|How Synthetic Diamonds Will Impact Our Future
by Abe Sherman, CEO The BIG Network
This article was originally published in The Centurion Newsletter prior to Thanksgiving.
There are those who believe the introduction of synthetic diamonds is a benign inevitability; the marketplace will find a place for them and their introduction won’t have any effect on the natural diamond market.
I’m not one of them.
Unlike the relatively small and largely ignored synthetic colored gemstone market, where a few well established manufacturers exist, an ever increasing number of synthetic diamond labs are opening along with claims of faster growth cycles and larger and finer rough material. Also unlike synthetic colored gemstones, which can be identified fairly easily by a trained gemologist, synthetic diamonds, once mounted, are difficult to separate from a natural diamond.
Diamonds are ubiquitous and represent more than 40% of sales for the jewelry industry. If the emerald market melts down, we’d hardly notice. This wouldn’t be the case were the diamond market to implode.
It’s interesting to note that although synthetic diamonds are new to the jewelry market, they have been used in other industries for more than an half a century in industries such as precision machining, drilling, optics, acoustics, electronics, sensors and water treatment.
Synthetic diamonds certainly have their value in our economy, it’s a matter of what effect they have on our industry.
Perhaps, as some claim:
- Synthetics will sell alongside natural diamonds in parallel markets.
- Will be sold online directly to consumers by their growers as “Cultured” or “Man-made”, calling them anything but what they are, synthetic.
- Growers and sellers may also claim that these synthetics won’t have a deleterious effect on the diamond industry.
Their marketing message has an appeal to today’s consumer:
- Man-made diamonds are environmentally friendly
- As of today are 30-40% less expensive than a comparable natural diamond.
Retailers need to have a position on this subject as your sales teams are about to face questions from customers about synthetics.
But what about the long term proposition of their value? As more labs ramp up production and competition among those labs builds, the only direction the prices of synthetics are going to go is down.
There will be far more competition for the same product and as the technology improves and energy costs decrease, market dynamics will cause a dramatic decrease in their costs. Then what? It isn’t that there is one dominant market maker, like DeBeers had been in natural diamonds for more than a century. The labs will all be competing for market share which will lead to declining prices of synthetic diamonds.