At the recent Dubai Diamond Conference panel on lab-grown diamonds, William Shor, managing partner of Caspian VC, one of the companies backing Diamond Foundry, made a startling suggestion.
“My colleagues would welcome the opportunity to co-market with [natural] diamond producers,” he said.
On one level, Shor’s suggestion makes no sense. His colleague, Diamond Foundry chief executive officer Martin Roscheisen, just wrote a magazine piece that accuses diamond miners of “price collusion.” (He provides no real evidence for this claim.) Doesn’t look like he’s ready for co-marketing.
On another level, Shor’s suggestion makes all the sense in the world. Why can’t the two sectors work together? Neither sector is going away. They both have money. They both need customers. A large number of companies currently sell both, including, of course, De Beers.
The fact is, the two sectors are intimately connected: on a retail level, on a distribution level, and on a consumer-perception level. They use the same cutters, the same vendors, the same retailers, the same manufacturers. When any part of that chain is hurt, that trickles down to the rest. Many lab-grown diamond sellers even use natural side stones.
They are also connected as far as pricing. Most lab-grown diamonds are sold based on their discount off the Rapaport price for natural diamonds. (Those are the same prices, by the way, decried by Roscheisen.) When natural diamond prices fall, so do lab-grown prices.
What brings this up is the Diamond Producers Association’s recent spots produced by Funny or Die, which takes several shots at lab-growns, calling them “microwave diamonds” and “factory diamonds.”
The day before I wrote the piece on that, I watched a Netflix special called Diamonds, Explained, where Jason Payne, head of Ada Diamonds, called natural diamonds “dirt diamonds.”
Does this kind of childish name-calling really help anyone? As the Vox-produced show points out, without the traditional diamond market, there would be no lab-grown industry. The reason people want to buy any diamond engagement ring is because of the brand equity that the natural industry has built up over decades. If that is destroyed, all sectors are destroyed.
We see this also with the eco-claims. This week, Ryan Bonifacino, the chief marketing officer of Clean Origin and Great Heights, called lab-grown diamonds “environmentally conscious”—even though the Federal Trade Commission has explicitly warned lab-grown companies not to use general environmental benefit terms such as eco-friendly and sustainable.
To be clear: I encourage companies to discuss and disclose their sourcing. But anyone who talks the talk better walk the walk. They need to provide info in a way that truly informs consumers and, one hopes, improves the industry, not just as a marketing gimmick or way to slam a competitor.
That means providing information on the producers and sources of all their materials, including the gold used in settings, as well as any products’ true overall eco-impact, particularly water and electrical use. Lab-grown sellers have never done that, even though they have been asked for that info for years. Hopefully, customers who truly care about sustainability will soon ask for it, too.
In many cases, they won’t like what they hear. As Roscheisen points out, many lab-grown diamonds, particularly the small sizes, are produced using coal power. Which means it’s possible—even likely—that many consumers are buying a supposedly “eco-friendly” product that makes climate change worse. That’s not just misleading, it is hard to justify on any level. And companies that make these claims without full transparency and product traceability are opening up a can of worms.
Sustainability is a challenge that the entire industry faces, including the lab-grown and natural diamond sectors, both of which use gold and other difficult-to-trace minerals in their products. That is something else they need to work together on, preferably with the help of reliable third-party auditors. Otherwise, the claims and counterclaims will come back to bite the entire trade.
Many people decry “both sides” journalism, but in this case, it’s true. Both sides take shots at each other, and both sides sometimes stretch the truth.
On one level, the natural and lab-grown sectors—or, if you will, the “dirt” and “factory” sectors—will always have some tension between them. I get that. They are competing. But throwing jabs at each other is not the way to do that.
And while these arguments may make a compelling story for the media, they are a terrible story for the trade. The industry is not only competing with itself for shopper dollars, but with other consumer goods. It is also under a microscope like never before. We need to strive for true great heights, not low depths.
So how do we change this? Retailers and manufacturers need to speak up. Any company that sells both lab-grown and mined diamonds should tell their suppliers that they will not patronize any company that issues statements that could hurt the value of a large portion of their inventory. Otherwise, they are subsidizing a business that will damage them in the long run. And if their vendors don’t comply, they should buy elsewhere. There are plenty of companies selling all kinds of diamonds.
A while back, I discussed the “charm wars” between Pandora and Alex and Ani—a battle that now seems almost quaint given what’s happened to the charm category. I brought up the theory that companies have two opportunities for growth—pie splitting (boosting market share) and pie-growing (increasing the overall market).
As a Harvard Business Review article put it:
[P]ie-splitting strategies often just drive short-term, unsustainable results where companies are merely “renting share.” And in the long run, too much share stealing without category growth destroys long-term industry profitability for everyone involved.
The sad thing is, lab-grown diamonds have the potential to truly enlarge the diamond pie. Instead, they seem to be shrinking it. This may be a decent strategy if you’re a short-term player, like a VC fund.
But for those of us who plan to be around for a while, it is both crazy and counterproductive, and could drive every company into the dirt.
(Photo: Getty Images)Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine