The proposed Toll Bros. building on the corner of Seventh and Sansom Streets isn’t the only thing looming over Jewelers’ Row. The jewelry industry could be rocked by the introduction of lab-grown diamonds.
These diamonds have only recently been sold alongside mined gems. Previously, they were only made for function and used in manufacturing.
Diamond giant De Beers, which once distanced itself from the synthetic market, debuted Lightbox Jewelry in May as a retailer of lab-grown diamonds with a huge markdown from mined stones.
One carat retails for $800 without a setting, and pricing is linear rather than the exponential increases favored by natural-stone jewelers. This is lower than brands like Brilliant Earth, where a one-carat diamond produced in a lab retails for about $2,000. Still, both are significantly less expensive than a mined diamond: the standard savings are typically quoted as 20 percent to 40 percent for lab-grown diamonds compared with its mined equivalents.
Until recently, the diamond industry functioned as a monopoly, shaped in large part by one slogan: De Beers’ iconic phrase, “A Diamond Is Forever.” The slogan, created in 1947, changed the way the United States saw engagements. By 1951, the sale of diamonds in the U.S. had increased by 55 percent.
But now, according to Georgette Boele, diamond industry analyst at ABN AMRO, the market is an oligopoly, with three mining giants dominating smaller players. She said that De Beers’ market share by volume has dropped from 90 percent in the 1980s to about 25 percent in 2015 as competitors acquired more mines.
An ABN AMRO report on Lightbox says De Beers’ strategy is to price its jewelry down to “create clear segmentation” and “protect the revenues from the mined-diamond business” by creating two different industries.
David Johnson, head of strategic communication for the De Beers Group, agrees, saying that market research “demonstrated that consumers see natural diamonds and laboratory-grown diamonds as two different product classes.” De Beers wants to create a sector difference. “The laboratory-grown products are pretty to look at, but they are simply not meaningful for people in the same way as a natural, rare, and unique diamond,” Johnson said.
And lab-grown diamonds have a certain green cachet. With the rise in ethical buying, particularly among millennials, and the introduction of the “blood diamond” in the public consciousness, the negatives of diamond mining are well-known.
Rich Goldberg, owner of Safian & Rudolph on Jewelers’ Row and president of Philadelphia’s Jewelers’ Row District, doesn’t stock lab-created diamonds in his store. But Goldberg says he’s fairly “middle of the road” — he’d source a synthetic diamond if a customer asked for one, though it hasn’t happened yet.
Goldberg cited a concern that lab-grown stones might have weak resale value. He said that he “would have no interest in buying something that can be mass-produced.” For those who see diamonds as a way to invest, lab-created stones may not be the best bet.
Although some jewelers such as Goldberg may be fairly neutral, extreme views about synthetic diamonds are common.
Martin Rapaport, chairman of diamond giant the Rapaport Group, has been a vocal opponent of lab-created stones. “Essentially, the current market for synthetic diamonds is evil, and consumers that buy them are suckers,” he said in a 2016 op-ed, citing the economic stimulus that mining has provided to impoverished areas in Africa.
Robert Schwartz of Harry Merrill & Son on Jewelers’ Row says it stocks lab-grown diamonds, in response to customer demand from people who “want a diamond that’s not within their budget … so this gave them something that had the same structure, property, as the diamond, but not at the same price point.”
Schwartz said some buyers still hesitate, finding relatively little difference in pricing between lab-grown diamonds and mined ones. De Beers hopes the dramatically lower price tags on Lightbox diamonds will carve out a new market segment.
Rapaport disagrees. He said in an op-ed for July’s issue of his trade publication that “the most important thing to understand is that whatever and however De Beers promotes and sells synthetic diamonds, they will be competing directly with natural diamonds.”
But Johnson reiterated De Beers’ perspective, that lab-grown and natural diamonds simply “are not the same product,” with physical characteristics that make them distinguishable.
There are differences. Some patterns occur in the lab that wouldn’t in nature, and vice versa. But these patterns are often only distinguishable with sophisticated equipment; often, a jeweler’s loupe won’t even reveal the difference between the two. As Goldberg put it, it comes down to consumer preference, and just how well Jewelers’ Row can respond to the evolving diamond market.