Lab Grown Diamonds Will Continue to Capture Natural Diamonds Market Share says Rapaport

The writing has been on the wall for a while now. “Lab grown diamonds are here to stay.” Despite consistent pushback from industry insiders like Rapaport, LGD has steadily grown in acceptance from industry players and especially consumers.

Now, we are in a new era where these man-made stones are claiming a significant piece of the pie that has for long belonged solely to natural diamonds.

This is evident from Martin Rapaport’s webinar in which he warned of a “bumpy ride ahead” for natural diamonds.

From the beginning of the first quarter of 2023, natural diamonds have experienced a significant price drop. Market forces, particularly influenced by the close alternative of LGD, pushed the price of a carat of natural diamonds down by 20%.

Rapaport makes the warning to the natural diamond industry to prepare to lose more market share to synthetics. His use of the term synthetics is evident that he still doesn’t accept the fact that lab grown diamonds are indeed diamonds but created by humans. 

However, he is cognizant of the inevitable rise of lab grown diamonds and the challenge they present for the mining industry.

One of the market leaders De Beers is already posting a slump in their sales of natural diamonds which have seen a 28% drop.

Other factors to consider

It cannot be squarely attributed to lab grown diamonds as an alternative to natural diamonds. Rapaport goes on to explain that three other factors have played a role in the diminishing sales of mined diamonds.

A fragile world economy is significantly affecting the ability and desire of consumers to spend on certain items.

World trade too has been hindered by political tensions and what seems to be the end of globalization.

While sanctions on Russia seem on the surface to be a Russian problem, the entire world is also affected by these. No one should be under the illusion that Russia will respond in kind and it will not be long before the same sanctions are extended to other countries.

But despite all this, sales of LGD in comparison to extracted diamonds are steadily rising. This is an indication that lab grown diamonds on their own are a major contributor to the reduced popularity of natural ones.

Take the bridal market, for example, a bigger number of young lovers seem to be happy buying lab grown diamond rings instead of natural ones. The reasons for this have been explained by different research reports. But in light of evidence that the economy is experiencing a slump, it makes sense that more people would search for affordable alternatives. The association as well of mined diamonds with blood and a choking environment has made them lose their appeal.

Martin Rapaport however predicts that this appeal that LGD has over natural diamonds in the bridal industry will not last. “We’ll see a backlash because women want to get married and the whole exclusive relationship scenario talks to natural diamonds.” He said in his webinar.

But let’s not forget that Rapaport has for long been a huge critic of LGD and for good reason. His industry depends on the survival of mined diamonds. He has to give hope to the big industries that have invested billions into mining and are currently under threat from laboratories.

Criticism of Lab-grown diamonds

By now everyone knows that lab grown diamonds are more than half the price of natural diamonds. Well, it is at this that the criticism is directed. Rapaport argues that this is not something sustainable.

At the moment everyone is happy. The consumer is glad to save by spending less on an engagement ring and the jeweler is happy that there is high demand for the man-made gems. Is this sustainable, however? He asks.

The industry insider believes that the increased availability of LGD will begin to affect pricing. The price of these diamonds will likely go down so low that jewelers will no longer be able to sustain their businesses on marginal profits.

“Jewelers can’t live off synthetics” This is the prediction he gives. 

At the moment though it would seem such a time when diamonds are of low value is not near.

The criticism however continues to grow with pro mined diamonds insisting that the value of natural diamonds cannot be compared to man-made ones.

Despite evidence from the gemological institute that the two types of diamonds are the same, Rapaport insists that the value of man-made precious stones continues to drop. He calls on jewelers to inform their clients that what they are buying cannot act as a store of wealth because they depreciate once they are purchased.

He is currently preparing a petition to have the FTC compel jewelers to disclose the diminishing value of lab grown diamonds when they are selling them.

The question though arises, how can 2 stones have the same composition, and look the same, and yet one would diminish in value and the other appreciate?

Marty Hurwitz, founder of MVI Marketing, a research firm that focuses on the gem and jewelry industry points out that Rapaport’s statement that mined diamonds can be used as a repository of sorts while LGD cannot is a false claim. He points out that all diamonds will lose value from the moment they are bought just like a car. “The average consumer has been fed a marketing myth, the greatest marketing story ever told,” Hurwitz explains. He goes on to reveal that most diamond consumers do not find this out because they never go on to sell their diamonds.

Criticism therefore of lab grown diamonds is simply part of trying to hang on to the old ways. LGD and natural diamonds are the same but many industry players would like to go on enjoying the position they held before there was competition for the market as there is today.

The value of natural diamonds is being affected by the laws of demand and supply and it doesn’t seem likely that presenting myths about LGD will change the trend or make them less real than they are.

Can’t stop time

Just as hanging onto the hands of a clock will not stop time, creating impressions that lab grown diamonds are inferior will not prevent the impending capture of natural diamond market share.

Rapaport has for long and continues to refer to LGD as synthetic, a term intended to create an impression that they are not the real thing. Despite this, demand continues to grow.

The GIA originally would consider LGD to be inferior and provided limited grading for these eco-friendly gems. This however changed in 2020 when there was increased demand and acceptance of the rocks. The word synthetic too was dropped.

Susan Jacques the Chief Executive at GIA defines this as the natural evolution of the diamond market.

There is an unstoppable emergence of new consumers. The market has no choice but to cater to the needs of this new consumer. It is a time-tested occurrence that industry players will survive as long as they can evolve along with their consumers.

No doubt, this is something many in the diamond industry have embraced. Both LGD and natural diamonds are being provided for the consumer to make the choice.

It is also evident from Rapaport’s webinar that they are gradually accepting this change. The tone used now is not as dismissive as it was in the past when many set in their ways couldn’t see the possibility of diamonds made in a lab becoming big competition for the natural diamonds that have been traded for centuries.

The brand effect

No doubt LGD is making huge strides in the market, but is it just any lab grown diamonds? Industry players note that a key factor in this evolution is branding. The diamonds that will sell the most are those associated with known brands. 

Why? Gen Z are the bigger consumers of lab grown diamonds and these place huge importance on brands.

It is easy to understand that though because when dealing with a product, you are better off going with one manufactured by a recognized brand. Jewelry like Pandora will have more young people lining up to buy their engagement rings than small unknown companies that may sell uncertified lab diamonds.

The branding effect will also help to address certain concerns about LGD. There is no denying that unscrupulous traders may take advantage and sell substandard gems online. Consumers are protected from these if they buy branded lab diamonds.

Conclusion 

There is all-round economic pressure affecting all industries. The war in Russia and sanctions have not been kind to businesses around the world but that hasn’t entirely stopped demand.

People want to get married, women enjoy luxury jewelry and so LGD provides a softer option than natural diamonds. Rapaport highlights this despite his expected criticism of the man-made gems. Jewelers can play it safe by having their eggs in the LGD basket to avoid being left behind by change. Even with natural diamonds still holding the bigger market share, the profits are not as high as they used to be.