Much has been made about the low resale value of lab-grown diamonds. Their lower cost relative to mined diamonds is one of their selling points, but along with that lower price comes a lower resale value. And if their resale value is lower than that of mined diamonds, lab-grown diamonds must not be a good investment. But the fact is, this problem isn’t unique to lab-grown diamonds. Mined diamonds, and gemstones and jewelry in general, don’t have much resale value. Loose diamonds aren’t a great investment either, as their price is volatile and they do not reliably appreciate in value.
Luxury jewelry is a major purchase, but it is not analogous to buying a house. Most of us buy a house not just to have shelter from the elements, a comfortable place to rest, and somewhere to keep our stuff; we buy a house as an investment, under the assumption that it will be worth more in 20 years than it was on the day you purchased it.
We see our house as an investment, and the same could be said about some hobbies. You might collect first-edition books, vintage guitars, fine wine, rare coins, or works of art with the understanding that having these objects not only gives you a sense of satisfaction now but a source of income later. If you have some disposable income and you’re not interested in investing in the stock market or reliable assets like gold bullion, copper, or land, these kinds of investment will be fun now and put money back in your pocket later.
There are other costly purchases we make that we don’t expect to appreciate in value. When you purchase a luxury car for $50,000, you don’t expect to sell it in five years for $80,000. At best, its diminished value will cover the down payment on your next car. But the fact that a car depreciates in value the second you drive it off the lot is not really a factor in whether or not you buy a car. You buy a car first of all because unless you live in a dense urban area with great public transportation, it’s just a necessity of modern life. But if you’re going beyond the basics of getting from point A to point B, you are considering the happiness a certain car will bring you: how comfortable it is, how nice those heated seats are in winter, how fun it is to drive, how good the stereo sounds, how nice it looks, how it might communicate something about your personality and taste, how great a family road trip will be. The same is true of a boat, a 90” 4K UHD TV, or a designer suit or dress.
No one views a new car as an investment. It ought to be the same with a diamond. You buy a diamond ring because it’s beautiful and because it serves as a symbol of a relationship meant to last a lifetime. If you’re planning on spending your life with someone, why would you worry about an engagement ring’s resale value, or even what it’s going to be worth tomorrow? It will still be just as beautiful and meaningful whether the price of diamonds goes up or down.
If you’re just looking to buy loose diamonds as an investment, you’ll run into a different set of problems. When you buy a diamond at retail price, you’re paying more than it’s worth. Retailers buy diamonds from wholesalers, who in turn buy them from manufacturers, who ultimately buy them from mining companies. The marked-up price of a new diamond includes the services of everyone involved in the supply chain, as well as the costs of paying employees and rent. And when it’s time to sell that diamond, you’ll receive less than it’s worth. The jewelers or the coin and gold buyers you’re selling that diamond to need to make a profit themselves, so whatever they pay you for it will be significantly less than what they will turn around and sell it for.
Another factor to consider when investing in diamonds is the volatility of the diamond market itself. Diamond prices rose steadily throughout the early 2000s until the 2008 recession, then increased quickly before falling again in the 2010s. Prices are rising again, but they’re still not back to pre-pandemic levels. And even when diamond prices were rising sharply after the 2008 recession, they still lagged far behind gold, silver, and platinum, all much more reliable investments. In the retail sector, diamond prices are dropping, and only the top luxury brands—companies like Tiffany and Bulgari—are seeing price increases. In those cases, prices are reflective of name brand status rather than the actual market value of their diamonds.
In the future, though, anything can happen—and that’s the problem with viewing diamonds as an investment. Increasing demand amid tightening supplies could see the price of diamonds rise. Lab-grown diamonds might also upset the mined diamond market in unpredictable ways. So it’s not just that lab-grown diamonds are a poor investment. Diamonds in general are an investment fraught with risks, and they are certainly not something you can purchase and quickly flip for a profit. You’ve got to be in it for the long haul, and you have to have an understanding of the market and the industry as a whole if you are to buy and sell at the right times. Diamonds do not appreciate in value, and resale prices are always lower because the jewelers buying used diamonds are also looking to make a profit. So rather than buying any type of diamond as an investment, it’s best to focus on what a diamond means to you now: an enduring symbol of a lifelong relationship, or a luxury purchase meant to be enjoyed.
The diamond industry has long been plagued by environmental concerns and ethical issues, leading many consumers — particularly among Millennial and Gen Z — to feel uncomfortable with mined diamond purchases. Lab-grown diamonds can be an excellent alternative for these buyers, but it's important that you tell the right story and not inflate the sustainability aspect of lab-grown, in order to create and keep trust with these new generations of jewelry buyers.
For consumers who are uncomfortable with mining of any kind, it’s important to have an alternative for them to consider. But what can you say - and what should you avoid - when speaking to the environmental impact of lab-grown diamonds?
It’s safe to say that these diamonds are made in manufacturing facilities similar to the manufacturing environments that produce all types of goods for home, business, and industry. If your customer’s interest is purely that they do not want to buy something that is extracted from the ground, then this may be sufficient information for them — particularly if you are setting their diamond in recycled gold.
If your customer wants to know if lab-grown diamonds in general are more responsible than mined diamonds, that’s more difficult to answer. It’s important to share with them honestly that lab-grown diamonds require a lot of electrical power to grow. Some lab-grown diamond companies are certified as carbon neutral, taking steps to use only clean power for production and offsetting their carbon footprint. So in general, it’s not safe to claim that lab-grown diamonds are universally more responsible than mined diamonds, though on a case-by-case basis they may be.
If your customer is concerned about human rights, lab-grown diamonds have less human and social impact, because they don’t damage water systems, cause deforestation, or commandeer land that belonged to someone else. But presumption of social responsibility is never safe - not just from a lab-grown diamond supplier, but from any manufacturer. It is important to work for greater transparency in all production of consumer goods, and to never make a promise about working conditions that is not backed up by some form of certification or verification.
What if your customer is mostly concerned about price, and is skeptical about what a grower has to “do” to keep prices so low? In this case it’s easy to explain that lab-grown diamonds are less expensive than mined diamonds because they are produced in a manufacturing facility. The cost of setting up diamond production is only a fraction of the cost of finding a new source of diamonds and setting up mining operations, and the quality and size of diamonds produced is also highly controllable. So prices are low because diamonds in the desirable range of size and quality are reproducible.
When we encounter something new and wonderful - like lab-grown diamonds! - we tend to get very enthusiastic about selling them. It’s important to stay grounded in truth when talking to customers, and understand what can and should not be promised. The last thing you want to do is score a big sale, only to have an angry customer come back after doing her research and feel like you deceived her.
There seems to be a bias in the jewelry industry to think about lab-grown diamonds as a budget alternative for young people in the marriage market. To be sure, a lab-grown diamonds provide the opportunity for a big, beautiful ring at a significant discount from a mined diamond - and it doesn’t hurt that nobody can tell it’s lab-grown just by looking at it.
But to focus entirely on this market for lab-grown misses an important demographic: the over-40 female self-purchaser.
Ideally, a woman’s jewelry wardrobe would include a suite of diamond basics beyond the engagement ring and regardless of marital/engaged status:
- 1.00 carat diamond studs
- 2.00 carat diamond studs
- Diamond hoop earrings
- Solitaire diamond pendant
- Cocktail diamond pendant
- Straight-Line diamond bracelet
- Diamond cocktail ring
But such a suite is beyond the purchasing power of many women, and many women of means still find it difficult to justify buying diamonds for themselves and wait for gifts for meaningful life milestones.
Many women find it increasingly interesting to buy some of the elements of the ideal diamond suite for themselves, rather than waiting five and ten years between life events to receive them as gifts. They can always replace their lab-grown diamonds with mined diamond gifts later, while having the option to enjoy their diamond jewelry throughout their adult lives.
If you’re not selling lab-grown diamond jewelry as part of a jewelry wardrobe to mature women, you’re missing a tremendous opportunity. When this client walks in your door looking for something special, don’t hesitate to ask her if she has all the diamond basics in her jewelry wardrobe, then show her how exciting it can be to add those pieces for herself, on her own timetable.
According to Marty Hurwitz, CEO of MVI Marketing LLC, “Critical mass of consumer interest is now converging with increasing acceptance of lab-grown diamonds by retailers. This unique moment in time will propel growth for many years to come.” MVI conducted a study in 2019 that indicated that 66% of millennials actively shopping for engagement rings would consider a lab-grown diamond, largely driven by the perception that they can get a larger, better-quality lab-grown diamond for the same or better price as a smaller diamond.
Lab-grown diamonds are not a new concept. They were first introduced in the 1950s. But these diamonds are a relatively new phenomenon in the diamond industry, because it took nearly 50 years to produce lab-grown diamonds with sufficient depth and quality to be used for jewelry purposes. They are made in laboratories using a process called chemical vapor deposition (CVD) or high-pressure-high-temperature (HPHT).
There has been a lot of debate about lab-grown diamonds and how they compare to natural diamonds. Lab-grown diamonds are the same chemical composition as natural diamonds, but they are created under controlled conditions in a production environment.
The reasons people choose lab-grown diamonds are fairly broad. Some consumers like the variety of colors they come in. Fancy pink and blue diamonds do happen in nature, but they are so rare that they are extremely expensive. Color production in the lab is more predictable and controllable, making colorful lab-grown diamonds an affordable choice.
Some people are completely enamored of the technical aspect of lab-grown diamonds. Just as they get excited about a new iPhone, smart watch, or smart home technology, they like the idea of buying a product that is precious and rare in nature, but which humans have figured out how to produce in a laboratory environment.
Some people prefer lab-grown diamonds because of their concerns about mining. Particularly during this time of increased awareness of the dangers of global warming, mining’s impact on deforestation and water pollution is something to be aware of. But it should also be noted that growing diamonds in a manufacturing environment demands a great deal of electricity. So unless the grower has committed to being carbon neutral (which some have), a lab-grown diamond isn’t inherently more responsible than a mining operation.
And finally, many prefer lab-grown diamonds for the price. While the number of companies that have the capacity to mine natural diamonds at scale is quite small and the barrier to entry is high, lab-grown diamonds are much easier to produce and there are far more producers of lab-grown diamonds. This means that the price of a lab-grown diamond is significantly lower than a mined diamond of the same specifications. Consumers have discovered that they can get a lab-grown diamond for between $800 - $1200 per carat, compared to natural diamonds which tend to be $3200 - $3600 per carat.
Lab-grown diamonds are not simply a replacement for a natural diamond. Natural diamonds have thousands of years of history as a symbol of wealth and preciousness, and the association between diamonds and romance has been strongly established. Don’t expect mined diamonds to go away! But research has indicated diamond consumers are interested in owning both natural and lab-grown diamonds for their diamond wardrobe. Part of the appeal may be that it’s completely impossible to tell with the naked eye if a diamond is mined or lab-grown. But part of the appeal is that a woman can expand her diamond wardrobe to include more diamond styles by including lab-grown in the mix.
Lab-grown diamonds also bring a new buyer to the diamond market … a person who did not consider diamonds interesting before due to reasons related to price or social or environmental impact. These buyers represent an entirely new market for jewelry stores that offer both types of diamonds.
The difference in consumer awareness about lab-grown diamonds has changed dramatically in just the past five years. When speaking to consumers about their jewelry needs, keep in mind the many reasons that a lab-grown diamond may be of interest to them, and offer lab-grown as an option when you suspect that it will fit with that consumer’s values and interests.
One of the things we sometimes hear retail jewelers tell customers is that they should avoid lab-grown diamonds because they won't hold their value. Let's take a look at the false premise behind this statement.
Let's start by recognizing that diamonds — mined diamonds — are cheaper now than they ever were in the past. One thousand years ago, only kings and high priests were allowed the privilege of owning and wearing diamonds, and today diamonds are available to the masses. This is because before the mid-1300s, diamonds were found, but not mined, so their occurance was quite rare.
But in the 1800s, when DeBeers unearthed a massive diamond source in Kimberly, South Africa, diamonds became the subject of one of the most successful advertising campaigns in history, "A Diamond is Forever." Suddenly it was not only possible for every groom-to-be to put a diamond on his bride-to-be (for just the price of two months salary!!), it became culturally expected that he do so. In 1953, GIA came up with a grading system to level the competitive playing field for diamonds and shore up trust in the diamond business. Jewelry stores around the world built entire departments around the engagement ring experience. Savvy merchants created "trade-up" programs, so the young groom who could only put a half carat on his bride's finger for the engagement could trade up to a 1.0 carat stone on their five-year anniversary, and a 1.5 carat stone on their ten-year anniversary. And merchants started talking about the smart "investment" of owning a diamond to young men who needed something more than romance to spur them to buy the biggest diamond possible.
Only, diamonds weren't actually an investment. This was just a salesperson's claim in the process of trying to get a young man to spend a bit more. Yes, diamond values have gone up and down over time, but as a relative holder-of-value, the value of a diamond has consistently trended down, not up.
Does this mean it's not a good idea to own diamonds? Absolutely not!
Consider this. Have you ever heard someone refer to a ruby or an emerald as an investment purchase? Of course not! And rubies and emeralds are considerably more rare than diamonds.
Our point is not that diamonds are a poor investment. It's that nobody should have ever offered the argument of diamonds as an investment in the first place! To a King in the 11th Century a diamond may have had monetary value, but since then diamond mines have been found all over the world, and there are more than enough diamonds to support all jewelry and industrial demand. We have more than enough diamonds. Mined diamonds. And this was all before lab-grown diamonds came into existence!
So when a salesperson claimed that a diamond would "hold its value," this was a sales claim not based on reality. Diamonds are no more or less likely to hold their value than sugar or corn (though they are certainly worth more). So a claim that a lab-grown diamond "won't hold its value like a mined diamond" is a claim based on nothing.
Trade-in Value Versus Investment Value
It's better to think about mined and lab-grown diamond value in terms of trade-in value rather than investment value. Unless you're out to buy a Ferrari 250 GTO, you're not buying a car for its investment value... you're buying a car that will get you around in a style that suits you and which will hold enough value to resell or trade against the purchase of a new car in several years.
Lab-grown diamonds can be used in trade-up programs for larger diamonds (and more and more retailers are offering these programs on lab-grown!), and can be traded in at whatever the current value is against a different jewelry purchase. Just like mined diamonds. Lab-grown diamonds can be pawned or sold outright to a 3rd party. Just like mined diamonds. True, lab-grown diamonds tend to be 30% - 50% less expensive to begin with than mined diamonds, so their value will be 30% to 50% lower when you wish to sell or trade them. But there's no loss of investment value, because it was 30% - 50% less expensive to begin with.
Now, we hope we've put that silly argument to bed once and for all.
The Reason to Buy Diamonds is Because They're Beautiful
It's now customary to offer a diamond when requesting someone's hand in marriage. This isn't about investment value. This is about romance, making promises, and showing one's commitment to the world. Lab-grown diamonds are real diamonds. They have the same physical and chemical properties as mined diamonds. For some people, lab-grown diamonds come with the added benefit of representing the excitement of technological advancement, or of not being party to the environmental and social impacts of mining. For others, a lab-grown diamond is the only way to get a diamond they can afford.
So don't hesitate to buy a lab-grown diamond because of an empty claim about holding value (and don't buy a mined diamond thinking that's a promise you can count on!). Buy a diamond — any diamond — that fits with your values, your budget, and your happiness.