Growing inventories, increased online searches, a rising number of grown diamond retailers, and reported handsome profits — it seems the grown diamond industry is coming around! The International Grown Diamond Association (IGDA) recently released a report, “The Diamond Choice 2019: Lab Grown Diamonds and The Future of the Diamond Industry,” that reveals exciting insights into what to expect in the grown diamond industry in the near future.
The survey conducted by MVI Marketing LLC included over 1700 US consumers who had recently purchased or received fine jewelry. The aim of the study was clear: to find the impact of lab-grown diamonds on the industry and consumers.
The findings and revelations of the survey point to promising growth and acceptance of grown diamonds in the coming years. The report sheds light on the disruptive approach of the man-made diamond industry and its increasing acceptance in the markets.
We’ve put together some key observations from the report.
According to the report, in 2010, only 9% of consumers were aware of and willing to buy man-made diamonds. This percentage rose to 51% in 2018. Despite limited efforts and investments from brands in marketing lab-created diamonds as compared to marketing mined diamonds, the market for lab-grown diamonds is growing as a result of consumers’ realization of the value of cultured diamonds. Consumer awareness about lab-grown diamonds and interest in their purchase is consistently increasing.
The online search for high-quality lab-grown diamonds has tripled in the last decade. This correlates to the fact that the number of millennial consumers of grown diamonds has gone up from 57% in 2016 to 70% in 2017.
Reports by Morgan Stanley estimated the market size of lab-grown diamonds at between $75 million and $220 million. Analysis by Citi estimates that the lab-grown diamond industry represents 2% of the overall rough diamond market, but by 2030 it could climb to 10%.
Every participant in the lab-grown diamond ecosystem – from manufacturers to cutters to polishers and jewelry designers – is embracing lab diamonds. One of the driving incentives for lab-grown diamonds is their potential to restore profits, which have seen a dip in recent years.
For manufacturers and retailers, the margins of lab grown diamonds are between 10% and 26% higher than mined diamonds. Over 70% of retailers, manufacturers, and loose lab-grown diamond dealers reported that they are happy with the profitability of lab-grown diamonds.
So what does this mean for their inventory? Inventories vary from retailer to retailer, but if the overall reports are anything to go by, inventories now include 10% to 40% grown diamonds. What is more, 85% of retailers plan on increasing their man-made diamond inventory. There has been continued growth in retail distribution and increasing adoption of man-made diamonds in jeweler's portfolios and inventories.
Whereas the lab-created diamond industry might be facing short-term challenges such as meeting consumer demands and hesitation in investments, experts are of the opinion that as long as there are profits, in the long term, the industry will see investments and scientific advancements, which will reduce the supply of mined diamonds, too. Some of the largest mines in the world will run dry, including the Argyle Mine in Australia, which is the largest in the world by volume and is expected to close by 2021.
Dealers and manufacturers of lab-cultured diamonds are planning to double the production and purchase of lab-grown diamonds in 2019. The supply and price of lab-created diamonds have been the two most pressing concerns of dealers, manufacturers, and retailers. The supply chain has been strained. Add to it the increasing number of retailers and the growing demand for lab-grown diamonds. New processes and advancements will be needed to support the increasing demand. Bain & Company’s Global Diamond Report 2018 stresses that lab-grown diamond sales will reach between 10 million and 17 million carats in a scenario where the current annual growth rate of 15 % to 20% remains consistent.
However positive, the report does touch upon the pressing issue of the grown diamond industry and the mined diamond sector competing and working against each other. “In the absence of some cooperative and peaceful co-existence, the mined diamond industry will likely step up attacks and efforts to undermine the growth, stability, and pricing structure of lab-grown diamonds. Ultimately, this negative promotion and raising questions over which diamonds are more real is a lose-lose proposition that has the potential to turn consumers away from all diamonds.”
The best way to ease this concern would then be to make a commitment to continued growth and transparency. Honesty and integrity in differentiating the two types of diamonds – grown diamonds and those created below the surface of the earth.
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