Lab-Diamond Sales Grow as Prices Fall

Lab-grown diamond jewelry demand grew an estimated 38% to $12B in 2022, however like-for-like prices retreated by an estimated 20% —a trend that likely continues into 2023

January 2, 2023 By Paul Zimnisky, CFA paul@paulzimnisky.com

Going into 2023, the swift momentum of lab-diamond demand growth continues, however, so does a trend of softer prices.

In 2022, more and more retailers, especially in the U.S., inventoried the product, which has led to much wider-scale downstream distribution of lab-grown diamond jewelry. Notably, U.S. major Signet Jewelers and global fashion jewelry powerhouse Pandora led the charge.

The former, which is the largest diamond jewelry retailer in North America, said that it would “really lean into” lab-created diamonds in early-2022; the latter, which is the world’s largest vertically-integrated fashion jewelry company, debuted a novel line of lab-diamond jewelry later in the year targeting its U.S. market.1

Signet is selling lab-diamonds side-by-side with natural diamonds in its primary banners, which include, Kay Jewelers, Zales, James Allen and now Blue Nile, which it acquired in September 2022. Prior to the acquisition, Blue Nile exclusively sold Lightbox-branded lab-diamonds marketed as non-bridal “fashion” jewelry.

Pandora is exclusively selling lab-diamonds, however, diamonds as a category is a new foray for the company which is known for its lower price-point charm bracelets and related jewelry. Prior to the debut of the diamond line, Pandora’s average order value (AOV) was estimated at under $100.

Globally it is estimated that lab-diamond jewelry sales grew to almost $12 billion in 2022, up a steep 38% year-over-year (see above chart). For context, this is up from under $1 billion as recently as 2016.

Notably, in 2022, lab-diamond jewelry surpassed the 10% mark of total global diamond jewelry sales for the first time.

This figure is expected to expand as lab-diamond jewelry sales are forecasted to continue growing at an annual double-digit percentage rate in the coming years. That said, in the medium and longer term, lab-grown diamond sales as a percentage of natural diamond sales will likely become less relevant.

A Pandora store in mid-town Manhattan in the summer. Image source: Paul Zimnisky

It is important to remember that lab-diamonds are creating incremental demand for diamond jewelry that would otherwise not exist —especially at the lower-price points.

Looking longer-term, this incremental demand will likely continue to grow while the share of lab-diamonds directly cannibalizing natural diamond sales will stabilize and level-off.

Product marketing by both natural and lab-diamond producers as well as product positioning by retailers at the jewelry counter will ultimately determine the level of segregation of the two products and the speed at which the bifurcation plays out.

However, as the price point between natural and lab-diamonds continues to widen, consumer’s intuitive perception of the two products is also likely to naturally diverge —as at the end of the day, diamond jewelry is a luxury/discretionary purchase often driven by emotion or feeling, i.e. the economic concept of diamonds being a “Veblen good” is at play.2

As recently as 2016, a 1-carat lab-diamond sold for only 10% less than an equivalent natural diamond; by the end of 2022, the differential had widened to as much as 80% (see above chart).

The global production capacity of lab-diamonds has exploded in recent years and it is expected that the trend will likely continue for at least the next few years. This dynamic has boosted the supply and pressured prices of lab-diamonds.

Recent new production capacity has been driven by declining capital equipment and production costs as well as growing investment capital availability.

For instance, according to anecdotes, off-the-shelf Chemical Vapor Deposition (CVD) machines can currently be acquired in India for under $100,000 —the compares to as much as $300,000 as recently as 2019.

Further, the Indian government is developing subsidies and capital equipment financing incentives for new lab-diamond producers as the government attempts to boost its current account deficit via export industries.

India and China, combined, are estimated to account for almost three-quarters of global lab-diamond jewelry production by volume.

Paul Zimnisky speaking on lab-diamonds in China in 2019. Source: Guangzhou Diamond Exchange

The (declining) price of lab-diamonds as a material will continue to be a primary driving force for how the product is represented longer-term.

In terms of jewelry, a lower price point could discourage retailers from offering the product as an alternative to a traditional (solitaire) natural diamond out of fear of top-line revenue destruction.

However, a lower lab-diamond price point also increases the creative flexibility of the product from a jewelry design perspective.

For instance, a natural diamond is considered too valuable to be cut into low-yielding “exotic” shapes, whereas this is not nearly as much a problem with lab-diamond. Further, lab-diamonds can be produced in chemical variations and colors not found in nature by altering the production “recipe.”

The current dynamic of rising demand for lab-diamonds but falling prices seems counterintuitive for the jewelry industry which has historically sourced primarily non-renewable natural minerals and metals, but lab-diamonds are a manufactured product based on an evolving technology.

1The line was initially tested exclusively in the UK in 2021. The U.S. is notably Pandora’s largest market.

2Based on the theory that for certain goods, higher prices drive higher demand due to the associated exclusive or special nature and/or status appeal of the good.

A press release that accompanied this report can be downloaded here.

The charts above were printed in The Wall Street Journal.

Access more of Paul Zimnisky's lab-grown diamond content here:

PZDA Podcast With Amish Shah of ALTR Created Diamonds

What a Mature Lab-Grown Diamond Jewelry Market Could Look Like

PZDA Podcast With Guest George Prout of Craft Diamonds

PZDA Podcast With Guest Tom Chatham a Man-made Gem Pioneer

Retail Margins Could Be Boosting Man-made Diamond Sales

What We Call Man-made Diamonds Could Determine Their Success

Paul Zimnisky, CFA is a leading independent diamond industry analyst and consultant based in the New York metro area. His research and analysis on the diamond industry is used globally by financial institutions, management consulting firms, private and public corporations, governments, intergovernmental organizations and universities. More information can be found here. He can be reached at paul@paulzimnisky.com and followed on Twitter @paulzimnisky.

For more detailed analysis of the lab-grown and natural diamond industry, please inquire for information on consultation rates and custom research capabilities. For subscription information or to request a sample of Paul Zimnisky’s State of the Diamond Market, a leading monthly diamond industry report which includes forecasts, data and trends, please contact: subscriptions@paulzimnisky.com.

The Paul Zimnisky Diamond Analytics Podcast can be streamed for free here or on Apple Podcasts or Spotify. Recent guests include former De Beers executive Stuart Brown, industry marketing icon Stephen Lussier, President of ALTR Created Diamonds Amish Shah and legendary diamond geoscientist Dr. John Bristow.

Disclosure: At the time of writing Paul Zimnisky held a long position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc, Brilliant Earth Group and Barrick Gold Corp. Please read full disclosure below.

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