Are Engagement-Ring Shoppers Paying Too Much For Lab-Grown Diamonds?

The diamond trading and information services organization Rapaport Group took the unusual step of alerting consumers against high retail prices for lab-grown diamonds (LGD) last week, seemingly motivated by concerns for consumers’ wallets after reports of retailers pricing LGD too high. According to the Group, some above-ground stones have been trading as low as 99% below the Rapaport price list for natural diamonds, and certain retailers are not passing these savings onto consumers.

The November 21 statement illustrated the wide range of pricing for above-ground stones, using a 3ct, round-cut, near-colorless G-graded, VS1 lab-created solitaire as an example, sold in the US at Walmart for $2,975 and at Blue Nile (Signet) for $8,190. “That’s a 275% difference for the same ring, the statement reads. “Some jewelers are pushing synthetic diamonds because they can make huge profit margins. This won’t last because synthetic diamond prices are crashing…because they are available in unlimited supply.” While the Federal Trade Commission (FTC) requires that all non-natural diamonds be qualified as such, i.e. ‘laboratory-grown, or ‘laboratory-created’ for example, the term ‘synthetic diamonds’ is controversial. Considered by some to imply simulation, it is no longer used by the Gemological Institute of America (GIA) to describe man-made diamonds. Blue Nile did not respond to requests for comment.

In an interview, Rapaport Group chairman Martin Rapaport came down heavily on retailers: “The real story here, is that many in the retail jewelry trade, including large companies, have taken advantage of this opportunity to price gouge customers.” He went on to indicate that he expects ”the wholesale prices for synthetic diamonds will eventually come down to tens of dollars per carat. Furthermore, they will all be high-quality, like cubic zirconia.”

He believes that such a low price will make them unsuitable for high-stakes purchases with emotional resonance, like engagement rings, at which time “the windfall profits that jewelers have been making comparing synthetic diamond prices to natural diamond prices, will end.” In September, De Beers announced the end of its LGD engagement ring trial through Lightbox, the Group’s lab-grown brand, citing the “commercial proposition for many engagement ring offerings is likely unsustainable,” due to the volume that would need to be sold to maintain profits.

“It remains to be seen to what extent synthetic diamonds will replace natural diamonds in the important jewelry and fashion jewelry categories,” Rapaport continued. “I believe the reason people buy real diamonds is because they want to gift something special and expensive. Timex watches did not put Rolex out of business. [LGD] will not put real, natural diamonds out of business; the synthetic diamond market will be dominated by low-cost jewelry companies.”

Diamond Foundry Founder and CEO Martin Roscheisen believes that consumers are overpaying for mined diamonds: “LGD is based on market pricing, whereas mined diamonds continue to be supply-controlled,” he argued, “however, there is a big upside to the consumer of LGD now being more affordable: it allows jewelry designers to use more of them in their creations.” Vrai, Diamond Foundry’s jewelry retail subdivision, has earned itself a reputation for design innovation alongside classic styles, for designer collaborations like Vrai x RandM, and celebrity endorsement.

LGD are man-made in a manufacturing facility, usually by High Pressure, High Temperature (HPHT), or Chemical Vapor Deposition (CVD), using a diamond “seed” to create diamond material for use in both jewelry and industry. The biggest LGD producers are based in China, India, the US and the UK, and since the uptick in production in 2015, they have been able to create increasingly large, better quality diamonds. In 2020, an estimated 6-7 million carats of LGD was produced worldwide (Bain & Company, The Global Diamond Industry 2020-2021).

Without specialist detection equipment, LGD are virtually indistinguishable from natural diamonds. Over the past decade, LGD jewelry brands like Vrai, Clean Origin and Dorsey have tapped into a new market for consumers looking for bigger stones at lower prices, with less investment value. Until now, there has been a clear division between LGD and natural diamond jewelers and retailers, but earlier this month, Antwerp-based Baunat Group became the first luxury diamond jewelry group to carry both a natural diamond and a LGD brand, with the launch of Valquère, a new subsidiary for above-ground diamonds.

According to Baunat Group founders Stefan Mouradian and Steven Boelens, “both brands [Valquère and Baunat] offer a ‘Smart Luxury’ proposition from a different angle. Baunat offers 100% natural and ethical diamond jewelry for long-term investment value, and Valquère offers maximum brilliance and diamond quality for your budget. We are convinced that both markets will have a great future since they both have very strong strengths and opportunities.” Looking to longer-term pricing, “we also believe that prices for both categories will be relatively stable in the coming months and maybe years. In the long run, prices for natural diamonds will grow faster because of their intrinsic scarcity. Both categories can perfectly coexist.”

Man-made diamonds are frequently marketed as the greener choice, citing the environmental damage caused by mining, a message which has particular resonance with Gen Z consumers. Yet with such high energy usage, unless the production plant is powered exclusively by green energy, as claimed by the Leonardo DiCaprio-backed Diamond Foundry, which makes diamonds for Vrai, LGD will also carry a significant carbon footprint.

Rapaport has previously expressed concern over evolutions in the diamond market. In Nothing Lasts Forever, a Netflix documentary released last year, he debated whether Rapaport Group—which has published a diamond pricing index since 1978—should create an index for above-ground diamonds, and questioned the authenticity of the man-made stones, which the documentary revealed were sometimes mixed into packets of tiny natural melée diamonds by unscrupulous dealers. He now envisages “one standard price for synthetic diamonds, with size adjustments as for cubic zirconia. I would estimate the price to be between $50 and $80 per carat.”

A previous memo, sent in February, during which Rapaport branded LG stones “fraudulent,” called on the diamond industry to stop doing business in man-made diamonds. In the intervening months, prices for natural diamonds have been under intense pressure from both global instability and the onward march of LGD, leading to several countries with holding rough supply while the market stabilizes.

In the end, only time—and the consumer—will tell how the war between natural diamonds and lab-grown stones will end. But consumer trust and transparency around pricing will be key arms in the battle.