Three last years became a true challenge for the global market that had brought so many new, previously unknown, but so influential factors. These factors promoted the reshaping of social tendencies and the business environment by causing unexpected economic processes, fostering some of them while postponing or even cutting off others.
The jewelry market appeared to be in the epicenter of changes with its “glory moment” for man-made diamonds. While many traditional but costly items, like natural diamonds, faced the obstacle of a decline in demand, lab-grown diamonds, which are rather affordable products, experienced an unimaginable ramp-up in sales. Just five years ago, in 2018, man-made diamonds represented around 5 % of global diamond jewelry sales. In 2022, they surpassed the 10% mark of total global diamond jewelry sales while some market observers expected this to happen in 2030.
caused such a pace of events in the jewelry market
There are two significant factors that boosted sales of man-made diamonds – emotional and economic.
start with economic preconditions
Even those who have no idea of economic rules can guess that one should look for the reason in the price level. Indeed, the price of man-made diamonds is constantly declining. At the same time, the quality of the product is constantly increasing, approaching it to a natural diamond as close as it was ever possible before. Consequently, the buyers have fewer reasons for questioning quality when choosing between traditional natural diamonds but have a significant financial argument to buy man-made diamonds. Thus, in 2016 the price difference between 1-carate lab-grown diamond and 1-carate natural diamond was 10%, today man-made diamond is 80% cheaper
It goes without saying that the price of high-quality alternatives to natural diamonds appeared to be the major reason for preferring man-made diamonds to natural gems. Money-saving reasoning was enhanced by the times of economic shakes related to Covid-19 - people wanted to have diamonds but they did not want to pay much, especially when having affordable alternatives.
about emotions
The managers of the leading European trader of man-made diamonds, Madestones, claim that the purchase of jewelry is driven by emotions and feelings. So, at times of uncertainty and threat, the need for emotions arises extremely. One wants to say, “I love you”, “I need you”, “Just keep our moments in memory forever” etc. To make these words and emotions material, people buy gifts - refined and eloquent things that are associated with eternity. They buy diamonds, and, as we can see, more often they buy man-made diamonds.
The pandemic of Covid-19, which became the first reminder about the fragility of people's life after II World War, has also sharpened the feeling of individual and collective responsibility. People more often ask themselves the question “Why did the pandemic (or any other diseases, or natural disasters) happen? What is my role in this?” If you know that the core difference between natural and man-made diamonds is a sustainable way of growth, you can easily notice how apocalyptic appeal has shaped the background of jewelry choice.
It is worth saying that both factors mentioned above are strongly intertwined and affect each other. Emotions foster demand; demands fosters production volumes. The more diamonds are grown, the less price for them is, because of decreasing production costs. It is an economic rule.
Yet, here are a couple of questions:
- whether the price can continue decreasing for the next years as well?
- Could this tendency be endless?
- Where is the bottom line of the price for man-made diamonds?
Apparently, it is not a lasting case. You will be surprised but we have the same two factors – economic and emotional – that will not allow this tendency to last forever.
From an economic point of view, the streaming decrease in price is related to shortening the margin. It means that the opportunities for profit become smaller and less promising. If not fixed the price, small enterprises will not be able to survive and meet the growing demand for man-made diamonds. If taking into account that lab-grown diamond manufacturers are small entrepreneurs who invested in the prosperous segment, this factor matters. They have no choice except for fixing the price.
Indeed, if addressing comparative statistics, one can see that the tempos of decreasing prices for man-made diamonds are slowing. The average retail price for a piece of lab-grown diamond set jewelry declined from $2,740 in March 2022 to $2,405 in March 2023
emotions can be a reason for making the price stop decreasing
Easily. Paul Zimnisky said that in the case of man-made diamonds the economic concept of “Veblen good” is at play. For those, who are not familiar with the term it is worth mentioning that Veblen good is a good the demand for which is increasing when the price for it is increasing as well. This economic phenomenon is preconditioned by the perception of the product and the value attached to it. In the majority of cases, it works for the luxury segment where people buy not the product itself but additional values, like status, emotions, sense of belonging to a sustainably thinking community, etc.
As the confirmation of the idea, one can see the signs of man-made diamonds’ entering to luxury segment. Step-by-step they become included in the collections of the most world-famous luxury brands like Pandora, Swarovski, and DeBeers; and not only solely jewelry but also status brands like Breitling.
Due to Madestones Pandora CEO Alexander Lacik believes that lab-created diamonds are the future of luxury.
If thinking about luxury things, one can justly assume that the story is not about low prices. People, who strive to have luxury items, will never buy anything that costs cheap. A low price is a ground for questioning – is this thing indeed a brand item? And this question underlays an economic concept of Veblen good.
Jewelry from Pandora cannot cost cheap even if it is man-made diamond jewelry. It will be cheaper than a natural-diamond-based line but more expensive than a non-branded man-made diamond item. And here is the trick.
If summing up, one can expect that the price of man-made diamonds will continue decreasing, but this decrease will not be as streaming as it was during the last few years. In the long-term perspective (if having no unexpected factors) price will be fixed and can keep rising because of branding or launching innovative lines with added values.
And a few words about geopolitics. One should remember that political events affect the global market by modifying a supply chain. It matters in 2023 since this year has already brought signs of big changes – war in Ukraine, and sanctions imposed upon Russia. These factors have huge potential to change the pricing trends this year.
Contact for more- https://www.madestones.com/
Address: Diamantclub Antwerp
Suite 16062, Pelikaanstraat,
2018 Antwerp -Belgium
Phone number:+32 3 226 46 77
Email:[email protected]
contact person- Olga Zhuravlova
