The world’s two strongest diamond firms are making quiet however decisive strikes to counter what some insiders are calling an existential risk to the business — the rising reputation of lab-grown diamonds.
In Might, Signet Jewelers — the world’s greatest diamond retailer, with chains that embrace Jared, Zales, Kay and Blue Nile — started printing a “purchaser beware” disclaimer of types on the receipts of all of its lab grown diamond gross sales, warning clients that the bauble they purchased may plummet in worth.
Lab-grown diamonds’ “relative abundance might not be sure that their worth will maintain over time,” Signet’s receipts now state.
The retailer can also be coaching its 20,000 gross sales associates to “educate” consumers about “pure diamonds’ distinctive attributes, together with their enduring emotional and monetary worth,” Signet spokesperson Katie Spencer informed The Publish.
In the meantime, De Beers — the world’s largest diamond producer — late final month unveiled a brand new diamond ‘verification’ machine that it’s promoting to retailers as a software to offer patrons confidence that they’re buying a pure diamond.
LGDs and mined rocks are almost indistinguishable to the bare eye — even to educated jewelers.
The developments come as Signet and De Beers purpose to ship a intestine punch to so-called LGDs, with the businesses making ready main advertising blitzes for actual diamonds within the coming 12 months because the business anticipates a long-awaited, post-pandemic surge of wedding ceremony engagements.
“That is the primary time in not less than 20 years that the biggest vendor and producer have come collectively to take a stand on pure diamonds,” diamond analyst Paul Zimnisky informed The Publish.
Signet is slated to report quarterly earnings on Thursday.
A 12 months in the past, the diamond business nonetheless appeared caught within the headlights as the recognition and profitability of LGDs soared. De Beers poured cash right into a fledgling LGD label known as Lightbox as celebrities like Meghan Markle, Billie Eilish and Leonardo DiCaprio touted them as “conflict-free” and environmentally pleasant to Gen Z.
The LGD development has been devastating for De Beers, which reported a 21% gross sales decline within the quarter led to mid-Might in comparison with a 12 months in the past. That’s on prime of the 36% gross sales drop in 2023 when De Beers took a $1.6 billion writedown — and blamed it partly on the rise of lab grown diamonds, in line with Northcoast Analysis.
“LGDs account for 19% of the market and are an actual risk, rising to as a lot as 22% this 12 months,” in line with Zimnisky.
However distributors of actual diamonds say traits recently have turned of their favor: LGDs have gotten so low cost that final 12 months’s revenue margins — as excessive as 50% at retail — are quick evaporating.
Final month, De Beers slashed the price of its Lightbox LGD brand by 37% to $500 a carat citing plummeting wholesale costs. This was on prime of a 10% price reduction by the diamond big in January.
In a little-noticed disclosure on Might 31, De Beers additionally revealed that its Factor Six factories will finish a six-year stint making lab-grown diamonds and return to their earlier concentrate on making diamonds for industrial makes use of.
Whereas China has lengthy been the biggest producer of synthetic diamonds, India started ramping up over the previous a number of years specializing in producing 3-, 4- and 5-carat polished artificial diamonds.
“We imagine that lab grown diamond manufacturing is larger than anticipated with provides nonetheless exceeding demand, pressuring costs down,” Northcoast Analysis analyst Jim Sanderson informed The Publish.
The result’s that jewelers are actually drowning in LGDs, which have fallen in value by almost 30% over the previous 12 months alone, in line with specialists.
“Retailers’ prime line income is getting squeezed,” Zimnisky added. “Retailers should resolve in the event that they wish to be promoting $6,000 or $8,000 pure diamonds or $1,200 man-made diamonds. I believe the acute value decline of generic LGDs has actually put this into perspective.”
Doug Meadows, proprietor of David Douglas Diamonds, of Marietta, Ga., is among the many retailers whose enthusiasm for LGDs is dropping its luster.
“It’s a race to the underside for LGDs for pricing,” Meadows informed The Publish. “Nobody can maintain it at this value. They’re simply too low cost proper now.”
A 12 months in the past, a two carat LGD engagement ring at his boutique offered for $4,500. Immediately that very same ring is $1,000 much less. In response, Douglas started coaching his gross sales workers to emphasise pure diamonds once more.
“We obtained so enthusiastic about LGDs that we misplaced concentrate on pure diamonds and the finesse of promoting them,” he added.
Signet’s gross sales had been down 6% to $2.5 billion within the newest quarter ended Feb. 3 and its greatest performing model within the quarter was value-oriented Banner, which noticed flat gross sales, the corporate stated.
“Whereas we now have seen continued discounting into the primary quarter,” Signet chief government Virginia Drosos stated on a March 20 earnings name, “I might anticipate that the inventories are recovering considerably and in order that might be a assist. I additionally suppose that customers have gotten extra conscious that lab-created diamond costs are falling.”
Signet and De Beers are hammering the purpose that LGDs are much less useful in a coordinated marketing campaign to vary shoppers’ minds about buying them for his or her engagement rings.
De Beers’ “a Diamond is without end” tagline was launched in 1948 and have become one of the crucial highly effective advertising slogans ever.
“Advertising is such an essential a part of this business,” Zimnisky stated. “It’s actually as much as the diamond business to clarify why shoppers ought to pay extra for pure diamonds.”
