The Chinese lab-grown diamond industry is currently at a crucial juncture in its development.
Lab-grown diamonds, like moissanite, are artificially manufactured in a laboratory and theoretically can be infinitely replicated. This nature makes it impossible to monopolize or oligopolize their supply. As production technology improves, the wholesale price of the raw materials is bound to continue to decrease until production efficiency can no longer be enhanced.
In recent years, the price of lab-grown diamonds has steadily declined, with wholesale prices dropping nearly 70% in the past five years. This continuous price drop has led wholesalers to avoid holding onto inventory for long periods, preferring instead to sell quickly at low prices to improve turnover efficiency and avoid inventory loss risks. Consequently, the price wars in the wholesale market have intensified, and profits have become increasingly thin. This trend has caused concern among industry participants and investors: Will lab-grown diamonds, as the ultimate substitute for natural diamonds, eventually follow the path of moissanite, where the market value of the product declines, and the industry's profit margins become minimal?
Simultaneously, various regions have increased their investment in lab-grown diamond production. Beyond Henan, provinces like Anhui, Zhejiang, Jiangsu, and Guangdong are also heavily investing. However, the industry chain distribution is irrational and fragmented, leading to more internal competition and further price drops. If this continues, will lab-grown diamonds end up like moissanite?
Despite both being substitutes for natural diamonds, lab-grown diamonds and moissanite have fundamental differences. Moissanite is considered a diamond imitation, whereas lab-grown diamonds are recognized as a subtype of diamonds. This fundamental difference lends lab-grown diamonds more legitimacy. The emotional value consumers place on natural diamonds has a better chance of transferring to lab-grown diamonds, allowing them to establish their unique value system based on the inherent value of natural diamonds.
Currently, the retail market price of lab-grown diamonds varies widely. For a 1-carat lab-grown diamond, prices can range from 2000 to 10,000 yuan depending on the brand or seller. However, according to Tmall category data, the highest sales volumes come from brands with higher-priced products, not the low-priced, unbranded sellers or small wholesalers. This demonstrates that lab-grown diamonds have already made initial strides in building category and brand value. Consumer perception of lab-grown diamonds is at a crossroads: one path leads to a high-end, luxury experience provided by branded sellers, while the other path is tainted by the low-cost impression created by price competitors.
In the U.S. market, lab-grown diamonds have significantly penetrated the overall diamond market, with a penetration rate of 56%. This has severely impacted vested interests, prompting a strong counterattack from the natural diamond camp.
Jewelry, due to its high value and the significant expertise involved, is naturally a sector where consumers pay close attention to brands. Thus, at this juncture of consumer perception, how merchants construct the perceived value of lab-grown diamonds and their brands will be crucial in determining the future direction of the lab-grown diamond market.
We have witnessed industries rise swiftly only to fade into obscurity. However, the lab-grown diamond industry has the potential to change the global landscape, making it one of the few industries capable of such an impact. All industry players must adopt a long-term mindset; otherwise, the outcome could be devastating. For suggestions, please visit the International Intelligent Diamond Association at www.aidi.org or email info@aidi.org.