The $80 billion mined-diamond industry is at a tipping point as man-made diamonds are offering consumers a new option. When consumers are given a choice between buying a 1 carat mined diamond for $5,000 or a bigger 1.25 carat lab-grown diamond for the same price, more people are opting for the bigger lab-grown stone. It is virtually identical in quality and composition to the mined diamond, but without the human toll or negative environmental impact of mining operations. This is most especially important to the millennial generation. That is, if they are given the choice at the jewelry counter.
Today the lab-grown diamond industry is estimated by Morgan Stanley to represent less than 1% of the global market for rough diamonds, with sales between $75 to $200 million. But by 2020 it predicts lab-grown diamonds could account for 15% of the gem-quality melee diamond market, defined as less than a half carat in rough form that can be ready for jewelry mounting by using industrial drill bits, saws and sanding equipment, and 7.5% of the larger diamond market.
That disruption is coming to the mined-diamond industry is without dispute—probably sooner than you think. A new study by MVI Marketing found millennial consumers are increasingly interested in lab-grown diamonds, especially premier diamond-engagement rings (a category that targets millennials).
In the survey among 1,000+ American consumers, aged 21-40 years, across all income ranges with half having household incomes of $50,000 or higher, nearly 70% of consumers said “Yes,” they would consider a lab-grown diamond for the center stone in an engagement ring if they were shopping or shopping with someone for an engagement ring.
“Millennials are telling the jewelry industry this is a product they are interested in and will come into the store to look at it. To ignore that opportunity, which is both profitable to the trade and valuable to the consumers, is a huge a mistake. For an industry struggling to get millennials in the door, the answer is right in front of their eyes”, Marty Hurwitz, CEO of MVI Marketing said.
Among consumers in general, and millennials most specifically, mined-diamonds have a bad reputation for the high human cost and environmental damage that mining operations entail. This generation is fixated on responsible sourcing and manufacturing of the products they buy. Lab-grown diamonds meet that demand, while mined-diamonds fall short.
“Millennials want to know that the products they buy aren’t harming anybody in their production. This is across all consumer products,” Hurwitz says. “That’s why companies are tracing chain of custody and providing transparency of supply chain. There isn’t a product in Whole Foods, Nordstrom or Walmart, for that matter, that isn’t being traced in case someone asks. Millennials are driving this trend.”
Millennials are exceedingly responsible consumers, but they are value consumers too. That is another reason why lab-grown diamonds have such a strong appeal. Having the chance to get more for less is what appeals to them most when it comes to lab-grown diamonds. Over three-fourths of millennials surveyed agreed with this statement, “I would consider lab-grown diamonds because I would like to save money on an engagement ring.”
From the consumers point of view, they can see, feel and touch a bigger gemstone in a ring, but positioning the price as 25% less than a mined-diamond is fuzzier. “If you are a retailer and consumer comes in with $5,000 budget and you have both products, you don’t want to reduce their budget. Just let them spend the same amount for a bigger stone,” he advises.
Millennials want the option to see and experience lab-grown diamonds at the jewelry counter, but only about 25% of independent jewelers are taking advantage of the opportunity, Hurwitz shares.
“It is a great opportunity for the independent retailers to differentiate themselves from the majors. It is a great story to tell to millennials,” he says. “And the best part is that in the supply chain, it is good margin for retailers. Mined-diamonds have very thin margins right now, but in lab-grown there is a very good margin.”