Why Didn’t Synthetic Gemstones Kill the Natural Gem Business?

There are those, particularly in the consumer media, who predict that the arrival of lab-grown diamonds will kill the market for mined diamonds. After all, why would consumers pay less for what is essentially the same product, just produced by a different means? 

Still, the natural trade can point to a notable counterexample: The market for lab-grown colored stones never killed the market for naturals.

Which got me thinking: Why is that? And are there any lessons that the diamond business can take away from the gem business’ experience with synthetics?

For insight I turned to Tom Chatham, head of Chatham Created Gems, whose father pioneered the man-made gem industry 50 years ago. 

First off, Chatham tells me, the two markets are not exactly analogous. The created gemstones were filling a market void, as there weren’t that many fine quality rubies and emeralds out there. “It’s hard to sell good-quality color in the U.S.,” he says.

The same can’t be said of colorless diamonds—although there may be a shortage down the road. (But that is way down the road.) It is however, difficult to find fancy-colored natural diamonds—and when you do find them, they are often absurdly expensive. (When I visited the Gemesis factory in 2007, one of my tour guides pointed to a sizable red stone and said, “If that was a natural stone, it would be worth over a million dollars.”) So fancy-colored synthetics do arguably fill a true need, as well as offer a sizable price break.

Second, the growers quickly realized that the two industries were very much interconnected.

Many worry that lab-growns could make the price of naturals go down. But at the recent Accredited Gemologist Association panel on synthetics, Chatham said that’s not in the grower’s interest, as that would mean they either have to lower their prices or lose their price advantage. Either way they lose. Consider amethyst, he said. When it became hard to differentiate the natural from the synthetic, the price of the natural dropped. As a result, the market for lab-grown product effectively disappeared, as the trade figured if they cost the same, you might as well get the natural stone.

Which is why, he says, misrepresenting the stones—in addition to being illegal—is a self-defeating game, because it shakes confidence in both products. “You can make a lot more money being honest,” he says. “It’s just so penny-wise and pound-foolish to try to misrepresent with one parcel when you can sell millions of parcels.”

Finally, he says, the industry eventually realized it didn’t have to pit the two types of gems against each other, but figured out how to use the created product as a way to meet certain price points. “It will have added benefits for your business if you use it correctly,” he says. “You can sell sizes that are above what the buyer can afford. Yes, the created might take the sale away from the natural. But you still make the sale.”

He thinks that the industry will eventually feel the same way about lab-grown diamonds, though for now their arrival has it pretty spooked.

 “We’ve been surprised at the different attitudes,” he says. “But in retrospect it makes sense. Colored gemstones are such a small part of the business. But natural diamonds are such a huge part of the industry that anything that could threaten or upset that is scary for everybody. I remember in 1996, we saw real fear on people’s faces.”

There is a lot more acceptance now, and he thinks that will grow—though it will take time. “It’s taken 50 years for [lab-grown] color to really find its niche,” he says. “Maybe the same will happen with diamonds.”


JCK News Director