Last year, Dorsey founder Megan Strachan got herself a new engagement ring. The one she had worn for the past 10 years felt a bit old, and she wanted to give herself options to go with different outfits. Strachan, whose company sells jewelry made from lab-grown stones, says she was able to upgrade now because of the ubiquity and price point of large lab-grown stones. I wear a ring because of what it signifies, but I don’t wear the same ring every day; I change it,” she says.
Until recently, diamonds were the ultimate flex. The diamond trade was dominated by bespoke businesses or global luxury brands like Tiffany and Cartier. Many buyers had to compromise on the size or quality of their diamond purchases because of the price and scarcity of natural stones.
But over the past couple of years, lab-grown diamonds have gotten mass-produced. All of this has thrown the natural diamond industry into a crisis and changed the way we shop for jewelry.
Strachan says that Dorsey grew revenue 100% last year compared with 2022, and that the five-year-old company experienced 600% growth year-over-year in 2022. She is banking on the sector growing because shoppers’s ideas about fine jewelry is changing. “Dorsey will be moving into bridal,” she says. “Women should wear rings that they love and that they can afford.”
Changing behavior
Dorsey was founded in 2019, a year after the Federal Trade Commission (FTC) determined that lab-grown diamonds are, in fact, real diamonds. Indeed, according to the Gemological Institute of America, lab-grown diamonds have the same chemical and physical properties as the mined versions. In 2019, the institute, following the FTC’s guidance, stopped calling lab-grown diamonds “synthetic.”
Lab-grown diamonds are more eco-friendly than their natural counterparts. That’s because, while a tremendous amount of energy is required to make them, they do not require extraction. Lab-grown diamonds are also likely made under ethical working conditions, so buyers don’t need to worry about their diamonds’ provenance. This may appeal to a younger, more sustainability-conscious cohort. That’s why companies began marketing lab-grown stones as a sustainable choice for conscious consumers, which helped boost their popularity. The technology to make them also became more widely available. According to diamond research firm Edahn Golan, lab-grown sales shot up 38% from 2021 to 2022.
Nidhi Dangayach, cofounder and CEO of jewelry brand Verlas says that demand from younger customers led her to introduce lab-grown offerings. “In 2021, we had a slightly younger audience come to us requesting the same high-quality products, but at a better price point for them,” she says.
The increased production led to a sharp decline in the value of lab-grown diamonds over the past few years. “In 2020, you could buy a lab-grown diamond for 20% less than a natural diamond,” says Ankur Daga, who cofounded direct-to-consumer jewelry brand, Angara. Now lab-grown diamonds can cost anywhere from 75% to 90% less than natural diamonds.” On his platform, which sells both natural and lab-grown stones, he has seen customers go for larger, blingier lab-grown stones that they could not have afforded if they stuck to natural diamonds. “The average size order has gone from one-and-a-half to two carats.”
The ubiquity of lab-grown diamonds has also changed the reasons people shop for jewelry. “Traditionally, there are two reasons people bought diamonds. One is that it’s an inflation hedge: People thought that if they bought a $20,000 natural diamond engagement ring, its value would hold over time or go up,” says Daga. “The other was that having big diamonds was a financial flex.” Both of those reasons are no longer relevant. Daga has seen the price of natural diamonds go down by roughly 35% from its peak in April 2022. After launching lab-grown options on his site six months ago, 60% of his customers are choosing them, with the average order going from 0.6 carats to 2 carats.
In the past, customers would save up to purchase one piece of expensive jewelry, like an engagement ring. Now, customers are purchasing lower-cost, lab-grown diamond jewelry for themselves to wear every day. Jewelers have also been able to market diamonds to a broader set of customers—such as women shopping for fashion items and accessories—rather than just couples. As a result, many customers become repeat diamond purchasers and develop a brand loyalty that previously only the ultra-rich might have had.
The price of lab-grown diamonds may still go down, though Daga says it could take years. Because of the fluctuation in value over the past few years, he does not recommend buying lab-grown diamonds as an investment. “There’s a lot more supply, and it’s cheaper to produce, but the labor costs are still the same. You still have to hand-cut and polish diamonds. I could foresee a scenario where that is automated, but we’re not there yet. It’s gotten 90% cheaper, but getting to 95% cheaper is going to take awhile.”
Emeralds, a girl’s best friend?
While synthetic gemstones exist, the value of natural gemstones has only risen over the past few years. “As the value of natural diamonds drops, the value of colored natural gemstones will rise,” Daga says. That’s because many precious gemstones are unique; emeralds from Colombia, Pakistan, or Zambia have different color gradients. The placement of natural crystallizations—inclusions—on the stones can vary. A flawless diamond is colorless and inclusion-free; whereas flaws on a gemstone can make it beautiful.
According to Daga, just 5% of engagement rings had colored stones a decade ago. Now it’s closer to 15%, and that number will likely increase. “Gemstones are so much harder to source than they were three years ago,” he says. “We’re stockpiling now because we’re worried that prices will continue to rise and will become prohibitive. We’d be happy to buy back the gemstones we sold three years ago.”
Branding Matters
While smaller natural diamond purveyors may struggle, Daga says that large incumbents can still prevail if they focus on branding. Last year, Chanel increased its prices by 16%, even though its products have not changed. Customers still followed, illustrating the power of luxury branding.
De Beers, the world’s largest diamond producer and distributor, has cut the price of mined stones by as much as 25% due to falling demand. In 2018, perhaps after seeing the writing on the wall, De Beers launched a separate subsidiary brand, Lightbox, to offer luxury lab-grown diamonds to customers.
LVMH-owned watchmaker Tag Heuer began selling watches with lab-grown diamond inlays last year. Fred, a jeweler owned by the same conglomerate, released a new collection featuring man-made stones to high-net-worth clients (to differentiate the pieces from the brand’s mined offering, the lab-grown diamonds they use are blue). Some of Fred’s lab-grown items retail for $250,000. “A lot of jewelers were down 12% in revenue last year, but LVMH group is up 28% in the jewelry space,” says Daga. “People are gravitating toward luxury brands you can spot from 20 feet away.”
Thinking of his own business, Daga says, “Bulgari’s profit margins are already so high, whether they would switch to lab-grown diamonds or not doesn’t really matter. You’ll be able to get the same stone, but cheaper, elsewhere.”
Last year, Dorsey founder Megan Strachan got herself a new engagement ring. The one she had worn for the past 10 years felt a bit old, and she wanted to give herself options to go with different outfits. Strachan, whose company sells jewelry made from lab-grown stones, says she was able to upgrade now because of the ubiquity and price point of large lab-grown stones. I wear a ring because of what it signifies, but I don’t wear the same ring every day; I change it,” she says.
Until recently, diamonds were the ultimate flex. The diamond trade was dominated by bespoke businesses or global luxury brands like Tiffany and Cartier. Many buyers had to compromise on the size or quality of their diamond purchases because of the price and scarcity of natural stones.
But over the past couple of years, lab-grown diamonds have gotten mass-produced. All of this has thrown the natural diamond industry into a crisis and changed the way we shop for jewelry.
Strachan says that Dorsey grew revenue 100% last year compared with 2022, and that the five-year-old company experienced 600% growth year-over-year in 2022. She is banking on the sector growing because shoppers’s ideas about fine jewelry is changing. “Dorsey will be moving into bridal,” she says. “Women should wear rings that they love and that they can afford.”
Changing behavior
Dorsey was founded in 2019, a year after the Federal Trade Commission (FTC) determined that lab-grown diamonds are, in fact, real diamonds. Indeed, according to the Gemological Institute of America, lab-grown diamonds have the same chemical and physical properties as the mined versions. In 2019, the institute, following the FTC’s guidance, stopped calling lab-grown diamonds “synthetic.”
Lab-grown diamonds are more eco-friendly than their natural counterparts. That’s because, while a tremendous amount of energy is required to make them, they do not require extraction. Lab-grown diamonds are also likely made under ethical working conditions, so buyers don’t need to worry about their diamonds’ provenance. This may appeal to a younger, more sustainability-conscious cohort. That’s why companies began marketing lab-grown stones as a sustainable choice for conscious consumers, which helped boost their popularity. The technology to make them also became more widely available. According to diamond research firm Edahn Golan, lab-grown sales shot up 38% from 2021 to 2022.
Nidhi Dangayach, cofounder and CEO of jewelry brand Verlas says that demand from younger customers led her to introduce lab-grown offerings. “In 2021, we had a slightly younger audience come to us requesting the same high-quality products, but at a better price point for them,” she says.
The increased production led to a sharp decline in the value of lab-grown diamonds over the past few years. “In 2020, you could buy a lab-grown diamond for 20% less than a natural diamond,” says Ankur Daga, who cofounded direct-to-consumer jewelry brand, Angara. Now lab-grown diamonds can cost anywhere from 75% to 90% less than natural diamonds.” On his platform, which sells both natural and lab-grown stones, he has seen customers go for larger, blingier lab-grown stones that they could not have afforded if they stuck to natural diamonds. “The average size order has gone from one-and-a-half to two carats.”
The ubiquity of lab-grown diamonds has also changed the reasons people shop for jewelry. “Traditionally, there are two reasons people bought diamonds. One is that it’s an inflation hedge: People thought that if they bought a $20,000 natural diamond engagement ring, its value would hold over time or go up,” says Daga. “The other was that having big diamonds was a financial flex.” Both of those reasons are no longer relevant. Daga has seen the price of natural diamonds go down by roughly 35% from its peak in April 2022. After launching lab-grown options on his site six months ago, 60% of his customers are choosing them, with the average order going from 0.6 carats to 2 carats.
In the past, customers would save up to purchase one piece of expensive jewelry, like an engagement ring. Now, customers are purchasing lower-cost, lab-grown diamond jewelry for themselves to wear every day. Jewelers have also been able to market diamonds to a broader set of customers—such as women shopping for fashion items and accessories—rather than just couples. As a result, many customers become repeat diamond purchasers and develop a brand loyalty that previously only the ultra-rich might have had.
The price of lab-grown diamonds may still go down, though Daga says it could take years. Because of the fluctuation in value over the past few years, he does not recommend buying lab-grown diamonds as an investment. “There’s a lot more supply, and it’s cheaper to produce, but the labor costs are still the same. You still have to hand-cut and polish diamonds. I could foresee a scenario where that is automated, but we’re not there yet. It’s gotten 90% cheaper, but getting to 95% cheaper is going to take awhile.”
Emeralds, a girl’s best friend?
While synthetic gemstones exist, the value of natural gemstones has only risen over the past few years. “As the value of natural diamonds drops, the value of colored natural gemstones will rise,” Daga says. That’s because many precious gemstones are unique; emeralds from Colombia, Pakistan, or Zambia have different color gradients. The placement of natural crystallizations—inclusions—on the stones can vary. A flawless diamond is colorless and inclusion-free; whereas flaws on a gemstone can make it beautiful.
According to Daga, just 5% of engagement rings had colored stones a decade ago. Now it’s closer to 15%, and that number will likely increase. “Gemstones are so much harder to source than they were three years ago,” he says. “We’re stockpiling now because we’re worried that prices will continue to rise and will become prohibitive. We’d be happy to buy back the gemstones we sold three years ago.”
Branding Matters
While smaller natural diamond purveyors may struggle, Daga says that large incumbents can still prevail if they focus on branding. Last year, Chanel increased its prices by 16%, even though its products have not changed. Customers still followed, illustrating the power of luxury branding.
De Beers, the world’s largest diamond producer and distributor, has cut the price of mined stones by as much as 25% due to falling demand. In 2018, perhaps after seeing the writing on the wall, De Beers launched a separate subsidiary brand, Lightbox, to offer luxury lab-grown diamonds to customers.
LVMH-owned watchmaker Tag Heuer began selling watches with lab-grown diamond inlays last year. Fred, a jeweler owned by the same conglomerate, released a new collection featuring man-made stones to high-net-worth clients (to differentiate the pieces from the brand’s mined offering, the lab-grown diamonds they use are blue). Some of Fred’s lab-grown items retail for $250,000. “A lot of jewelers were down 12% in revenue last year, but LVMH group is up 28% in the jewelry space,” says Daga. “People are gravitating toward luxury brands you can spot from 20 feet away.”
Thinking of his own business, Daga says, “Bulgari’s profit margins are already so high, whether they would switch to lab-grown diamonds or not doesn’t really matter. You’ll be able to get the same stone, but cheaper, elsewhere.”