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LGDs in the News
Lab-Grown Diamonds have been making news
over the last few months. Among the items garnering
attention is the announcement by De Beers’
Lightbox Diamonds—which declared earlier that it
would not sell its lab-grown diamonds with grading
reports—that it is now adding general grading information
for white diamonds above 0.2 carats.
This change results from consumer feedback
asking for clarification on what the brand is selling.
Thus, the company is now providing general grade
ranges, rather than standard color and clarity scales.
Customers will be given technical specification cards
noting that the diamond’s color is “near colorless”
(G to J) or better, with clarity VS or above, and a cut
that is “very good” or better. Lightbox indicates that
it currently does not intend to offer grading reports
for pink or blue LGDs.
In related news regarding a patent dispute, the
High Court of Singapore ruled that IIa Technologies
infringed on an Element Six patent for proprietary
synthetic diamond products and their method
of manufacture. Element Six is a member of the
De Beers group and the producer of Lightbox lab grown
diamonds as well as a range of industrial and
technological applications.
A somewhat more whimsical headline in the lab grown
sphere is Pepsi’s launch of a platinum engagement
ring whose 1.53-carat solitaire is a lab-grown
diamond that has been infused with Crystal Pepsi.
Dubbed A Ring with Taste, this engagement ring
is the beverage maker’s latest foray into non-traditional
products. According to Pepsi, the diamond
was made by boiling down the brand’s clear Crystal
Pepsi drink to its most basic carbon form, resulting
in a powder. The powder was then added to the process
for creating a lab-grown diamond. Pepsi fans
can tweet their ideas for the perfect proposal and a
chance to win the $3000 sparkler, with the winner to
be announced March 16.
The feature article in this third issue of Lab
Grown Magazine takes a look at the Big Box sellers
of LGDs, and some of the sales tactics used by these
mega-brands. The author also examines how selfpurchasers
view LGDs, along with wholesalers who
are attracting retailers with stronger margins—often
greater than natural stones can offer. This article is a
must-read for both wholesalers and retailers.
The major jewelry shows are also recognizing the
importance of LGDs as a category as evidenced by a
panel discussion held at JCK Tucson in February. A
Q&A summary by one of the panelists is also worth
the read in this issue.
Zev
The
BIG BOX
Tipping Point
By Dan Scott
Gemstone manufacturers, wholesalers,
designers and local jewelry retailers have long
been watching one specific group of buyers very
closely. This group comprises proven specialists
in seasonal diamond trends and time-tested
diamond jewelry merchandising. The group sets
its own retail price, works hand-in-hand with
well-financed national advertising and promotional
departments and boasts of daily streams
of local shoppers. Highly regarded, the group is
collectively known as the “Big Box Buyers.”
On the luxury side, Neiman Marcus, Saks
Fifth Avenue, and Bergdorf Goodman are
three examples that fit into this national mega department
store “Big Box” classification. From
a mass mindset, we find Kay’s, Jared, Macy’s
and Walmart. All of these major retailers have
been selling lab-grown diamonds (LGD) for well
over a year and many offer other lab-grown colored
gemstones such as sapphires, rubies and
emeralds in a variety of prices and styles.
The Company You Keep
Big box buyers work in a highly controlled
jewelry department and report to the VP of
Merchandising or Sales of the parent brand.
Together, they help ensure qualified traffic walks
in, and satisfied paid customers walk out. It’s a
wonderful model to watch, analyze and pattern
the selection and asking price of your seasonal
product to your buyers, be they B2B or B2C.
For those manufacturing LGD and for the
independent jewelry stores and online shops
selling them, keeping a monthly tally on what the
big box buyers stock and sell offers you instant
local market research to help your own sales.
By eyeing big box diamond jewelry retail cases,
reviewing their ads, seasonal publications and
websites, one may estimate the popularity and
even the turn of their collections by market, as
well as in real time.
Big box buyers are specialists paid to see
through Fashion Week hype, learn and leverage
global trend reports and forecast their own
market analysis. Many of these buyers stay
with the parent brand for years, which means
they are selling within their trend forecasts, so
it makes a lot of sense to follow their success.
The Color of Time-Tested Sales
Sometimes, big box brands restrict jewelry
collections to online sales only. This was initially
the case with De Beers’ Lightbox Diamonds. We
can learn from this tactic, too.
By offering a select jewelry line only online,
a company can instantly change copy, photos,
promotional text, and price. Online allows the
brand to evaluate the amount of time “screen
shoppers” spend on any product page, noting
favorites, and providing tons of topical data to
close a sale and build retention.
Reducing physical inventory, eliminating
employee training, while being constantly communicative,
are clear benefits for any test market
study, which is exactly what Lightbox Diamonds
did before selecting its brick and mortar
test partners. Important sidebar: It’s impossible
to purchase De Beers’ Lightbox Diamonds from
any De Beers parent retail location, and there is
no mention of Lightbox Diamonds on De Beers’
parent site. This is because Lightbox Diamonds
is owned by Element Six, a company in the De
Beers group. And, you would be hard pressed
to find the Lightbox brand on the Element Six
website either, which is about as strange as the
cover photo of the Element Six CVD Diamond
Handbook. (Spoiler alert: it’s a plain, white metal
band—no diamonds—known as a CVD disk).
What’s obvious is the goal of Lightbox Diamonds.
The brand is separating itself from the
parent as much as possible. Its objective is to
lead the main supply and median price of colored
and colorless LGDs in the one to three carat
range. Most bets are on Lightbox to price
its LG stones so low that they won’t be
considered for a luxury jewelry collection, but
rather be seen as fashion accessories. This
helps ensure that natural diamonds stay “rare”
and expensive. Of course, it also allows De
Beers to enjoy sales from both sides since
Element Six develops and implements industrial
diamonds for multiple industries including hefty
contracts with the U.S. Defense Department.
But let’s go back to the story at hand…
After months of digital research, Lightbox
Diamonds were shipped to cherry-picked
Bloomingdales and Reeds Jewelers locations.
The first shipment arrived in October 2019.
What wasn’t shipped was a De Beers diamond
grading certificate or even a guarantee. “We
produce our gems to a consistently high standard,
so our solitaires don’t need certificates to
describe them. They are all high quality, just different
sizes. Instead, each diamond larger than
0.2 carat will be laser inscribed with the Lightbox
logo (but invisible to the naked eye) as a
promise of quality.” That statement resides on
the FAQs section of Lightbox’s website as of
this writing. (lightboxjewelry.com/pages/faq)
This is another example of the brand’s attempt
to create a distinct separation between
their man-made and mined offerings. Will we
see more colored varieties coming from Lightbox?
The answer to that question is how well
their unofficial partner, Swarovski, fares.
Swarovski-created diamonds, especially with
the launch of the line’s sixteen new colored
man-made diamonds, debuted at the Paris
Haute Couture Fashion Week. The collection
features exotic colored stone names including
Cubist Sky, Gothic Cognac and Draped Fire.
Everything is strategy. By using free-spirited
and youthful color-themed names, Swarovski created
colored diamonds are “dumbed down”
thus reducing the concern of competing with the
truly exotic and incredibly rare naturally colored
mined diamonds, which are auctioned off in the
millions of dollars and have a permanent home
in all things luxury.
And, the public is voting “yes” to the introduction
of these colorful creations. Swarovski-created
diamond sales are reinforced by the brand’s
stellar and long-standing brand popularity.
A recent consumer poll, denoting the top three
jewelry brands for mid-market shoppers, shows
Swarovski in third place. It is just behind Tiffany
and Pandora, two global jewelry brands that
have zero interest in LGDs as of now.
In fact, Andy Hart, senior vice president of diamond
and jewelry supply at Tiffany stated, “Our
position is that lab-grown diamonds are not a
luxury material. We don’t see a role for them in
our luxury brand… I think luxury consumers will
continue to desire the rarity and amazing story
of natural diamonds.”
Helzberg Diamonds & More
Ensuring that its mall-dependent retail operation
stands strong against competitors such as
Kay’s, Jared and Zale’s, Helzberg Diamonds
introduced its own man-made diamond.
Called ALTR-created diamonds, it is an exclusive
license with New York wholesaler, R.A.
Riam Group. If you’re wondering if “ALTR” is an
acronym, it’s not. It’s a license-plate-style play
on letters from the word “altar,” as in the altar at
a wedding.
As cheeky as the name may be, the company
means serious business by offering Type IIA
man-made diamonds complete with a certification
from the Gem Certification and Assurance
Lab (GCAL).
Helzberg is, however, no stranger to labgrown
colored stones. Its website and some
retail locations have been offering a bevy of
lab-grown colorless and colored gems including
man-made rubies and emeralds for years.
The Buck Stops at the Doe
A jewelry market study released in January by
marketing agency, MVI, reviewed 1,011 U.S.-
based females aged 25 to 40 with a household
income of $50,000 or more. When focusing
on LGD questions, 69% of the sample group
had heard about lab-grown diamonds with the
majority wanting to learn more.
Analyzing this LGD-related data, 37% of the
total participants stated they were “unsure they
would actually purchase lab-grown diamonds
for themselves,” while 35% said they would
purchase an LGD for themselves. The majority
stated that they have participated in or would
like to participate in shopping for a diamond
engagement ring with their partner, whether it
be lab-grown or earth-mined.
The study showed that nearly 50% of selfpurchasing
females would consider lab-grown
diamonds for environmental reasons. Note:
Some early adopters in the lab-grown sector
have used (or are still using) confusing marketing
messages touting how “green” they claim
their creation process is when compared to their
mined competition.
Some of these specific “good for the earth”
promotional messages are not including information
on the carbon footprint of LGDs,
including how much electric power is required
to create their diamonds. In this regard, the FTC
is targeting companies that don’t obey its jewelry
guidelines, so LG manufacturers should be
careful how they word their promotional text.
The argument and the defense for truly clean
LG manufacturers is this: Most lab diamonds
produced today transform methane gas into a
diamond. Since methane is often used in present-
day man-made diamond creations, at least
some of it will be removed from the atmosphere,
yet that benefit isn’t widely promoted.
Big box buyers are specialists
paid to see through Fashion
Week hype, learn and leverage
global trend reports and
forecast their own market
analysis.
An Atypical, But Highly Effective
LGD Retail Sales Tactic
Recently, I watched a clever (and perhaps a
tad sinister) LGD retailer instantly sway a confident,
self-purchasing female from buying mined
to man-made. Within seconds, he took her adoring
gaze of a lovely, natural 2.3-carat diamond to
another diamond that was more expensive, less
than 2 carats, and man-made. How? By tapping
into a deeply-rooted human emotion—precisely
how most people shop for anything.
This LGD salesman started with an eyebrow
raising statement: “Our lab-grown diamonds are
virgins… Virgin Diamonds.” A puzzled curious
look came over the shopper’s face.
Then, the jeweler gently leaned forward and
in a whispery sort of voice, he asked, “Do you
really want to risk a natural diamond purchase…
a stone that may have been removed from a
failed, tear-filled engagement ring proposal? Or
perhaps the diamond is part of the collateral remains
of a bitter divorce? His LGD sale couldn’t
be consummated fast enough.
One may call words like “virgin diamond”
mere marketing prose, but receiving something
of high personal value that was created for you
alone may be as romantic as knowing it took a
billion or more years to naturally create it.
The Price of Success
In business profitability, it’s all about the margins.
While LGD companies continue to market
sustainability as a consumer buy-in hook, LGD
wholesalers are now starting to reel in retailers
with stronger margins—much greater than any
natural stone can offer. The retail gross margin
(RGM) of man-made diamonds is as high as 1.8
times that of mined stones and is predicted to
go even higher (Figures 1 and 2).
“What’s eye opening here is, theoretically, that
a jewelry retailer would only have to sell $5,000
worth of lab-grown diamonds to match the gross
profit of selling nearly $10,000 worth of equivalent
mined diamonds,” stated Paul Zimnisky, an
acclaimed industry researcher. “Gross margin is
considered to be a retailer’s top-line profit
when selling a diamond, or the sales price relative
to the wholesale cost of the diamond.”
Other factors must also be taken into consideration.
Bain & Company reported that the cost
to make an LGD in 2018 fell from $500 to $300
per carat, compared with $4,000 per carat ten
years earlier.
LG manufacturers continue to see a deep drop
in production and operating costs. The continued
rise of LG manufacturing plants as well as
LG retailers both online and off are creating an
abundance of goods and a potential price war.
Despite China’s political, socio-economic and
recent health-related woes, the country remains
the largest producer of LGDs, estimated at
56% of worldwide production (Figure 3). Other
countries are seeing opportunities, however,
especially in light of U.S. tariff policies. They
are stepping in with world-renown gem cutters
in tow, which may potentially result in an
even lower cost per carat and a higher number
of polished stones. Clearly, this creates added
pressure on American firms attempting to match
price and quality with overseas providers.
Thinking Outside the Box
If you’re an LGD manufacturer or wholesaler,
it is important to approach your sales leads with
total transparency. Defend the healthy margins
between diamond types and speak to the use of
LGD in fashion over bridal. If you are a designer
or a retail store owner, perhaps it is time to
invest, slowly and carefully, into a trusted LGD
brand. You may be able to negotiate a strong
buy-in for a small investment, but it is essential
to be clear on returns, guarantees and certifications.
You might not get all you desire, but as the
song goes, “you get what you need.”
Dan Scott is Founder/Brand Architect with New
York Metro’s Luxe Licensing. Past and current
clients include Harry Winston, Chanel, Gucci
and several up-and-coming high jewelry and
demi-fine brands. He welcomes conversation
and can be reached at 201.294.3697 or by
email at dans@luxelicensing.com. ■
Lab-Grown Diamonds in the Desert
A Panel Discussion at JCK Tucson
Because of the rising interest in lab-grown diamonds, one of the talks at the recent JCK
Tucson show was “Lab Grown: Trends & Insights,” where three representatives of the
lab-grown diamond industry spoke to a group of retailers. One of the panelists was Jerry
Taylor, CEO of Lab Grown Source, an online trading platform for lab-grown diamonds
(LGDs).
The following are his responses to some of the questions asked by the audience.
Question: What trends do you see in the lab-grown diamond space?
Jerry Taylor: Consumer demand for lab-grown diamonds is growing exponentially. Five years ago,
when I started offering lab-grown diamonds as an option to my customers, virtually no one knew
anything about them. Now, almost 25% of my customers request lab-grown diamonds. In servicing
customers all over the country—and indeed across the globe—I see trends that are similar to those
recently reported by MVI Marketing. Simply put, more and more customers are not only open to the
idea of considering a lab-grown diamond, but they are also requesting them. The main takeaways
of MVI’s report are:
♦ 66% of millennial customers say they will consider a lab-grown diamond, which is an increase
of 13% over the previous year
♦ 23% of millennial consumers say they will definitely buy a lab-grown diamond.
Q: What do you think is the future of lab grown diamonds?
JT: The future of the lab-grown diamond industry is very bright. It is revitalizing retail jewelry
operations and breathing new life into the cutting, polishing, and distribution sector. It is projected
that today’s increasing consumer demand will continue to grow at very rapid rates. Currently, the
production of high-quality LGDs, especially in the 2+-carat category, can’t keep up with demand.
Private equity venture capital money is pouring into the sector to meet the need for more supply.
Q: What do you think about concerns that, with improvements in technology, an unlimited
number of perfect-quality lab-grown diamonds will flood the market causing the price to
drop to virtually zero?
JT: These concerns are baseless and ignore several fundamental truths about economics and the
nature of the supply chain. First, it is very expensive to grow a diamond. It’s even more expensive
than mining one. And cutting, polishing, and distribution costs are exactly the same as mined diamonds.
So, even if the cost of growing fell to $0, which it never will, most of the costs of getting
lab-grown diamonds to market will be the same. And, as labor costs in developing countries rise, so
will the cost of lab-grown diamond production. I predict that the supply of lab-grown diamonds will
have a very difficult time keeping up with the demand in the near future and for years to come. The
price will fluctuate like it does for mined diamonds, but the outlook is very positive.
Q: Will selling lab grown diamonds hurt my natural diamond business?
JT: This is a legitimate concern, but it applies more for the suppliers of mined diamonds than for
jewelers. When a grocery store, which exclusively sells Coca-Cola, contemplates if it should add
Pepsi to its shelves, it doesn’t ask “Will selling Pepsi hurt my Coca-Cola sales?”
Rather, it tries to predict if an additional product line will attract more customers. And, if the store
is asking this question, it’s probably because customers have commented “No, I couldn’t find the
Pepsi” when asked at checkout if they were able to find everything they were looking for. The store
knows that people who walk in to buy Pepsi and walk out empty handed when they can’t find it
will go down the street to a grocer who sells what they want. These customers then buy not only a
carton of Pepsi, but also chips and a gallon of milk. This is similar to a jewelry store.
Expanding your product offering into lab-grown diamonds will capture additional market, and
even more importantly, will add to your returning customer base who also may buy wedding bands,
anniversary gifts, and other jewels. Stores who don’t offer LGDs because they are worried that they
might hurt their mined diamond sales aren’t asking the right question.
The question to ask is “Will offering lab-grown diamonds help grow my business?” I’ve found
that in most cases, the answer is YES. You might think that your store is the exception, but I would
urge you to test a sample of clients, particularly your millennial customers, and see how it goes.
I’ve seen that my customers who buy LGDs are more excited about their purchase and are more
likely to refer their friends and family to buy from me. I think you’ll be pleasantly surprised as well.
Jerry Taylor is CEO of Lab Grown Source, the largest online trading platform dedicated to helping
jewelers sell lab-grown diamonds. He has 20 years of retail jewelry experience as the COO of
Taylor Custom Rings. He can be reached at jerry@labgrownsource.com. ■
