A few thoughts on synthetic diamonds, in the wake of Chaim’s story last week  ….

– I really don’t think we can compare lab-grown stones, as some have done, to simulants like CZ and moissanite. Lab grown gems are the exact same product as natural diamonds, just produced in another way. Sure, they have different selling points (I’ll get to that in a bit), but they are basically the same item, and their producers won’t let us forget that.

– The natural diamond industry will not get very far trying to force their manufacturers to call them “synthetic.” “Lab-grown” and “man-made” are perfectly acceptable descriptions. “Cultured,” I agree, means and says absolutely nothing and should not be used.

– It is true that other created gems (like rubies, emeralds, etc.) have not hurt the market for their natural counterparts. But diamonds are different. They are much more high-profile. In addition, many young grooms-to-be feel “forced” to buy diamonds. They may welcome a price break.

– Some of the claims about man-made stones are pretty shady, if not outright misleading. For instance, I’ve heard that man-made stones are of “better quality” than natural ones. How can that possibly be true if they are the same product?  Do they have a different grading scale? (Maybe their stones go up to “C.”) Also, I’ve heard claims that their stones are “more ethical” than natural diamonds. Yes, their diamonds cannot possibly be “conflict” stones; but they also don’t have a chance of helping anyone other than the people making them.  

– It will one day be possible for a consumer to go into a jewelry store, and have a choice between a natural and man-made stone. But that day is pretty far off, probably a generation or two away. I could be wrong on this; Chaim wrote that Apollo has gotten its act together and that he expects De Beers to start offering synthetic gems in 2011. Still, the growing process remains unpredictable and hard to replicate on a mass scale.

– Finally, even withstanding that last point, the natural industry has to seriously brain-storm how to deal with this new product. There is a lot at stake here. De Beers may be able to market synthetics themselves, but they also have mine contracts until the middle of this century.

We all know the industry’s line on this: Diamonds coming from the Earth have far greater value and symbolic meaning than diamonds made in a factory. But let me digress a bit. This week I did some interviews with retailers about how they are responding to Blue Nile. Most said the familiar things about wowing customers with service and the in-store experience. But one admitted, “That’s usually not enough to justify a 40% price differential.” (So he’s lowered margins.)

Yes, natural diamonds have a far greater mystique than man-made ones. But will that justify a 40% price differential? Or more?  

We shall see, perhaps sooner than we were expecting. More comments on synthetics here.

Rob Bates

JCK News Director