It’s been a difficult couple of years for most luxury goods markets, but diamonds have fared better than most. While revenue and operating margins may have declined, diamonds continue to be an important symbol of love and partnership.
However, as an industry the diamond trade is going through some of the biggest changes since it was first established by DeBeers in the late 1800s. New sales channels, developments in technology and increased transparency are all contributing to shaking up an industry that was once in the grip of a virtual monopoly. No longer.
The Growth of Online Sales
While consumers still unquestionably prefer to buy diamonds in brick-and-mortar stores, with the associated opportunities to see and touch the goods, online sales are growing rapidly, buoyed by the pandemic.
In fact, e-commerce has grown from just 5% five years ago to around 20% of sales last year.
Online retailers have gone to great lengths to recreate much of the in-store experience virtually, with one-on-one consultations and bespoke rings available. Where they can improve the experience for customers over traditional stores is the huge range of diamonds that customers can review and choose from (sometimes several hundred thousand) and significantly lower prices.
Consumer Education
Diamonds have always been graded for quality using the ‘4Cs’ of carat, clarity, color and cut, with each diamonds values recorded on a diamond grading report or ‘certificate’, prepared by an ostensibly independent laboratory. However, up until relatively recently, consumers were often left to interpret these mysterious factors themselves.
Diamond retailers had scant incentive to aid consumers and frequently focused on factors that made little difference to how a diamond looked to the naked eye. As a result, many diamond customers would over-index on quality, resulting in higher prices paid and more money in jewelers’ back pockets.
This information asymmetry between those selling the diamonds and those buying meant that the purchase process was often fraught with uncertainty, with many ring buyers feeling that they had paid more than they needed to.
As with many industries, the internet has changed this and consumers now have many resources to educate themselves before making their purchase. Diamond education websites like Ringpso.com focus on helping diamond buyers understand where they should focus their attention when it comes to quality, and where they can afford to pull things back without any ill-effect on the beauty of their ring.
‘Lab-grown’ Synthetic Diamonds
Synthetic diamonds have been grown and used in commercial applications for over 50 years, but it’s only in the last 5 that they have received widespread acceptance within the jewelry industry.
As they don’t require any mining, lab-grown diamonds are seen by many as more sustainable than mined diamonds, although the FTC has rapped several lab-grown diamonds producers over the knuckles for being unable to substantiate their eco-friendly claims.
What lab-grown diamonds undoubtedly are though is less expensive – often costing between a quarter and half of an equivalent mined diamond.
As a result of the combination of value for money and perceived eco-friendliness, adoption has been rapid, and lab-grown diamonds are now one of the most disruptive forces in the jewelry industry with some retailers reporting that 50% of their sales are lab-grown stones.
Tracking through the blockchain
Since 2006’s ‘Blood Diamond’ brought the issue to worldwide attention, the potential that they may have funded armed conflicts has cast a long shadow on diamonds and what they represent.
While there have been initiatives to try to improve this, most notably through the Kimberley Process, the diamond trade still struggles to demonstrate the origin of a large part of its supply chain.
Blockchain-tracking may change that, with companies like Everledger using blockchain technology to track polished diamonds (ie. those used in jewelry) all the way back to the rough diamond, the mine and even the miner who found it.
This level of transparency can allow diamond producers to eliminate conflict stones, improve worker rights along the supply chain and take a more sustainable approach to environmental impact.
The next level of course is cof consumers to understand the benefit of this and understand that this transparency may come with a premium attached. Time will tell whether enough consumers view this as a worthy investment to improve the quality of the supply chain and the lives of those who produce their diamonds.
