found that “the dire nature of the work was no longer characterized by the choice between either forced labour and slavery or illegality, but by the impossibility of making a living from mining for diamonds.Adventurers never gave up though”(Vanneste, 2021).

Jacques de Coutre, a diamond trader from Bruges, Belgium, who spent more than thirty years in southern Asia and the Middle East, travelled to the diamond mine of Ramanacota in 1611 where he witnessed 50 000 men, women, and children at work.He described them as “poor, working practically nude, wearing nothing but a loincloth, which was a measure to prevent theft.” Vanneste reveals that the Odisha area in India, where the Hirakud(meaning diamond island)Dam can be found today “was so rich in diamonds that the nearby ruler of Golconda filled up the mine with debris in 1622 to ensure that there would be no abundance in diamonds, which would ruin their price.”

An abundance of diamonds remains the biggest threat to the category today.The fact that there is an over-abundance of diamonds in the world has long been an industry secret buried as deep as the geological stones themselves, but that myth too has now also been unearthed.“The problem with diamonds isn’t their scarcity, but their abundance,” notes Epstein(Epstein, 2013).He continues to state that “convincing the U.N.Security Council to impose a global ban on ‘undocumented’ gemstones from ‘conflict zones’ was another brilliant coup from the De Beers cartel.Eliminating, to an extent, the presence of cheaper gems in the market allows the company to keep prices high.If you don’t support the price, a diamond becomes a mere piece of carbon”(Epstein, 2013).

Having said that, there has long been a trend towards the use of “mine to market” stories and even a fast-growing market for “diamond television” that shares ethical mining stories with consumers(Kautsky, 2016).As such, people have become more knowledgeable and are either seeking ethically-mined or rare stones.The most highly valued rare stones tend to be the intense and vivid coloured or “fantasie” stones from Australia’s famous Argyle mine, most notably the pinks, reds and blues.Note that Argyle Pink DiamondsTMis considered by Rio Tinto as “an iconic Australian brand, built over 37 years, with significant global reach, providing opportunities for the brand to be sustained beyond the end of mining”(GJEPC India, 2021).Many others are trying to build brands in this field, some, like the famous Asscher family, based on their patented cuts.

As for the mainstream D colour stones, the COVID-19 pandemic had a devastating effect.In retailer Tiffany & Co’s TIF.N February-April quarter 2020 report, “Engagement jewellery was the worst-performing category, with sales almost halving”(Reid et al., 2020).No mention is made regarding the impact of lab-grown diamonds even though the De Beers Group introduced their own lab-grown subsidiary in 2018 called “Lightbox” “offering consumers high-quality, fashion jewellery designs at lower prices than existing lab-grown diamond offerings”(De Beers Group, 2018).“Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting: affordable fashion jewellery that may not be forever, but is perfect for right now”, said Bruce Cleaver, CEO, De Beers Group.Steve Coe, General Manager at Lightbox Jewellery added that their research found that consumers regard lab-grown diamonds as “a fun, pretty product that shouldn’t cost that much”(De Beers Group, 2018).

Such developments and positioning are disrupting the luxury diamond market.In contrast to the tradition of being rare and expensive, diamonds now have the possibility to be just the opposite, lab-grown.In this paper, we will explore trends and practices that are revolutionizing the world of diamonds and identify key take aways that can help brands navigate this new realm.

THE INCREASE OF ONLINE MEETINGS

With the explosion of digital communications, the market witnessed a substantial increase in demand for face-related jewellery.With consumers searching for personalized and meaningful items, jewellery began to evolve into a vehicle for self-expression.As consumers sought out individuality, pieces with more character came in high demand.These pieces tended to come in non-traditional shapes and forms and used unconventional materials.We saw gemstones with inclusions, asymmetrical cuts, and opaque gems and satisfying consumers’ search for individuality.As a surplus of brands flooded the market, consumers，particularly Millennials and from Gen Z，gravitated towards those which shared their values(while of course keeping quality and value in the forefront).Such values included social responsibility, sustainability, corporate governance, and diversity(Quiniquini, 2021).

According to the Global Diamond Report 2020-2021 by Bain & Co and the Antwerp World Diamond Center, around 20% of diamond jewellery retail sales last year occurred online.Major diamond jewellery retailers posted up to 60% to 70% year-on-year sales growth in their online channels, it noted.The Bain & Co report indicated that 60% to 70% of younger consumers in China, India and the US consider sustainability when deciding on diamond jewellery purchases.“Regarding diamond jewellery, social impact is the top sustainability concern for US consumers.In China and India, consumers care most about environmental preservation, conflict-free supply chains and carbon footprints” it disclosed.The report goes on to quote The Natural Diamond Council(NDC)Consumer Insights Report on Diamond Desirability(US)findings that American Millennials and Generation Z acquire natural diamond jewellery both for themselves and to gift(Quiniquini, 2021).

“Together, these generations account for 38% of the country’s adult population but more than 60% of demand for natural diamond jewellery”, the Global Diamond report stated.“One in five of the study’s respondents purchased luxury jewellery within the last 24 months, 50% of which included natural diamonds.Half of the latter were self-purchases.In addition, almost 80% of purchasers bought natural diamond jewellery as a gift.Of the 37% of respondents intending to buy fine jewellery this year, 20% were likely to pick a natural diamond piece”(Quiniquini, 2021).“It’s obvious that we will continue to see a rise in remote working and therefore more online ‘portrait’ visibility.We expect ‘portrait-wear’ as we call it, to rise indefinitely”, stated Mihailovich and Taylor in their 2020 book,HAUTE‘Luxury’Branding.

MUCH NEEDED JOBS

Mined diamonds, with good reason, have been the subject of intense criticism from human right activists for decades.Thanks to those who have exposed the past horrors of the industry, it has gone through monumental changes to right such wrongs moving forward.Now, major companies are offering transparency along with certifications of ethicality throughout the entire supply chain, so consumers can have a piece of mind that what they are buying isn’t supporting human exploitation.Of course, it is then up to the consumer to check up on the piece they are purchasing, but if they value sustainability, they should do so.These stones create much needed jobs for local communities.Synthetic gems may argue that their process could also supply jobs, but they fail to mention that these jobs are primarily for scientists operating machinery; this doesn’t help those in remote parts of the world seeking employment.

The primary question consumers are being faced with when they venture out to make these purchases is which kind of diamond to buy, lab or mined? “Why buy mined diamonds when real diamonds can now be grown in labs?” ask the authors ofHAUTE‘Luxury’Branding.These questions form the fundamental principles of the “disruptive” Parisian lab-grown “luxury” brand Courbet on the Paris’ prestigious Place Vendme.Courbet is “likely to have a Stella McCartney effect on the entire jewellery industry” they stated, adding that one would hope that alternatives will be found for the families that depend on the mining industry: the miners, traders, lapidaries, cutters, polishers, jewellery makers and retailers amongst others.Some ten million people work in the mined diamond industry, in some of the poorest areas in the world(Mihailovich & Taylor, 2019).

Thanks to digital technology, scientists can now measure the actual impacts that mined diamonds have, as they are very open about their whole process in order to gain trust and show their progress.The provenance of stones from Australia, Canada and elsewhere are certified and even blockchained.One of the major issues with synthetic gems is that they are very secretive about their actual carbon footprint and therefore, we cannot measure their actual impact, which we suspect to be very high given the immense amount of energy required to operate the labs.For the time being there seems to be very little transparency from the lab-grown industry or even comparisons regarding the energy required to produce CVD versus HPHT and if the source of energy is derived from electricity, fossil fuels or other.But for a better understanding of these man-made diamonds, let’s take a look at how they are cultivated.

HUMAN GENIUS?

These synthetic gems are becoming prominent in the world of diamonds, but what are they, and how are they made? While they are undoubtedly shaking up the industry, one cannot undervalue the human genius that has gone into the technique of cultivating diamonds.These technologies took over 70 years of development to perfect, resulting in replicating an act of nature that takes place over a billion years and recreating it in a lab in the period of a couple of weeks.

There are two methods for growing lab-grown diamonds: High pressure high temperature(HPHT)and chemical vapour deposition(CVD).The HPHT process involves exposing a carbon material, such as graphite, in a capsule to extreme temperatures and pressure.The pressure, given by way of anvils, produces enough force to change the carbon’s atomic structure(Putka, 2021).This material then crystallizes onto a diamond seed and, with crystallization occurring over the period of several days to weeks, a synthetic diamond is born(Shigley, 2016).While the atomic structure of a synthetic diamond is identical to that of a mined diamond, there are still some differences we can identify, one being growth patterns.As explained by the GIA, “while natural diamond crystals tend to form as octahedrons, HPHT synthetic diamond crystals typically have cubic faces in addition to octahedral ones.Because the shapes of natural and HPHT synthetic diamond crystals are different, their internal growth patterns also differ dramatically”(Shigley, 2016).Observing these growth patterns is one of the most reliable ways to differentiate between the two.The synthetic gems also tend to exhibit “distinctive colour distribution, fluorescence zoning and graining patterns related to their cross-shaped growth-sector structure and also sometimes contain dark flux-metal inclusions”(Shigley, 2016).All of these distinctions are very finite though and mostly only noticeable by the trained eye along with lab equipment.

The CVD method also requires high temperatures, but not at the level of HPHT.In this method, seeds(flat slices of diamonds)are placed inside a vacuum chamber containing hydrogen and carbon-containing gas.This gas is then heated up to a point where the gas molecules are broken down and proceed to precipitate.The carbon atoms disperse onto the colder, seed plates.The ensuing crystallization takes place over three or four weeks(Shigley, 2016).CVD lab-grown diamonds grow laterally resulting in a six-faced tabular shape and commonly develop black graphite around the edges which needs to be removed.They also exhibit a brown colour which can be removed via heat treatment(Shigley, 2016).Characteristics that can help scientist to distinguish between CVD and mined diamonds are banded strain patterns and occasional dark pinpoint inclusions(Shigley, 2016).One important thing to note about the CVD method is as the diamonds grow in a tabular shape, there is a lot of waste when cut down.

With temperatures reaching up to 1 600℃ and contracting pressure above 870 000 pounds per square inch, it’s no surprise that these methods require a substantial amount of energy(Shigley, 2016).This is the side of lab-grown diamonds that isn’t communicated and for good reason, lab-grown diamonds boast “environmental sustainability” and being the “ethical” choice, and while in certain areas they have a leg-up on their mined counterparts, in fossil fuel consumption they are the bigger consumer.In 2020, China manufactured 50% to 60% of synthetic diamonds(Bain & Company, 2021).With little restrictions on greenhouse gasses in the country, most of these laboratories run on fossil fuels.Furthermore, for the extraction of carbon, many laboratories use gases which are potentially harmful, such as methane.Again, there is little transparency about the sourcing and management of these materials(Pinnock, 2019).

A recent report from JCK The Industry Authority questioning “just how eco-friendly” these diamonds are, finds it is difficult to substantiate, if not impossible.Perhaps for this reason, the more circumspect lab-grown companies tend to use the word “sustainable”(Bates, 2019).“Man-made diamonds are unusual for a ‘sustainable’ product as they are produced in factories” it states.The report elaborates that the machines that produce diamonds “require constant energy, 24/7, running huge microwave-heat generators”(Bates, 2019).Furthering the issue of lab-grown diamonds’ carbon footprint, the extent to which e-commerce/online businesses create footprints of their own is still a subject of much debate.As we will see, there are hundreds of lab-grown diamond businesses that operate solely online.Due to the colossal number of data centres that are needed to fuel planet earth’s internet obsession, the online world is now also beginning to damage the natural world.

Such secrecy surrounding the actual impact of lab-grown diamonds is disconcerting.With mined diamonds, the industry has been working relentlessly to increase transparency and better their practices and environmental and social impact.New technologies such as MinPET, which we will elaborate on later, have even been introduced, which substantially decrease their carbon footprint as well.Lab-grown claims sustainability, but how can they back it up when they won’t elaborate.

WHICH ARE INVESTMENT STONES?

With uncertainty surrounding these gems in the industry, there is no knowing how the value of these lab-grown gems will increase or decrease.However, having more and more suppliers on the market, giving way to perfect competition, points to the latter.

Looking past sustainable and humanitarian arguments, a considerable amount of consumers are seeking investment purchases that will hold their value over time.As with the purchase of a new car, it is now common knowledge that the minute a person walks out of the jewellery store, the diamond’s resale value drops to 30% of the purchase price, a 70% loss from the original cost.We also know that given the limited supply of the world’s natural diamonds, they will retain some value, at least that 30%.In contrast, lab-grown diamonds have been found to hold little to none.It is for this reason that the high jewellery industry tends to classify them as “fashion jewellery” positioned closer to Swarovski than the “real thing” even though many lab-grown stones may be “more perfect” in look than geological stones.The influx of lab-grown “perfect” stones has helped to fuel a trend towards appreciating naturally “imperfect” and “soulful” stones while rejecting the industrialised ones.Funnily enough, we are witnessing the same trend in organic vegetables giving rise to movements supporting “ugly produce” or “misfits”.

There is potentially an unlimited supply of lab-grown diamonds as there is limitless carbon on the planet.Labs can produce diamonds on demand, the Argyle mine cannot.This coupled with perfect competition within the lab-grown market, there will always be those trying to offer the cheapest price possible.Every country is investing in producing their own diamond labs, some for jewellery, others for industrial use such as for semiconductors or MRI scanners.It is here where lab-grown diamonds have an unequalled advantage.“Diamond in single-crystalline form can directly be used as semiconductors, replacing GaN and SiC semiconductors entirely” and likewise offer great advances for 5G, electric cars, satellites and the like(Diamond Foundry, n.d.).While we can’t deny that in industry, synthetic diamonds have the clear upper hand, this doesn’t help them in their standing in the jewellery domain.

NEW FORMS OF FRAUD

Will jewellery customers ever reject the beautiful, rare stones produced by nature for the unique stones painstakingly produced in a lab? If so how long would it take? Some aren’t so sceptical, Lorenz Bäumer, the famous living jeweller on the Place Vendme-who brought both Chanel and Louis Vuitton into fine jewellery and created the half-head tiara for the Princess of Monaco’s wedding-maintains that “...things evolve constantly.It’s not because somebody owns a poster of a Picasso that it would be taking away the value, people always want the real thing.”(L.Bäumer, personal communication, Sep 30, 2021).He goes on to say that at this point he doesn’t see himself using synthetics anytime soon because he values “beauty”, “authenticity” and using the most “sophisticated” and “interesting” materials in fine jewellery.The other high or “haute” luxury jewellers of Place Vendme are also currently refusing to offer lab-grown diamonds.Meanwhile, many e-platforms are domiciling their offices at No.10 Place Vendme to pretend that they have a tangible presence and a bench workshop of their own.Almost five hundred companies are registered at this address, some using temporary co-working spaces nearby and others simply sharing a mailbox.Beware these fakes.

Lab-grown diamonds have given rise to many consumers and even jewellery brands being duped into buying them without being aware of the fact that they are lab-grown! ABC News ran a story about a Molly Carlson who bought her diamond engagement ring at a local mall only to find out later that she was duped into believing it was natural(Bates, 2020).Ordinary consumers are not the only ones who have fallen victim, even some celebrities have unsuspectingly purchased extravagant pieces comprising nothing but synthetic stones.In theory, jewellers are supposed to clearly communicate diamond typology, whether it be natural or lab-grown.Be that as it may, many, notably in the US, do not(Hailes, 2019).

The biggest scam so far, it would seem, was uncovered by investigative jeweller, Edward Jap Epstein, author ofHaveYouEverTriedtoSellaDiamond? Epstein exposed that De Beers were themselves duped into buying tons of lab-grown diamonds from Russia(to keep their stones off the market)without realising that they were lab-grown! “In June 1982, a spokesman for the Institute of High Pressure Physics in Moscow confirmed toTheSundayTimesof London that Soviet scientists had succeeded in synthesizing gem-quality diamonds weighing up to half a carat out of carbon.Their shape and greenish tint was not unlike the diamonds that(they had been selling to De Beers)”(Epstein, 2013).The fact that consumers and companies are being deceived into purchasing lab-grown gems, goes to show that these consumers are stead fast on a mined stone; if they knew it was lab-grown, they most likely wouldn’t have purchased it, so they had to be tricked into doing so.

Lab-grown diamonds may now be marketed in the United States as real gemstones, as long as they “clearly and conspicuously convey that the product is not a mined stone”(Kostyukov, 2018).The main problem attributed to priorly misleading customers into buying lab-grown diamonds was vague or deceptive wording.Prime examples were “cultured” or “alternative” used to describe the gems or placing the brand name next to the word ‘diamond’ with no further language to explain that the product was not a mined stone(Bates, 2020).

In the defence of some jewellers, the crystal structure of a mined and synthetic diamond are identical, which, for many, is reason enough to purchase.The main issue for being deceived, along with the fact it is the consumers’ money and they should be privy to exactly what they are purchasing, is the story and value of the product.As previously mentioned, the value of previously owned lab-grown diamonds at this stage is extremely low, and we can’t ascertain how and if this will change in the future.While some consumers may not mind this, they may just want a cheap diamond, for those in the luxury market or looking for investment pieces, this poses an issue.In terms of story, the monetary value of this is obscure, but we know that there are many who desire and seek out such rare and natural objects, those which have been forged in the earth for billions of years.That is not to say that the story of lab-grown diamonds is trivial, but its vastly different and different consumers value different stories.For many, these are reasons enough to buy a mined diamond and cultivators of synthetics recognize this; which is why we are witnessing consumers being tricked into buying them.

GROWING BRAND AWARENESS

Human ingenuity and “sustainability” are the core philosophies and keystones of some lab-grown brands’ storytelling.These, when legitimate, are significant feats, which is why such companies are appealing to a great deal of “eco-conscious” consumers.One such brand is Courbet, since its humble beginnings in 2018, the company can proudly claim to have generated more than “600 articles in tier-one publications such asTheNewYorkTimes,ForbesandLesEchosas well as a handful of interviews on major television shows”.(Mihailovich et al.,2019).As a result, it has been the luxury department stores themselves that have invited Courbet to be present on their floors, often right opposite Cartier! In May 2020, the popular, affordable mass-market jewellery brand, Pandora, announced the international roll-out of its lab-created Pandora Brilliance range, after its successful pilot launch in the UK.The brand proclaims,“The man-made stones will be graded for cut, clarity, colour, and carat weight before being set in sterling silver or 14-carat white or yellow gold.The spirit of the collection mirrors Pandora’s brand mission: to create desirable, affordable jewellery that empowers self-expression and radiates enduring beauty.With sustainably lab-created diamonds, we intend to make diamond jewellery available to more consumers and to extend its usage from special occasions to something that can be worn and enjoyed every day”(Roden, 2021).

For now, the established high luxury houses in Paris, London and New York will not be considering introducing lab-grown diamonds at all.Tiffany’s could be the first to try it, perhaps by openly offering customers a choice of one or the other, but for now, they are more focused on trading up and away from their cheaper items.The brand is instead emphasizing its iconic 128.54 carat yellow stone and are clearly adding celebrity stories to it in order to size-up Cartier.ThisBreakfastatTiffany’sdiamond had recently been dusted off to be worn by Lady Gaga at the Oscars and can now be seen hanging around the neck of singer Beyoncé, while her rapper husband Jay Z admires a recently unearthed Basquiat painting inspired by or simply mocking, Tiffany’s.No more the all-white Upper East Side or even whiter-than-white Andy Warhol universe.Tiffany’s had finally chosen African American icons to add another historical moment to their star diamond’s legacy.

THE MinPET REVOLUTION

As seen, one of the main, and unsubstantiated, arguments for lab-grown diamonds is their lesser carbon footprint.However, they are not the only ones working for the betterment of the environment, and this realisation by consumers could be their downfall as it is a pillar of brand communications.New technologies have been introduced in the mining industry to reduce their impact, one such is MinPET.

MinPET imaging technology is currently used to assist mines that make their revenue predominantly from large diamonds.When Petra Diamonds Ltd.introduced an X-ray stimulated optical fluorescence technique with several X-ray sorting machines costing around $6 million, the apparatus paid for itself in just a few months when the firm recovered four large diamonds worth around $43 million.These diamonds, presumed to be fragments of a larger single one, were 508, 168, 58 and 53 carats, in comparison to the average one-carat engagement ring.

Very pure diamonds that do not fluoresce, and gems completely surrounded by rock, can remain hidden to these sensors.As such, a newer sensor-based sorting technique that uses an enhanced form of dual-energy X-ray transmission(XRT), similar to the technology for screening baggage in airports, has been invented to get around this problem.It can recover liberated diamonds down to 5 mm diameter, where 1 mm is usually the smallest size recovered commercially.Additionally, unlike the fluorescing technique, it can detect some locked diamonds.These two techniques have brought the benefits of sensor-based sorting into sharp focus for more efficient, greener mines and for reducing breakage(Connell et al., 2017).

We now see why operators far smaller than De Beers are now making such significant large carat discoveries and are finally unveiling some of the greatest diamonds ever seen, year after year.It is these that have set the diamond market alight, especially for investors in a time of market uncertainties.The success and closure of the Australian Argyle mine, source of the most pinks and reds ever seen, has served to educate the market away from the more common D colour water clear diamonds and towards the rarer coloured “fancy” or “fantasy” stones that may never be found on Earth again.In contrast to such rarities, almost every country is now producing lab-grown diamonds, some such as the British Sky Diamonds are even “mined from the atmosphere” creating the necessary gasses from rainwater and using a combination of wind and solar energy(Sky Diamond, 2021).

The introduction of MinPET imaging technology has greatly reduced emissions of the mining process as it tells miners exactly where to dig, so they are not expending energy digging in places that may not have gems.If lab-grown diamonds want to compete from an angle of ‘environmentally friendliness’, they must get a grip on their own.However, it must be noted that not all labs use negative energy sources, and not all mines have MinPET.Courbet claims that its lab-grown suppliers use mostly green energy and are genuinely eco-conscious.They are aiming to buy exclusively from a French CVD start-up that is also able to produce large fantasy-coloured gems.

NEW WORLD RECORDS FROM NATURALS

These revolutionary technologies have clearly contributed to the annual new world records for natural diamonds.With more press given to these natural stones, people seem to have become more invested in them.By Sept.2020, Anglo American had reported a 176% jump in rough diamond sales from De Beers during the seventh sales cycles of 2020, compared to the sixth sales cycle underscoring a recovery following the easing of hard lockdowns(Faku, 2020).Petra Diamonds, which operates the Cullinan, Finsch and Koffiefontein mines in South Africa, attributed the growth to sales of big stones valued at US$5 million or more.This segment contributed a record $60.2 million in revenue during the year, compared with $14.9 million in the previous year.During the period, the company sold five rough blue diamonds to De Beers and manufacturer Diacore for $40.4 million, while Dubai-based Stargems DMCC bought a 299.3-carat, white rough stone for $12.18 million.All six pieces came from the famous Cullinan mine(Rapaport, 2021).In the last few years, world auction records were smashed by large carat, coloured diamonds discovered at Argyle Australia, Petra and Lucura in South Africa, Lesotho, and even the Ebelyakh mine in Yakutia, Russia.Many of these finds are thanks to new technology.Petra can now legitimately claim to be “unearthing the world’s most beautiful product as responsibly and efficiently as possible”(Petra Diamonds, 2020).

CONSUMER TRENDS TOWARDS OLD CUTS

These new world records in sales can also be attributed to recent trends.The COVID-19 pandemic seems to have influenced consumers pace of life.People are slowing down and starting to appreciate more complex and genuine moments and objects.There seems to be a yearning for the “old-days” where life was much slower, and items more “authentic”.This mindset has undoubtedly transferred into the purchasing decision process.The marketplace is witnessing a rise in the demand for unique cuts, Old Mine, Old European, and antique diamonds(Lajiness, 2021).There is even a gravitation towards vintage classics such as solitaire(De Beers Group, 2020).This search for authenticity at face value challenges the lab-grown diamond incentive.Or so it would seem.

In a 2021 investigation, it was discovered that the level of perceived authenticity was not significantly affected by diamond typology(lab vs mined).On the other hand, perceived scarcity “played a crucial role in the relationship between mined diamonds and authenticity”(de Angelis et al., 2021).The investigators found that when the levels of perceived scarcity were higher, mined diamonds were taken as more authentic in comparison to lab-grown.So, while the trends towards these cuts may appear disruptive for lab-grown gems, in actuality it may not be.It is the(perceived)scarcity of the product that would be a cause for concern.Here, the key word is “perceived”, in actuality, lab-grown diamonds only make up 4%-6% of the market at this time(Putka, 2021).This is a possible angle that lab-grown diamonds could play on.However, a counterargument to that would be that the world only has a limited supply of natural diamonds which has been speculated by some to run out by 2050(Putka, 2021).While natural diamonds dominate the market, there are only so many, whereas we can always continue to make them in a lab.

Given the rise of lab grown diamonds, mined diamonds are also one way for people to feel more emotionally attached; it comes from nature, it’s genuine and these natural attributes are something that can’t be made in a lab.We witness this search for emotional connection again in the tendency amongst some jewellers and customers towards vintage rings with Old Mine or European Mine cuts, and even a yearning for the romantic Golconda cuts.These cuts are seen to be more soulful, seen by eye, cut by hand, with an aim to generate a soft glow in the candlelight.This is exactly the opposite of the laser-cut, super-faceted diamond that aims to dazzle and attract attention.People search for a meaningful connection.De Beers found that “if(a consumer)owns diamond jewellery, the majority of respondents continue to wear it while sheltering in place, primarily because ‘I never take it off’ and ‘it makes me feel connected to someone’”(De Beers Group, 2021).It is much easier to form such a connection with an object not only when it comes from the earth but also with a compelling story.Storytelling has always been vital to the marketing of natural diamonds.People are captivated by the story of something that’s been in the earth for billions of years and gradually forged.Michael Fried, CEO of an online diamond exchange called The Diamond Pro, remarked that, “It all pulls on people’s heartstrings in a certain way.I’m not saying it’s logical, but people are still driven towards it”(Putka, 2021).These two consumer mindsets combined, perceived scarcity linked to perceived authenticity and forming natural connections with compelling stories are big challenges that lab-grown diamonds face.

THE TRUE RARITY OF NATURAL COLOURED DIAMONDS

Scarcity breeds desire.As we are writing this paper, diamond buyers, collectors, and admirers of the world’s rarest gems are flocking to Sydney for a first-hand examination of the diamonds in Rio Tinto’s annual Argyle Pink Diamonds Tender(The Jewellery Editor, 2014).A world leader in the extraction of pink diamonds, Rio Tinto has unveiled a stunning selection named the Final Five(lots)that have just been sold at a far higher price than the high estimate.To get a grasp of what rarity looks like in the diamond universe, the company reveals that “only 13 Fancy Red diamonds have been included in their annual tender over the last 30 years”(The Jewellery Editor, 2014).

The fact that geological diamonds will physically stand the test of time coupled with a trend that those in the 20-50 age group may want to have a safe investment(as having lived through a pandemic they are wary about future events)present the perfect environment for coloured diamonds.The value of colourless diamonds is not expected to increase much in the near future, except for the very large finds, and the common brilliant cut engagement stones are even expected to decline in value due to the influx of “cultured” stones to the category.In contrast, coloured diamonds are expected to continue to increase in value at a rate beyond our ability to forecast, especially those with Argyle provenance.These coloured gems are amongst the few diamonds that are considered as a true financial investment, especially in this age of insecurity.Here is where diamonds are returning to the role that they once had when worn by kings; something small and easy to escape with, unlike physical property or works of art.

The glut of brilliant cut diamonds, whether lab-grown, found, or mined, being found all over the world in every jewellery store leaves us emotionally untouched as they all begin to look the same.They no longer make us dream and now feel as common as a Swarovski crystal.Having said that, the renowned Austrian company of signature crystals, announced in 2017 the launch of “Diama” which they claim to be “an exclusive line of lab-grown diamonds jewellery”(Madestones, 2017).

As such, we are now witnessing a new hierarchy of diamonds that is less linked to the traditional 4Cs.At the top of the pyramid are the hand-crafted “fancy vivid” and “fancy intense” coloured diamonds, with rare red, pink, blue, purple and greens as the first class.These are followed by the larger traditional D colour 4C-perfects and other large carat as the business class.Next in line, are the smaller geological D colour and finally, the lab-grown diamond that are considered more linked to “costume jewellery” than to fine jewellery.

TBS DIPSTICK RESEARCH

We have read studies, done research, and made trend observations, but to better understand younger consumers and their thoughts on the matter, we implemented a little opportunistic study to witness the gears turning first-hand.On 30 Sept 2021, the authors took a class of fifteen Luxury MSc students from Toulouse Business School, Paris to Place Vendme to visit the new Courbet(lab-grown)showroom.Only three were French, others were from China, different parts of India, Italy, Greece, one from the USA, and one from Kenya.They had no previous awareness of Courbet.We video interviewed them before their visit to ask their views on lab-grown diamonds.Other than our American, who was strongly supportive of “ethical and environmentally-friendly” lab-grown diamonds, most admitted that they did not know the difference between the two typologies.At least half of them were sceptical of lab-grown diamonds, some strongly supportive of natural diamonds.This was due to factors they attributed to these natural diamonds such as “natural”, “expensive”, “rare”, and “real”(“real” meaning that some believed the structural composition of lab-grown wasn’t the same as mined).

Courbet’s co-founder, CEO and Artistic Director, Marie-Ann Wachtmeister then shared their story of creating this brand and spoke of their disdain for mining practices explaining that even their gold is recycled from old electronic goods.Wachtmeister argued that making diamonds was the ethical and more sustainable choice with less damaging effects on the environment.Students were informed that the structural properties of lab diamonds are exactly the same as natural, and even the Gemological Institute of America(GIA)certifies them along with their counterparts.Courbet tells a story of human genius and technological marvels in creating something so rare and pure in an ethical and sustainable way.

After the presentation, we asked students if their perceptions had changed, and an astounding 12 of the 13 students who were previously supportive of mined diamonds had changed their minds.The main rationale was that they believed lab-grown to have less detrimental impacts on the environment and if it has the exact same structural properties, why not buy.After meeting and listening to the discourse of one of the co-founders of Courbet, all, but one, came out strongly supportive of the eco-friendly, conflict-free lab-grown diamonds.

They were then taken to the Van Cleef & Arpels exhibition of heritage pieces in collaboration with artist Mika Ninagawa in a courtyard behind Bäumer Vendme called FLORAE.Afterwards, the students were told to imagine that they had seen lab-grown diamonds on display; did their perceived value of the pieces decrease? All got very hesitant; responses were mixed and unsure.It seemed that while they were previously for lab-grown, maybe they didn’t think the stones held much value.That evening, they were sent a short recording of an interview we had done that day with the distinguished Lorenz Bäumer explaining his view on lab-grown diamonds.Here he gave a very fair evaluation of both sides.However, he elaborated on the value that natural diamonds hold, which lab-grown don’t.He also spoke about the jobs mined diamonds create and the improved transparency and ethicality of the whole process.He carefully selects his suppliers on those grounds.Bäumer commemorated lab-grown on their own transparency of how they are made and how that is very important for people, but recognised that they are not very transparent on their carbon emissions, which we know to be very high.Actively hiding this while boasting claims of “environmentally conscious” could easily backfire and significantly damage such brands.We wanted to see if we could now get the students to change their views on lab-grown in support of mined diamonds.

SURVEY RESULTS

After our back-and-forth propaganda games, the majority of students preferred mined diamonds in the end.The main reasons for this were mined diamonds have a higher value, provide more jobs, and are considered as “magical” as they are a rare natural marvel.Students also gave their reasons as to why they would specifically not go for lab-grown.These were that there is a lot of uncertainty surrounding them, notably in their actual carbon footprint and value.The few that stood by lab-grown diamonds expressed that this was because these synthetic diamonds are cheaper, more affordable and more accessible, while containing the same atomic structures as natural ones.They also liked that there is no doubt that the process does not exploit humans.

These responses were in some ways surprising, as we are constantly told that the younger generations highly value “sustainability” and we brought them to a lab-grown brand which envelopes the whole of their being around such claims.Yet in the end, most supported mined.While it’s clear that these students search for attributes such as sustainability, after the Courbet presentation they were hard-set on lab-grown, we also see that they want value and total transparency.The majority of synthetic diamond labs are very secretive about their emissions, this alongside claiming “sustainability” many students found to be hypocritical and therefore untrustworthy.They also know that value has a price and are willing to pay more for something that will, at the very least, hold some value over time.While lab-grown diamonds are more accessible, luxury consumers don’t care about having something cheaper, they want value and the best.

JEWELLERS’ PERCEPTIONS

The question is then raised as to if these different diamond typologies(lab and mined)have significant differences for jewellers in the industry.The Diamond Pro’s CEO states that, placed side by side, a lab-created and a natural diamond look nearly identical.The price and value, however, differ,sometimes dramatically.At the beginning of 2017, lab-created diamonds were actually higher priced than their natural diamond counterparts.By the end of 2017 leading up to today, there’s a very different landscape.Prices have dropped dramatically for man-made diamonds, while prices for natural diamonds have increased slightly.The change is dramatic.The lab-created diamond doesn’t retain any value.It can’t be resold to a jeweller, and it won’t garner more than a few dollars on a site like eBay.On the other hand, the natural diamond can be resold for at least 50% of the original price, but potentially much more(Fried, 2021).

Perhaps this is just one of the reasons why the traditional jewellers are now considering lab-grown diamonds as “fashion stones” or even “costume jewellery”.The emergence of these stones has indeed encouraged fashion brands to introduce diamonds to their jewellery offers and their conflict-free, guilt-free proposition.This coupled with their affordable prices, has made them very desirable to the youth who may still aspire to possess a diamond.However, due to these same reasons, some renowned lapidaries are fearful of being tainted by synthetic gems.It was divulged to us that some will require code-names for those who supply/sell lab-grown diamonds, so they are not associated with them.It would seem these lapidaries don’t want their name alongside something so unremarkable.Such major players in the game being weary of these diamonds is very discouraging.

From where we sit, we see a commodity that will soon be made as common as zirconium, with no personality or soul.In fact, the very emergence of these perfect 4C identical “brilliant cut”, sparkling solitaire stones is not only likely to hurt the mining industry and all the millions of people in the developing world that have no other source of income, but it is likely to completely devalue all one carat or less brilliant cut solitaire diamonds just as it has helped to devalue the 4Cs criteria and the D colour.These devaluations could also be accredited to diamonds being a Veblen good meaning the demand is driven by status and high prices, lower priced diamonds entering the market have the possibility to actually decrease demand as they become commonplace.If such diamonds become mass-produced, they could completely disrupt the market(Rarick, Charles, & Arifin, 2017).With the lab-grown market continuously growing, even up to 20% in 2019, its no shock that those in the mining industry are fearing the worth of their own product(Bain & Company, 2019).

HOPE FOR LAB-GROWN?

At this point, if you are a company specializing or offering synthetic diamonds, it may seem all hope is lost, but this is not true.It mostly depends on the market you cater to because as we have seen, there is definitely one for these gems.It all depends on how they are marketed.For example, given that unconventional engagement rings are also increasingly popular(in the USA)and innovative designs are being sought out by younger consumers, it is suggested that consumers are looking for uniqueness.While uniqueness can be found in nature, can it not also be constructed in a lab?

The older generation may be harder to sell on lab-grown, but the younger generations give hope to the industry.Millennials are becoming increasingly concerned about transparency of sourcing and the price, rather than the fact that the diamonds are made in labs(Rarick et al., 2017).With younger generations, there are definitely huge growth opportunities for lab-grown diamonds and their eco-conscious, conflict-free message.No doubt the power of Pandora and Swarovski alone will have a huge impact in the Western world.In contrast, according to a 2018 Rapaport News interview with China’s Chow Tai Fook Jewellery Group, their Managing Director Kent Wong stated that “Chinese customers simply don’t want the product.To them, an authentic diamond has to be natural”(Instore, 2018).China, being the world’s largest market for diamond jewellery after the US, is therefore quite attractive to new brands trying to make a name for themselves.However, this problem of perceived authenticity needs to be addressed before making a debut.

By May 2021, the Hong Kong listed jeweller, which has more than 4 452 stores in mainland China, said it had signed a “strategic partnership” with the industry lobby group the Natural Diamond Council to promote mined diamonds in China while Danish jeweller Pandora announced that it would only sell lab-grown diamonds made using renewable energy, a move that was criticised by the Natural Diamond Council and four other industry groups for implying that the natural diamond industry was less ethical.The NDC has been stepping up its pushback against lab-grown diamonds.It complained this year to the US National Advertising Division about the marketing of Silicon Valley lab-grown producer Diamond Foundry.In response, the NAD recommended Diamond Foundry modify its advertising by “clearly and conspicuously disclosing the origin” of its diamonds.

While “environmentally conscious” and “ethical” are strong positions these brands can play, companies must be careful in doing so as it actually has the possibility of backfiring with certain consumers.In a paper published in theJournalofConsumerMarketing, researchers found that positioning strategies which stress ethicality are more effective with low materialism consumers, whereas this strategy is less effective and even has the potential to backfire for high materialism consumers.They explain that “the impact on social status consumers perceive from a lab-grown product explains why this effect occurs among low materialism consumers”(Keech et al., 2020).These findings warn brands to adopt specific positions and appeals for different segments “based on values such as consumers’ materialism levels”(Keech et al., 2020).

RISK OF FRAUDULENT DIAMONDS

With the increase of diamond supply in the market, specifically with lab-grown, the risk for fraudulent diamonds is dangerously increasing.Sellers of truly fake diamonds(mostly made of cubic zirconia)can now possibly persuade unsuspecting consumers that their items may appear different due to the lab-making process and that they are still real.This poses a major threat to the industry given that demand of diamonds is directly related to their price.With fake gems in the market attracting consumers with their lower price, demand for the gems could decrease as they become commonplace.Fighting fraudulent diamond sellers is extremely complicated as they are difficult to locate and retrace.One of the best things companies can do is to increase education on this issue and urge consumers to only purchase gems which are certified and/or traceable to their source.Companies can also hire organisations which specialize in cracking down on the sales of fraudulent products.Most countries have governmental entities which deal with these issues, but hiring more people to squelch these practices could help in reducing the amount of fraudulent goods in the market.

CONCLUSION

While there are promising markets for lab-grown diamonds, it is unlikely that they will become a fierce player in the luxury domain anytime soon.We observe the market for these synthetic gems growing, but it must be noted that the attraction to these diamonds is for ethical issues along with a lower price.Moreover, at the end of the day they still provoke mixed associations such as “artificial”, “fake”, and “affordable”; all traits unwelcome in the luxury domain(De Beers Group, 2020).From these observations, we can assert that these lab-grown diamonds could add value to mass-market or premium brands, but for how long? Being a Veblen good, we know that with lower prices, the value of diamonds will also drop.Therefore, if introduced into a product line, affordability shouldn’t be the biggest selling point.

Perhaps the leading online vendors, such as the successful James Allen and Blue Nile, are showing the way for the mass-market jewellers.Simply give consumers the choice.For example, Blue Nile offers “ethically sourced” mined as well as Lightbox(De Beers owned)Lab-Grown diamonds.Be that as it may, the high luxury brands cannot risk doing the same.We have already seen how easily a lab-grown brand can influence those who have not previously researched the differences between lab-grown and geological diamonds, and most are unlikely to do so until they find themselves planning an engagement.As such, the traditional jewellers that stick to geological stones may need to find innovative ways to “educate” consumers regarding today’s ethical mining practices.However, this won’t be an easy task because bad news travels faster than good, and the diamond industry has already suffered reputation damage due to unethical mining practices, human rights violations, and the “blood” associations.

We also must address the argument that consumers don’t have a true need for lab-grown diamonds.The real natural stone already exists and while at some point the world’s hoard will run out, that won’t happen for several more decades.Even then, there is speculation as to when the supply will actually be exhausted.We’ve seen that ethically-mined diamonds have the potential to offer a peace of mind for consumers looking to make sustainable purchases, therefore, the only void synthetics fill in the market is for a cheaper commodity.Yet, for luxury consumers of fine jewellery, that said void and positioning is irrelevant.For all diamonds, including lab-grown, one could say that they are simply “wants” and are therefore pure luxuries to those who desire them, regardless of what the industry may say.On the other hand, they could end up being compared to the abundance of fruit produced via industrial farming methods compared to the limited volume of wild fruit that the planet naturally offers us.

From where we stand in the luxury world, we can only see an increasing demand for coloured geological stones with old or unusual cuts that are packed with personality and also carry an ethical and transparent provenance.The challenge for lab-grown may lie in producing “Disney dream” diamonds that the planet is not able to produce for all and sundry.For now, it is consumers who will stand to benefit from low-cost lab-grown gems, as long as they are giving it their own special meaning and not buying them as investment pieces.

In any event, one thing is certain, the whole “lab-grown” industry, if not careful and properly controlled, will be obliged to intensely focus on value-branding their goods or face the risk of finding themselves under growing pressure to sell their carbon-based “farmed” commodities at lower and lower prices, as the market begins to be flooded.