On Tuesday this week, De Beers, the world’s largest diamond company, which controls around 30 per cent of mined stones in the world, announced the launch of Lightbox, a brand of fashion jewellery with laboratory-grown diamonds. After being sacrosanct about the provenance and rarity of a natural diamond for more than hundred years now, this complete U-turn has come as a shock to many in the industry.
Apart from being an exponent of mined diamonds, De Beers has also been vehemently opposed to the idea of “synthetic” diamonds, and it has been carefully planning its line of attack via a few campaigns in an effort to thwart the market, case in point, ‘Real is Rare’. However now, Lightbox will retail lab-grown diamond jewellery from US$200 for a quarter-carat stone to US$800 for a one-carat stone in pastel pink, white and baby blue shades packaged in bright candy coloured gift boxes, starkly different from its smooth velvet counterpart, that houses its natural diamonds.
In a statement released on Tuesday, CEO Bruce Cleaver said, ‘while it will be a small business compared with our core diamond business, we think the Lightbox brand will resonate with consumers and provide a new, complementary commercial opportunity for De Beers Group.’ We aren’t sure about ‘small’, but this move is definitely ‘commercial’ just going by its pricing. While lab-grown diamond companies like Diamond Foundry and New Diamond Technology have been supplying their diamonds 40 per cent lesser than mined diamonds, they still come at a premium price. For example, a 1.5 carat lab-grown diamond from Brilliant Earth costs around $1500 and this doesn’t come anywhere close to what Lightbox is offering ($800 for a 1 carat stone).
The reason why De Beers is able to offer synthetic diamonds at competitive pricing is also because it can afford to do so. The technology is not new to De Beers – the Element Six Innovation Center in the English countryside has been manufacturing synthetic diamonds for industrial purposes for almost 50 years now. However, with De Beers eyeing the rather lucrative segment of synthetic diamonds, scientists at Element Six are now working on lab-grow diamonds for jewellery too. After decades of waxing eloquent about the rarity and provenance of a natural diamond, the idea behind getting involved in synthetic diamond jewellery is crystal clear – disrupting the synthetic diamond market with its monopoly.
So what does this mean for the natural diamond industry which has already been threatened by the emergence of its synthetic counterpart? This game changing move could effectively bring down the prices of lab-grown diamonds and we all know how a perceived value of a product has a lot to do with how it is priced. If lab-grown diamonds are being sold at 10 per cent of the price of natural stones, then there is a clear message that is being sent out – synthetic diamonds are not diamonds. So, there is a good chance that people, especially in Asian markets where diamonds have long been associated with status and class, will stick to natural diamonds for special occasions. However, millennials in the U.S. are drawn towards synthetic diamonds mainly for two reasons – its price and the sustainability quotient. The diamond jewellery market’s growth has been slow over the last couple of years also because of millennials interest in other luxury indulgences like iPhones or vacations. Almost 20 years ago, something very similar happened with Cubic Zirconia aka American diamond, which is copiously used in the fashion jewellery business today – the profits are hefty because of higher value addition, compared to diamond jewellers. Hence for De Beers, the need to tap the synthetic diamond market is more pronounced now than it was before; it wants to grab the market monopoly before companies like Swarovski makes the plunge. The fact that pink and blue diamonds are going to be made available at such low prices could also impact the semi-precious gemstone business in the U.S., which is quite substantial.