Rapaport Magazine

Changing Attitudes

If a diamond is defined by time and pressure, then how much time and pressure will it take to get the industry to accept lab-grown stones?

By Lara Ewen

Time and pressure create diamonds in the earth, but above ground, people have found a newer, faster way. For an industry rooted in tradition, it’s not surprising that lab-grown diamonds have not been widely embraced. In fact, many in the industry see lab-grown diamonds as interlopers in an established industry built on tradition.
   However, not all diamond manufacturers see themselves as intruders. In fact, many of them are proud of the stones they’re making and are trying to find a way to work alongside the mined industry in order to offer an alternative choice to buyers looking for something new.
   Moreover, these manufacturers don’t see the stones they’re making as fake. It’s become a point of contention. While everyone agrees that simulated stones, such as cubic zirconia or moissanite, are one thing, not everyone agrees on the term “synthetic.” In fact, some manufacturers argue that because their stones are chemically equivalent to mined diamonds, the word “synthetic” is a misnomer.
   It’s an issue that some people in the lab-grown industry feel very strongly about. “Anyone who calls our product ‘synthetic’ is not understanding what’s going on,” says Alon Ben-Shoshan, head of commercial relations for Diamond Foundry Inc., a lab-grown diamond company based in Palo Alto, California.
   Danny Baruch, vice president of American Grown Diamonds, a lab-grown diamond company in New York City, agrees,“‘Synthetic’ is a term people associate with lab grown, but it’s not correct,” he says. “Synthetic means fake, like cubic zirconia and moissanite. We prefer to call them lab grown.” Naturally, this isn’t merely a semantics issue, but one of legality, and the manufacturers themselves don’t get to make all the rules.

Legal Disclosures
   At least when it comes to some specifics, the mined industry agrees with lab growers. Everyone wants transparency and education, and everyone is pro-labeling. Moreover, the Jewelers Vigilance Committee (JVC) has laid out very clear rules on the subject. “It is unfair and deceptive to use the unqualified word ‘diamond’ to describe or identify any object or product not meeting the requirements specified in the definition of diamond,” according to JVC standards. Under Federal Trade Commission (FTC) legal standards, a diamond is therefore defined as a natural mineral consisting essentially of pure carbon crystallized in the isometric system, whose hardness is 10, whose specific gravity is approximately 3.52, with a refractive index of 2.42 and at least 17 polished facets. According to Cecilia Gardner, president and chief executive officer (CEO) of the JVC, all resellers of lab-grown diamonds are legally required to divulge the nature of their stones in some verifiable form before the sale. This generally means that disclosure needs to be in writing.
   Since responsible lab growers are proud of the work they’re doing, they’re happy to label the stones as lab grown. “The origin of a diamond is a very important product attribute that no buyer must be confused about,” says Ben-Shoshan. “As a manufacturer, we require all of our resellers to be clear on communication and labeling.”
   Additionally, Ben-Shoshan insists consumers understand the differences between lab-grown and mined diamonds very clearly. “We have found zero confusion with our existing messaging on the mined versus nonmined matter,” says Ben-Shoshan. “As a company, it is our entire value proposition that our diamonds are nonmined. As a result, our entire marketing messaging and communication, starting even with our company name, is about explaining to people that these diamonds are not from a mine but from our foundry. We make every effort to be clear about the characteristics and nature of the product we are selling.”
Defining the Lab-Grown Customer
   Putting aside the legal concerns regarding disclosure, one of the most frequent questions asked about lab-grown stones is: “Who would want one?” Many in the traditional corners of the jewelry industry have a hard time understanding why anyone would intentionally seek out a lab-grown stone.

   For one thing, the price is appealing. Lab-grown diamonds cost less than mined diamonds. “The price point of lab-grown stones is fantastic,” says Jason Greenwalt, graduate gemologist at Neustaedter’s Fine Jewelers in St. Louis, Missouri. “It’s for the consumer who wants a diamond, but doesn’t want to pay mined prices. With round goods, that price is at the highest point now. So what a great time for an alternative to come into play.” Greenwalt, who has been selling lab-grown diamonds from Pure Grown Diamonds in his store since November 2015, is impressed by the margins. “We try not to do crazy markups, because we want people to understand that this is a lab-grown diamond,” he says. “We decided to offer lab-growns at a fair set markup, and people have been really receptive. We’re getting 30 percent margins, and we pass the savings onto the customers. I mean, Blue Nile’s doing 20 percent margins, so this is a way to take back a piece of that pie.”
   According to Baruch, that savings can be significant. “There’s a 20 percent to 25 percent difference in pricing now between lab-grown and mined diamonds,” he says. “With larger diamonds, there’s a more significant savings. Paying $15,000 for a 2-carat stone as opposed to $20,000? Customers say to me, ‘I can take that extra $5,000 and go on a honeymoon.’”

   Price is not the only consideration, however. Many customers are fascinated by the technology, which to some is as magical as alchemy. “There’s something brand-new here,” says Greenwalt. “What speaks to me as a gemologist is that you can look in and see the physical and chemical and gemological properties of a diamond. We’re talking huge advances.”
   Jennifer Dawes, designer at Sonoma County, California – based Jennifer Dawes Design, agrees that the technology is fascinating. Dawes, who is also an ethical metalsmith, has been in business for 16 years and began designing for Diamond Foundry in 2015. “To be able to dictate what shape and form I want from my diamonds is a dream come true,” says Dawes. “In the past it was hunting and gathering. But now, to be able to say, ‘I need a 1.5-carat duchess-cut stone,’ and they can produce that for me in 3.5 weeks? It’s mind-boggling.”

   Naturally, the environmental concerns are also a factor. “I loved the idea of working with a company that has such a small environmental footprint,” says Dawes. “The environmental stuff is important. My brand is known for that, and I’d like to see the industry moving in a responsible direction because the end product is a very meaningful talisman for people. My client base is all about the experience, and it’s very much about what nobody else has except for them.”
   At Brilliant Earth, an online retailer that specializes in ethical, sustainable and conflict-free jewelry, and offers an extensive collection of lab-grown diamonds, Vice President of Strategy and Merchandising Kathryn Edison Money says customers certainly take environmental issues into consideration. “Natural versus lab-created is a customer preference, and we offer both options,” she says. “Lab-created diamonds resonate particularly well with a Millennial audience. Customers are drawn to them because they are beautiful, responsible and affordable. Customers are also drawn to the fact that lab-grown diamonds do not require any diamond mining. Some customers prefer the history and romanticism behind a mined stone. They like the idea that the stone is from the earth and want something that’s natural. But Millennials may not associate a lab diamond with the same type of stigma.”
   Another big selling point of lab-grown stones has been that they’re conflict free, but that may not be as big an issue as it’s been made out to be. “The claim that lab-grown diamonds are conflict free is accurate, but it begs the question of how many diamonds are actually conflict diamonds to begin with,” says JVC’s Gardner. “It’s a miniscule amount. And the benefits to the communities and supply chains that produce diamonds are enormous.”
   To some extent, Millennial strategist Ben Smithee, CEO of The Smithee Group, a consumer consultancy specializing in Millennial marketing, agrees that the conflict-free issue may be overstated when it comes to lab-grown diamonds. “If I’m the lab-grown industry, I’m not playing the ‘conflict-free’ card, and I wouldn’t play into people’s fears and misconceptions,” says Smithee. “I think the best choice is to appeal to a customer who’s interested in the tech process and the price point. I don’t think the ethics is a nonissue. However, if I were a lab-grown producer, I’m not building my business on that. Instead, I’m saying, ‘I have an 8,000 degree heat reactor, and we made this thing just for you, and you can see this diamond from its inception to final product.’ The Millennial generation, who are just maturing now, are open to new technology, and are very much about sustainability and environmentally friendly things.”
   Of course, the growers also stress that a big selling point of lab-grown stones is that they are still exclusive, too. Limited supply chains currently make creating and stocking lab-grown stones the work of a few respected growers, including Pure Grown Diamonds, Diamond Foundry and American Grown Diamonds. And all of them see their product as high end. “This is a luxury product,” says Ben-Shoshan. “This is like Stella McCartney, who is an avowed vegan, selling faux leather handbags. This is about craftsmanship. It’s going to continue to be masterfully crafted in small batches.”

Retailers’ Reactions
   Some stores, like Brilliant Earth, Neustaedter’s, Helzberg Diamonds, Sam’s Club, and even Robbins Brothers, are very open to lab grown. In fact, Robbins Brothers has a proprietary version, called the E3, that it says customers are embracing. “The E3 Diamond allows Robbins Brothers to offer our consumers a variety of diamond options that fit their needs, lifestyle and budget,” says Sandy Sansavera, vice president of merchandising for Robbins Brothers. “The response from customers so far has been great, and we look forward to seeing this side of our business grow.”
   However, other stores are not quite so enthusiastic. Although Signet stores do sell synthetic semiprecious stones, Vice President of Signet Corporate Affairs David Bouffard says the stores have no plans to expand their offerings. “Our company policy is that we trade in natural diamonds, not synthetics,” says Bouffard. “While we do not sell synthetic diamonds, we do sell synthetic ruby, sapphire and emeralds. These are simply our long-standing gemstone policies. Signet’s sourcing policies strictly prohibit synthetic diamonds in our jewelry supply chain.”
   For Brad Congress, owner of Bradley’s Jewelers in Fort Myers, Florida, the decision is mostly about timing. “The reason I’m not selling lab-grown diamonds is that technologically based products become rapidly less expensive,” he says. “The diamonds that are being created in labs today are the most expensive that they’ll be in history. Next year, they’ll be less expensive, and five years from now, there will be a sharp decrease in price again. There will be a time for having a lab-grown diamond market and a mined diamond market working side by side. And as prices drop on lab-grown, it might become a genuine alternative. But only once customers come in asking for it. I don’t want to be the first guy on the block selling the most expensive lab-grown diamonds on the market.”

Coming Together
   According to Smithee, however, this is a great opportunity for the industry as a whole to find a new conversation with customers. “Instead of the mined industry taking up arms against lab grown, I would ask the mined industry to open its arms and say, ‘Here’s this opportunity we have,’” he says. “Nobody would tune into a debate with only one candidate, right? So this is an opportunity for the mined diamond industry to have a real conversation about diamonds. There are brilliant people in the diamond industry who are hungry to create a space for diamonds. These people can use this conversation about lab grown to talk about mined. It boosts the economy for the diamond industry to have competition,” says Smithee. “Lab grown isn’t the end or the beginning of the end of mined. This is the opportunity that the industry is looking for.”
   Ben-Shoshan agrees. “The diamond and jewelry industry can only benefit from this process,” he says. “There are people who would not buy mined diamonds. But right now, our diamonds are all grown in America, and this technology thrives in Silicon Valley, and I’m working to do all of our polishing in-house. We hired Israel Itzkowitz and Maarten de Witte from Hearts On Fire. Every single person in America should prefer this product. And the retailers make more money on it. And there are plenty of other nondangerous and nondisruptive jobs to do in Africa.”
   For his part, Baruch sees change coming within the next few years. “I think there’s going to be pushback from sightholders who are against lab-grown diamonds, but as a whole, the jewelry industry has always lagged behind when it comes to staying ahead,” he says. “There’s maybe a two- or three-year curve, but I think the stores who jump on this sooner will get the most market share, and they’ll be happy to see the healthy margins. Anyway, the jewelry industry needed something fresh to reinvigorate itself.”
   For Neustaedter’s Greenwalt, lab grown could be the start of a much bigger industry overhaul. “What it’s going to take is the renewing of the industry,” he says. “You have to have a younger Millennial mentality here, and we have to make sure that we change our mind-sets and remove the stigma about lab-grown diamonds. It’s a little scary. But the make of these lab-grown diamonds is phenomenal, and we should be proud, as a store, to offer these items to our consumers. This is the future, and everybody has to come together and get on board. This is an opportunity for the industry.” Greenwalt also cautions against the industry insiders who want to undermine lab-grown diamonds. “You have the choice to say, ‘I’m not doing this,’ but don’t slander it,” he says. “That’s mean, and it means they don’t understand. It’s putting doubt in customers’ minds that doesn’t need to be there. Instead, they should be a part of it.” 

Photos courtesy Diamond Foundry Inc.

Article from the Rapaport Magazine - April 2016. To subscribe click here.

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Tags: Lara Ewen