Edahn Golan, a key figure in diamond industry statistics, has tracked vital data such as the average price of polished diamond imports in the U.S. (at $2,256 per carat in 2022) and the retail gross margins for lab-grown diamonds, which are currently between 60% and 68%.
Golan, owner and manager of Diamond Research & Data and a managing partner at Tenoris, which provides consumer and retail trend analysis for the fine jewelry and gem industry, recently shared insights with AIDI on the dramatic drop in lab-grown diamond wholesale prices over the last six years and where he sees the market heading. The interview has been condensed and edited for clarity.
Can you quantify how much lab-grown diamond prices have dropped?
Since I started tracking wholesale prices in Q3 2018, they have fallen by 86.5%. I'm currently compiling the Q1 report for this year, and prices continue to plunge.
Was this decline sudden or gradual?
It depends on the size of the diamonds. As technology advanced, it became more efficient and cost-effective to produce larger diamonds. When new products hit the market, they are priced high, but over time, the prices come down.
What's the simplest explanation for the sharp drop in this category?
During the pandemic, demand skyrocketed. Everyone wanted to buy because they were worried about not making enough money. Then they ran into the problem of oversupply, which triggered a snowball effect on prices.
Additionally, the initial pricing was very high. It felt a bit unnatural at first—“we're like natural diamonds, but a little cheaper.” However, the costs were so low and profit margins so high.
In natural diamonds, the profits are divided between miners and retailers, with manufacturers in the middle squeezed hard. But in lab-grown diamonds, producers and growers could make substantial profits. The midstream profit margins were exceptionally high, with retail margins reaching 60% to 68%. For example, the gross profit margin on a 1-carat lab-grown diamond is 64%, compared to 40% for natural diamonds.
If it costs $400 to make a lab-grown diamond, and you sell it for $1,000, that’s a 100% profit on keystone, essentially 150%. No other product offers retailers such a high margin.
Have retail profits decreased in line with the drop in wholesale prices?
No, they’ve actually increased. Retailers haven’t been quick to pass their savings onto consumers. Let’s say you bought a lab-grown diamond on memo six months ago, and it’s been sitting in your inventory. You can simply return it and get fresh DM at a much lower price. Your cost might go down 5%, but you don’t immediately pass that on to the consumer.
On the other hand, you're making a greater profit from smaller dollar values. In other words, to get the same revenue as last year, you need to sell at least 20% more units to break even. If you can’t, your revenues will decline.
Has the market bottomed out?
No. If gross margins drop from 60% to around 30% to 40%, maybe then we’ll see a bottom. Growers are already pushing the limits.
On the flip side, what happens when the price of an engagement ring drops below $1,000? People will stop buying it. Think about it—no one buys a silver ring for an engagement. There’s nothing wrong with silver—it’s a strong metal and looks as good as platinum, but it’s just silver. It’s priced at one-tenth the price of gold.
At the end of the day, people want to spend big on an engagement ring. If today, when buying a lab-grown diamond, someone says, “My diamond is bigger than yours,” at some point, the diamond will become too large, and buying a bigger one becomes meaningless. Then you hit a wall. People will start asking, “What, don’t you want to invest in me? Am I not worth it?”
I don’t know when that point will come, but I suspect there’s a threshold, a value or price, that consumers—especially American consumers—won’t go below.
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