Jeweller - November 2021

Editor’s Desk
DeBeers, it was always going to happen
De Beers recently announced that it will now sell loose lab-created diamonds direct to consumers.
ANGELA HAN explores further challenges that lie ahead for both retailers and suppliers.
It was more than two years ago, on
29 May 2018, when De Beers Group
stunned the jewellery industry with its
announcement that it was entering the
lab-created diamond market with a range
they described as “high-quality, fashion
jewellery designs at lower prices than
existing lab-grown diamond offerings."
The jewellery was to be manufactured and
marketed by a new, stand-alone company
called Lightbox Jewelry, with sales of earrings
and necklaces beginning on 27 September
that year. Naturally, all diamonds for the
Lightbox collection would be sourced from De
Beers’ own Element Six manufacturing facility.
As if the unexpected move wasn’t enough,
the announcement was made just prior to
the opening of the JCK Las Vegas Show, in
what many said was a well-timed attack on
its competitors.
The pricing model of the Lightbox diamonds
flew in the face of all accepted pricing
‘standards’ and ‘models’ for both natural
and other lab-created diamonds.
De Beers used Lightbox to create a
‘transparent’ and ‘affordable’ linear pricing
model at US$800 (AU$1,350) per carat
regardless of whether the piece of jewellery
consisted of a one-carat diamond or two half
carats, or even four-quarter carat stones.
Recently, it introduced loose diamonds
under the same linear model, but now with
a 2-carat stone being priced at US$1,600
(AU$2,650).
While De Beers’ unorthodox pricing was said
to be another attack on competitors as a
way to create upheaval in diamond pricing,
its logic was more rational – all stones
are manufactured under state-of-the art
conditions so they are all identical, therefore
the pricing is identical.
Sally Morrison, chief marketing officer,
Lightbox Jewelry told Jeweller in December
2018: “Our reasoning is simple: this is a
manufactured product and we firmly believe
lab-grown stones should be priced based on
cost of manufacture, not as a discount from
natural diamond pricing, which is defined by
relative rarity.”
Following the Lightbox announcement, a
2018 Bain & Co report commissioned by the
Antwerp World Diamond Centre, revealed
that a the manufacturing cost for a onecarat
CVD-created diamond was US$300 to
US$500 per carat, compared with US$4,000
per carat in 2008.
Unlike other lab-created diamond suppliers
offering loose stones, the Lightbox branded
diamonds were only available in set jewellery.
But even blind Freddy could see what was
coming!
And so it was last month, almost two years
later, the announcement was made for “the
launch of Lightbox Loose Stones, a new
purchase format that gives consumers the
ability to buy individual high-quality Lightbox
lab-grown diamonds at its industry-leading
price of $800 per carat.”
Surprise? Not really!
You see, De Beers entering the lab-created
market was no surprise to Jeweller. In fact, in
2018 when Lightbox was launched, we asked:
“Why did it take so long?”
Indeed, 13 years earlier in 2005, Jeweller's
editorial stated: “De Beers should begin
manufacturing synthetic diamonds… Rather
than fighting the inevitable, perhaps the
company would be best to embrace it.”
After all, the diamond behemoth had an
enormous income stream to protect, so it
wasn’t a matter of if but when it would begin
selling lab-created diamonds. The reasoning
was simple: you can’t win a game you’re not
playing – have you ever seen a game won by
a spectator?
De Beers’ latest announcement to offer
lab-created diamonds directly to consumers
simply follows an inevitable path towards an
evolving business model.
If we accept this logic, then we are left with
another question: was all this a strategic
move to ensure that other lab-created
diamond innovators didn’t become a blanket
disruption to the natural diamond market,
or was it because De Beers finally realised
that lab-created diamonds are not a serious
threat after all?
Jeweller first raised this question in 2018
in our Great Diamond Debate – Natural Vs
Synthetic where we concluded that it might
be both, or perhaps it didn't matter at all!
The debate then quickly moved on; cool
heads prevailed and the lab-created diamond
manufacturers learned to live with competition
De Beers’ latest
announcement
to offer
lab-created
diamonds
directly to
consumers
simply follows
an inevitable
path towards
an evolving
business model.
from the De Beers-backed Lightbox just as
De Beers had come to realise lab-created
diamonds were here to stay.
The next debate became Fact vs Fiction
as both sides fought a marketing
jargon battle. Sure, the winners were
the consumers who now had more
choice. However, could they really make
an informed decision in the midst of
a marketing barrage about the pros
and cons of natural versus lab-created
diamonds?
Away from the battlefields of marketing
and jargon, both retailers and suppliers
are now faced with other dilemmas.
Mass-manufacturing facilities can’t stop
manufacturing. In order to keep the
business operating and doors open, it must
keep producing, at which point supply will
outstrip demand; thus prices drop.
With such a volatile model, retailers may
be less likely to keep stock of lab-created
diamonds in the same way they do with
their natural counterparts.
Increasingly, with the price of lab-created
diamonds falling and suppliers selling loose
stones direct to the public becoming the
preferred model, this could further impact
retailer diamond sales. When prices are
driven so low to a point where no one in
the supply chain makes a profit, something
somewhere along the way has got to give.
De Beers executive vice president Stephen
Lussier told JCK in March that the
wholesale price of lab-created diamonds
was still declining and, “They are probably
down some 20 per cent in the fourth quarter
of 2020 alone.”
A diminishing margin could further propel
lab-created manufacturers to stray from
traditional supply channels and go direct to
the consumer. For retailers, whose natural
diamond sales have been challenged by
online platforms, lab-created diamonds
could also prove to further undercut their
overall diamond sales.
The dust has yet to settle in this battle, but
one thing is for sure: the market for gemquality
lab-created diamonds is there and
continues to grow – but the supply channel
still has a way to go.
Angela Han
Publisher
November 2021 | 11