The Lab-Grown Diamond Boom Is Over

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Editor’s Note

The rapid rise of lab-grown diamonds appears to be reaching a plateau. As this analysis notes, the market is normalizing, with natural diamonds regaining favor and an oversupply likely to drive down prices for synthetic gems. This shift marks a new chapter for the jewelry industry.

The Boom Ends

Jewelry industry experts say the lab-grown diamond boom is over. Analysts told Business Insider that lab-grown gems are now mainstream and natural diamonds are back in vogue. Prices for lab-grown diamonds are likely to tumble amid a glut of supply.

Analyst Predictions

Leading diamond analyst Paul Zimnisky foresees jewelers scaling back their business in lab-grown diamonds while ramping up their focus on natural diamonds over the next year. He told Business Insider that most jewelers aren’t even bothering to stock lab-grown diamonds in inventory and are only purchasing them on consignment, which is the exact opposite of their strategy since the hype took off in 2018.

“Some of the fad is starting to fade a bit,” Zimnisky said, pointing to lower-priced retailers like Walmart and Pandora, who have started to “aggressively” push lab-grown stones. “I think it’s become a lot more mainstream.”

He said prices for lab-grown diamonds will continue to fall over the next year. While Zimnisky didn’t have a specific price target, he believes loose lab-grown diamonds could see a decline similar to 2023, which jewelry analytics firm Tenoris estimated at about 20% in the 12 months leading up to November.

Cormac Kinney, CEO of commodities trading firm Diamond Standard, believes the plunge could be even steeper as the hype fades. He estimated man-made diamond prices could ultimately drop another 50%-80%.

“Fashion jewelry is always worth a small fraction of real jewelry,” Kinney said. “Only real is rare.”
The Rise and Saturation

It’s not hard to imagine why man-made diamonds were so popular. Even A-list celebrities have been known to buy lab-grown jewelry—they’re cheaper and basically identical to the naked eye.

“It’s a manufactured version of one of humans’ most valuable natural resources,” Zimnisky said of lab-grown stones. “It allows consumers to buy a diamond at really affordable prices, especially very large diamonds that would cost tens or hundreds of thousands of dollars if they were natural diamonds.”

But some of the shine has diminished largely due to wide availability. Zimnisky estimates lab-grown diamonds now make up around 20% of the total diamond market, up from nearly zero in 2015.

Tenoris data shows sales of lab-grown diamond jewelry soared 51% in the 12 months leading to November, while sales of loose lab-grown diamonds grew 47%. However, prices have been declining since they first became mainstream in 2015. Back then, a man-made diamond was priced at around a 10% discount to a natural diamond. Today, Zimnisky estimates they’re priced at up to a 90% discount.

“I think people kind of just bought it, and they thought, ‘you’re the only one with a three-carat diamond.’ But … if you go to a wedding these days, you’re just looking at people’s engagement rings, there’s a lot of three-, four-, five-carat diamonds and it’s become ubiquitous,” Zimnisky said. “I think now you might actually start to see the opposite happen, where people are like, I just want a smaller natural diamond.”
“A synthetic diamond is not the same as a natural diamond,” Kinney added. “Any gem lab can tell the difference, and your friends probably can too — especially if the diamond does not match your economic status.”
Market Segmentation and Resale Reality

Demand for lab-grown stones won’t disappear and they will still hold appeal for some buyers, but sales growth will likely slow. Zimnisky estimates growth could fall to single-digit percentages this year, down from 20%-30% at the peak of popularity.

Zimnisky and Kinney said lab-grown stones will likely no longer be seen as an alternative to a bonafide diamond. Rather, they’ll segment into a different, lower-priced market for those who don’t want to buy the real thing or plan to upgrade later.

As for people who have already bought lab-grown stones? According to Kinney, pawn shops likely won’t even pay 10% of the original price for any synthetic diamond—even those above one carat.

“Jewelers tell me that a growing number of couples are coming one to three years into a marriage and replacing a synthetic stone with a smaller but real natural diamond,” Kinney said.
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⏰ Published on: November 01, 2024