Since BCG, commissioned by De Beers, released the report titled "The Future of the Natural Diamond Industry" in May, we have been closely following the international discourse. Last month, Rapaport, in its June price index release, included the following comment:
Rapaport believes that lab-grown diamonds will dominate the U.S. bridal market in 2024, accounting for over 50% of all engagement ring purchases. However, due to their low price, they are deemed unsuitable for engagement rings, and their bridal market is predicted to collapse in 2025. As consumers return to traditional engagement rings, the demand for natural diamonds will experience a strong resurgence.
This statement sparked extensive discussion (and controversy). On the one hand, the continuous price drop of lab-grown diamonds is a cause of anxiety within the industry, while on the other hand, the subsequently released July natural diamond price index also showed a significant decline.
In other words, given the current economic environment and market conditions (especially in China), both lab-grown and natural diamonds are facing significant challenges.
Key Questions Facing the Industry:
- Is There a Chance for Natural Diamonds to Recover?
Most public opinion we encountered is positive regarding the future of natural diamonds, believing that a recovery is only a matter of time. However, both the market scale and marketing content might change, and the industry will continue to appeal to a segment of consumers, as long as it can stay above a certain "price threshold." - Do Lab-Grown Diamonds Still Have an Advantage?
This question is far more contentious. Critics bluntly state that the future of lab-grown diamonds will resemble that of synthetic colored gemstones, or even moissanite and cubic zirconia. The reasoning is simple: price drops lead to anxiety and drive away consumers and retailers.
However, proponents hold a different view, focusing on consumer consciousness to argue that the lab-grown diamond market will continue to encroach upon the natural diamond market.
Key Points from the Article
"Will the LGD Market Collapse in 2025?":
- Root Cause of the Decline in Natural Diamond Prices
While the price drop appears to stem from a sluggish Chinese market and U.S. inflation, the real underlying cause is the destruction of the value-creation mechanism of natural diamonds. - The Value-Creation Mechanism
The value of natural diamonds was initially created through early monopolies and ongoing political favoritism. Over time, monopolies turned into oligopolies, and political biases fractured due to issues like the Russia-Ukraine conflict. Under the pressure of sanctions from entities like the G7, Russian diamonds entered international channels through "abnormal" means, leading to competition and a fractured supply chain, thereby undermining the moral perception of diamonds among young Western consumers. - Changing Moral Perceptions of Young Consumers
Against this backdrop, young consumers' belief in the value of diamonds (not just natural diamonds) began to shift. They started questioning whether the sourcing was "clean," whether labor rights were upheld, and whether the environment was harmed. Despite efforts by the natural diamond industry to address these concerns, the results have been limited. - "Limited Supply" Equals "High Value"?
Theoretically, all mined products are "limited," but strong online marketing has made more people aware that the value of such products—particularly in non-essential industries—depends entirely on supply and demand as driven by marketing. In simpler terms: the more people desire these products, the higher the industry's value. - Counter-Marketing by Lab-Grown Diamonds
Almost all marketing for lab-grown diamonds emphasizes "ethical" and "environmental" aspects, contrasting (intentionally or not) with the natural diamond industry. This counter-marketing strategy, while controversial, has a real market impact.
Objectively, the lab-grown diamond industry lacks the "highly united category marketing" of the natural diamond sector. However, by emphasizing "ethical attributes," the industry has "unexpectedly created a unique category marketing approach," which is an interesting phenomenon.
- The Possibility of an "Ethical Premium"
Due to long-term counter-marketing, lab-grown diamonds may eventually establish an "ethical premium" in the retail market. People who recognize their ethical value will be willing to pay a premium to express their support for the brand and the product.
It's important to note that this is unlikely in the wholesale sector, but it is not out of reach in retail.
- Why Haven't Synthetic Colored Gemstones Achieved an "Ethical Premium"?
When synthetic gemstones were being developed (late 19th to early 20th century), consumers of the time did not have the same ecological and moral awareness as today's Gen Z, meaning there was no foundation for an "ethical premium" to develop.
Consequently, even if the synthetic gemstone industry used counter-marketing, it had little impact. This is why natural and synthetic gemstones ultimately "split" successfully. However, the social environment and consumer characteristics faced by lab-grown diamonds today are completely different from those faced by synthetic colored gemstones. It is uncertain whether lab-grown diamonds will follow the same path or be pushed out of the bridal and jewelry segments.
The Future of the Lab-Grown Diamond Industry
The lab-grown diamond sector is set to undergo a challenging period:
- Upstream and Midstream Competition:
Internal competition will be intense, and wholesale prices will continue to drop. - Downstream Counter-Marketing:
Counter-marketing will further expand, intensifying the marketing battle with natural diamonds (already evident from various promotional campaigns).
When observing and predicting the market, whether we need to apply 20th-century experience is a matter of perspective. As always, "beauty lies in the eyes of the beholder."