Whether the staunchly traditional diamond industry likes it or not, synthetics seem to have gained momentum among a segment of the consumer base. So how do stores address industry and customer concerns without harming either mined-diamond sales or the market potential of lab-grown?
It’s probably no surprise that synthetic-diamond customers skew younger and are comfortable with both new technology and online shopping. Brilliant Earth, which began online and has since expanded into brick and mortar, did a survey to determine who, exactly, was buying its lab-grown products.
“We’ve found that lab-created diamonds resonate particularly well with the millennial consumer,” says Beth Gerstein, the company's co-CEO. “We conducted a survey that showed millennial consumers are more likely to have a positive view of lab diamonds compared to other demographic groups. In fact, eight out of 10 millennials had a positive or neutral view of lab diamonds.”
The millennial age range overlaps with bridal, which means bridal customers are often looking for lab-grown. That’s one reason stores offer these stones as alternatives.
“We know the two things an engagement-ring client is looking for,” says Richard Kessler, CEO of employee-owned chain Kesslers Diamonds, which has six stores in Wisconsin and one in Michigan. “She wants big and beautiful, and he wants to stay in his budget. And I want to help them get what they want, so my job is to offer options.”
But Kessler wasn’t always keen on offering alternatives to mined diamonds. “I’ve been selling lab-grown for two years, and prior to being in it, I spent years trying to figure out why I would do it,” he says. “I was afraid of it, and I didn’t want to believe in it. But now, three out of four diamonds we sell are 1-carat round lab-grown. And we don’t decide for customers. The client decides.”
Still, retailers wrestle with the idea.“It’s not that we won’t ever sell them, but we can’t think of why we would want to sell them,” says Kathy Cary, stone and diamond buyer and graduate gemologist at Skeie’s Jewelers in Eugene, Oregon. “We’re happy to bring in lab-grown diamonds, but there are so many opportunities to not get the message right.”
The question of messaging looms large over an industry that’s facing monumental changes in how its customer base accumulates knowledge. Many customers do extensive online research before even entering a brick-and-mortar store, so store owners and salespeople need to have talking points ready. For Tara Silberberg, co-owner of The Clay Pot, which has two locations in New York City, offering lab-grown has given her an unexpected informational advantage.
“Obviously, there’s a big move with kids buying online, and they do their research,” she says. “But they don’t always know about lab-grown diamonds, and then I tell them something they didn’t know. They mention conflict, I say I offer lab-grown, and they learn something new. And their eyes light up. And then they find it’s 30% cheaper, and they’re like, ‘Sold!’”
Silberberg’s staff was intensively trained on the subject of laboratory-grown stones. That training has proved valuable, and profitable. “My staff is able to discuss the key phrases, such as ‘plasma furnace’ and ‘not synthetic, but grown from a nucleus,’” she says. “Then we let the customer decide. I probably sell three or four a month now.”
Training is also crucial at Kessler’s stores. “When we first got involved with lab-grown in mid-June 2015, our head buyer trained every single store in lab-grown,” he says. That attention to detail paid off: “With zero advertising, we immediately sold more lab-created diamonds than our traditional 81-facet Kessler diamond. Our people were able to offer another option, and the customer took it.”
However, Kessler intentionally shies away from discussing the environmental factors. “There are guys who talk about how green this is, but I would never talk about the environmental issues, because I also carry mined diamonds,” he says. “That would be like shooting yourself in the foot.”
One concern about synthetics is that they will lose value over time.
“If you spend $3,000 on a diamond, sometimes horrible things happen and you have to sell it,” says Cary, who warns her customers to be cautious. “There’s almost no market for lab-grown resale.”
However, stores such as Sartor Hamann, with three locations in Nebraska, assuage those concerns with guaranteed buybacks.
“Who knows what the market will be like in five or 10 years?” asks gemologist Rick Hamann, the retailer’s vice president, who’s been offering lab-grown diamonds for about a year and a half. “Most of the people who are saying the stones will lose value don’t buy anything back from their customers anyway. And of course, we will buy the lab-grown diamonds back from our customers.”
In any event, Kessler says predictions about market crashes seem premature. “I’ve been in diamonds long enough to know prices fall and rise,” he says, so no one can know for certain if synthetic diamonds will lose their value. “If a person says they can tell you a lab-grown diamond will drop in price, they can also tell you when Santa is coming to your house.”
So are lab-grown stones here to stay? Retailers’ reactions are mixed.
“In the 1980s, when catalog stores came out, everyone knew that was the end of the independent jeweler,” says Cary. “And then the internet came out, and everyone knew that was the end of the independent jeweler. And when moissanite came out, everyone knew that was the end of the independent jeweler. And now they’re saying lab-grown is going to be the end of the independent jeweler. And it’s not. I’ve sold some bizarre stuff over the last 40 years, and I see lab-grown as another bizarre thing to sell.”
Hamann, for his part, says he’s selling the stones because his customers want them. “I think a lot of people in the industry are afraid of them,” says the jeweler, who was the original dealer for Pure Grown Diamonds in Nebraska. “To me, we’re in business to sell stuff, and if my customers want something, we’re going to sell it to them. It’s kind of a no-brainer. We’re not afraid of them.”
At Brilliant Earth, curiosity about these stones continues to climb. “We’ve seen an increased interest in lab-grown diamonds, and they are resonating with customers because they are beautiful, responsible and affordable,” says Gerstein, who notes that the environmental issue is only one reason her customers like the stones.
“Customers appreciate that lab diamonds offer good value relative to natural diamonds of comparable size and quality,” she says.
In the end, customer demand may be what ultimately drives the market.
“Why is it that some people are going out of business, and people like me are opening new stores every year?” asks Kessler. “It’s because they’re not in tune with the market. So you can sell what you want to sell, or what the customer wants to buy. I love people who criticize lab-grown. They’re not hurting my business. They’re hurting their future business.”
Image: ShutterstockArticle from the Rapaport Magazine - September 2017. To subscribe click here.