Diamonds Lose Their Luster as Consumers Embrace Alternatives

Diamonds Lose Their Sparkle: The Shifting Landscape of the Gem Industry

The iconic "A diamond is forever" slogan, coined by diamond giant De Beers in 1948, is starting to lose its shine. As the diamond industry faces a growing number of challenges, the once-unassailable allure of the precious gemstone is starting to fade, particularly among younger consumers.

The industry's woes stem from a confluence of factors, including a decline in demand from key markets like China, the rising popularity of lab-grown diamonds, and a shift in consumer preferences toward other precious metals and colored gemstones.

"Diamonds don't really fit in anymore despite the strong legacy of De Beers under Anglo," said independent diamond industry analyst Paul Zimnisky. The company's largest shareholder, Anglo American, has even announced plans to divest from De Beers as part of a radical restructuring, with CEO Duncan Wanblad describing the move as "the hardest part" of the process.

The reasons behind the diamond industry's struggles are manifold. In China, a key consumer market, falling marriage rates and the growing popularity of gold and lab-grown gems have all contributed to a decline in demand for natural diamonds. The end of pandemic restrictions has also seen consumers channeling their spending toward travel experiences rather than diamond products.

Moreover, the preference for lab-grown diamonds, which can be up to 85% cheaper than their natural counterparts, is playing a critical role in driving down prices of natural diamonds. Ankur Daga, founder and CEO of fine jewelry e-commerce company Angara, noted that in the U.S., the largest consumer of diamonds, half of engagement ring stones will be lab grown this year, up from just 2% in 2018.

The investment rationale for buying diamonds has also largely faded, as prices have plunged more than 30% from their all-time high in 2022. "The diamond industry is in trouble," Daga stated, predicting that natural diamond prices could fall another 15%-20% over the next 12 months.

However, not everyone is ready to write off the diamond industry just yet. Anish Aggarwal, co-founder of specialist diamond advisory firm Gemdax, believes that the challenges facing the industry can be addressed through a cohesive marketing approach.

"The industry has not done large-scale category marketing for almost 20 years. And we're seeing the aftermath of that," Aggarwal said, adding that meaningful industry marketing could turn the diamond market around.

The industry's efforts to reignite consumer demand are already underway, with the world's largest jewelry retailer, Signet Jewelers, announcing a marketing collaboration with De Beers. The move is expected to drive a 25% upswing in engagements over the next three years.

As the diamond industry navigates these turbulent times, it remains to be seen whether the once-unassailable allure of the precious gemstone can be rekindled or if consumers will continue to embrace alternatives that better align with their evolving preferences and values.