De Beers' iconic 1948 slogan, "A diamond is forever," has made diamonds symbols of love and luxury. However, modern consumers are now shifting towards lab-grown diamonds, gold, and colored gemstones.
This evolving market has led Anglo American, De Beers' primary shareholder, to consider selling the diamond giant amidst a major business restructure. This article explores the ins and outs of this market transformation; read on to discover more.
Changing Consumer Preferences
The demand for natural diamonds is waning, especially in key markets like China. Factors contributing to this decline include:
- lower marriage rates;
- preference for gold and lab-grown gems; and
- post-pandemic focus on travel over luxury goods.
Diamond prices have tumbled 5.7% this year, marking a steep drop from their peak in 2022. De Beers, once a market monopolist, has felt the sting of these economic shifts, prompting a 10% price cut at the start of the year.
Rise Of Lab-Grown Diamonds
Lab-grown diamonds are significantly cheaper—up to 85% less than natural diamonds. They are created in labs using high pressure and heat, mimicking the natural process. The popularity of lab-grown diamonds has surged, capturing 18.4% of the global diamond jewelry market by 2023, up from a mere 2% in 2017.
Ankur Daga, CEO of jewelry e-commerce firm Angara, noted that in the U.S., half of all engagement rings now feature lab-grown diamonds, an increase from 2% in 2018.
Challenges And Predictions
The notion of diamonds as a sound investment has diminished. For decades, diamonds were viewed as valuable assets and a hedge against inflation. However, the sharp drop in prices has eroded this investment appeal.
The diamond industry faces significant challenges, with experts like Daga predicting another 15%-20% price drop over the next year. However, some industry insiders remain optimistic.
Potential For Market Recovery
Anish Aggarwal, co-founder of diamond advisory firm Gemdax, believes the industry can rebound through effective marketing. He argues that diamonds, like other luxury items, must reignite consumer desire.
The industry has lagged in large-scale marketing for nearly two decades, and renewed efforts could help revive demand, particularly in China.
To boost natural diamond sales, Signet Jewelers, the world's largest jewelry retailer, has partnered with De Beers on a new marketing campaign. Signet projects a 25% increase in engagements over the next three years. This collaboration signals a significant effort to revitalize the diamond market.
With strategic marketing initiatives and collaborations, the diamond industry has the potential to rebound and regain its former glory.
