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The Luxury Market is Changing: How Synthetic Diamonds Will Impact The Future |  November 24, 2015 (0 comments)


Merrick, NY—While every year brings change, this year seems to have brought more than most. At The Centurion, we know the retail landscape continues to evolve. To help you start out 2016 on the best note, we asked a variety of industry experts for their take on dealing with these changes. Each replied from their own viewpoint, offering strategies and insights into the changes the year ahead will bring. Our fourth installment comes from Abe Sherman, GG, of Buyers Intelligence Group, who writes today about synthetic diamonds and their place in the natural diamond market. --Caroline Stanley

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.  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.  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, conflict-free, and sustainable and (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.  The prices have to come down; name another man made product that, over time, does not sell for less…. Especially a product that is clearly not patent protected – there are labs popping up all over the world!

The important things to keep in mind are to: stay educated on this subject, know the detection instruments available, know your suppliers, and train your staff on how to discuss this subject with consumers.  Synthetics Diamonds are potentially as disruptive to our industry as Uber is to the taxi industry.  We need to keep in mind that synthetic diamonds will appeal to a certain percentage of the marketplace to begin with, but how much market share they will ultimately command is yet to be seen, and I believe has a lot to do with how we deal with this subject in your stores. 

Those of us who have been asked to write articles about our industry’s significant challenges were asked to identify those challenges and offer solutions.  Unlike other subjects I write about, such as budgeting, inventory management and cash flow, I simply don’t have a solution, but a warning that I don’t see any long-term upside to promoting and selling synthetic diamonds. 

To read a full white paper by Abe Sherman on the topic of synthetic diamonds' impact on the industry, click here.

Did you miss the previous articles in this series? Click below to read them all to date:

For Local Jewelers, The Future Is Brighter Than You Think by Doug Gollan

The Luxury Market is Changing: Social Media, Hiring & Firing by Suzan Flamm, JVC

The Luxury Market is Changing: Marketing by Ellen Fruchtman, Fruchtman

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