February 2022 | Lab Grown Magazine

February 2022 | The Lab Grown Diamond Resource Book 20 To advertise call (888) 832-1109 | February 2022 21 January 20 2 | The Lab Grown Diamond Resource Book 2 PART 2 OF A 3-PART STORY BY DAN SCOTT he topic of this story is as controversial as it is polarizing.Many seasoned industry profes- sionals (and some that have seemingly never entered a jewelry store) have formed fast opinions on LGD worth. So, we’ll call them out and challenge those comments while providing what I hope you’ll agree is clear, concise diamond data on LGD value. All the information herein is offered with respect to all parties and supported with facts. When a lack of facts is present, we’ll red flag those areas and suggest constructive ways to address the situation so that natural and the man-made sides may hopefully see eye-to-eye. We’ll also prove that luxury has stepped into the LGD world, and why this luxe news may be the start of a game changing mindset specifically surrounding worth and value. The key questions at hand: Are LGDs a ‘flash in the pan,’ soon to be a sea of quality, but generic stones oversaturating the market with no resale value? And, will LGDs face imploding price wars as millions of carats are being grown worldwide at record speed? We’ll unpack these questions and separate fact from fiction. Realizing anti-LGD folks continue a “no re- sale value” chant- let them chant. We’re ready. Not to fight, but to sway the conversation onto a more even playing field. The goal of this and every feature of its kind is to unveil diamond facts and attempt to create partner- ship discussions. Taking opposite positions weakens the diamond industry as a whole. Aligning forces be- tween the natural diamond community and LGDs will increase the worth and value of diamonds in to- tality. Value over Worth The most repeated judgement claim against LGD’s value and worth is: Any man-made diamond has no re- deeming value from inception, and it never will. I’m paraphrasing, but that message continues to be quot- ed, promoted and inappropriately taken as a fact. Statements like it seem to be powerfully protected, for now, with a blanketed false sense of overconfidence. Overconfidence as released from the source, and over- confidence from the recipient reading into a person’s title or the legacy of the corporation they work for. Several smart people confuse the difference between ‘value’ and ‘worth.’The word ‘value’ is used to indicate ‘importance.’The word ‘worth’ is often associated with the production cost of a particular product and refer- enced to the cost of that item as it is bought and sold. A particular house is worth a certain dollar amount in the real estate market. In this scenario, the worth of a specific property determines the selling threshold that’s expected to create a financial transaction within current market conditions. Another example is setting a natural or LGD within a watch. Since diamonds in watches are generally small, diamond specifics are not line listed. Rather, the brand equity and watch style denote the suggested retail price (SRP) or worth. Some will note watch brands have yet to move into LGDs, but they would be mis- taken. Citizen is the first to release a LGD watch with a Swarovski partnership, and doing well with that launch since 2020. The point is ‘worth’ speaks to the materials of pro- duction. Here’s where things get a little cloudy. If a luxe watch design is offered in 18k gold and also in stainless-steel, the cost of the gold option is clearly more, but the stainless-steel model of a well-known luxe brand easily sells in the thousands. Given this fact, I’d ask you to ponder the definition of worth in this context. ‘Value’ is expressed as the significance and the impor- tance of an item. If a loved one purchases a tangible gift for you, the cost they paid for that gift may carry a low dollar amount (in expenditure) yet the item may denote great value to you personally. Due to senti- T To advertise call ( 88) 832-1109 | J nuary 2022 3 mental reasons, most of us have an item we’d never part with, regardless of a dollar amount. Note the connotation of the word ‘value’ in its ex- pression, such as ‘the value of time,’ or using figu- rative phrases such as ‘cultural values,’ and ‘religious values.’ We often see ‘value’ as a highly personalized term. Since almost every wedding ring is blessed in a Church,Temple, Sinologue, Mosque, all bridal jewel- ry value (engagement rings included) should super- sede their respective SRP worth. If you’re thinking what dollar amount you could resell an engagement ring for, you probably have larger relationship value concerns to contend with. Personal or perceived value is an honest anchor for LGDs, especially in the bridal and gift-giving realm. LGD Resale Value Modern retailers who value customer retention are rethinking their LGD buy-back and trade-in polices. Once a dead issue, companies like James Allen offer a lifetime trade-up plan for any LGD item purchased with the caveat the upgraded item is double the sales price initially paid. While LGD SRPs continue to dip, this doubling-up to upgrade doesn’t seem unrea- sonable. Then, there’s e-bay and similar platforms. Sadly, many pre-owned LGD engagement rings are being sold, but several I charted were sold at the same, or higher price of a very similar new one. Take a look at Lab Diamonds Review (https://you- tu.be/i4lqhyOuAFY?t=127 ). Their answer to the ‘no LGD resale value’ stance is interesting. They show a natural, round, 1-carat, E-color, VS1 clarity with an excellent cut retailing at $7,910 and compare such to the exact same graded LG stone at the same store selling for $2,030. In their observation, the consum- er could lose over $3,000 by re-selling their natural diamond. However, even if the original store (or any retailer) won’t buy-back the LGD diamond, the amount ‘saved’ when compared to the same type of natural diamond is in the thousands. Let’s not for- get about those e-bay private sales where people are making money on pre-owned LGDs (loose or set). So, stating ‘LGDs have no resale value’ is much more hyperbole than fact. How low can you go? When growing diamonds, mining groups are fast to remind us there is no production cap. The supply is endless. Additionally, diamond growing quality is increasing while the speed-to-market is quicken- ing. Add rapid LGD production expansion world- wide and we understand why the price of man-made stones is dropping. But that price can only go so low, as there could be import fees, grading report charges, and there will always be cutting and polishing costs. Remember too that ‘generic’ LGDs or non-branded LGD jewelry will be the first and hardest challenged since that worth/value proposition is seen as much easier prey from a mined diamond perspective. One low number that isn’t often discussed is the LGD market entry expense. Carat Systems, a Mas- sachusetts corporation offering single crystal gem producing gear stated, “Market entry costs are unde- niably low, and therefore accessible to many people, some with zero knowledge of the diamond industry.” When asked to give a gauge of the average invest- ment to start a small diamond growing company, a sales representative said, “Today, with CVD creation, after taking in the cost of the instrumentation, in- stallation, software and training, the total is less than $40,000 US.” $40k…that can’t be the total invest- ment required to start a LGD facility, I questioned. “Well, there are operating costs for the electricity, gas, and service fees - those will run about $15,000 a year,” she added. So, even when hiring a tech support, an operations manager, cutters and polishers, the start- up total cost for a small LGD business comes close to what a fully appointed electric car costs. Low market entry fees coupled with reasonable risk and high mar- ginal gains may explain why lab coats are replacing business suits for some these days. Flip of a coin Alejandro Aguayo lives in Mexico and was a very suc- cessful former Morgan Stanley banker. He relied on a coin toss to enter the LGD world. Literally. ‘Heads,’ he moves money into CBD oils. ‘Tails,’ and it’s all about investing in LGD production. “It was tails,” his wife recounts, wanting to join the conversation from across the room via Zoom. As the interview proceeds, she shouts words of encouragement while being too busy in the kitchen to come on cam. She thinks she’s helping. She is. A lot, actually. As my interview with Mr. Aguayo continues, the voice of his wife is heard, “Remember, we won’t grow diamonds just for those jewelry people.” This, as Mr. Aguayo maintains a perfect poker face accessorized by self-tinting eyeglasses. Oddly, his lens appear to be darkening. As Mrs. Aguayo continues to stir soup and sauce she adds, “The medical community needs diamonds too. Grow them to help doctors. And, Alejo, what about dentists? Dentistry and diamonds! I see rappers - they’re all getting diamond teeth!”That’s not where I thought she was headed with diamonds and dentistry, but she makes a solid point. For consistency alone, if Citizen partnered with Swarovski and created three watches committed to advancing environmental and human rights ini- tiatives released in September 2020. The Eco series, features a lab-grown diamond and certified by the Responsible Jewelry Council. Photos: Citizen Watches