Diamond Analytics Forecast: When Will Lab-Grown Diamond Sales Be the Majority?

At some point, more lab-grown diamonds will be sold than naturals. This is a given and does not even require any diamond analytics, as natural diamonds are a finite resource, and over time, their supply will dwindle. Lab-grown diamonds are factory made, and the raw materials for producing them are nearly infinite. Lab-grown diamonds sales will eventually outpace naturals. The question is not if but when this will happen.

Here is a glimpse into the future: This change will happen faster than most of us imagine.

In the past few weeks, I showed the following forecast to a range of key people in the industry, from mining companies to retailers. Most responded with a gasp – even those deep in the lab-grown business.

The Importance of Loose Diamond Sales to Retailers

About half of global consumer demand for diamonds is from the US. In 2022, an unusual year, it was more than 50%. About 22% of all jewelry sales by US jewelry retailers are sales of loose diamonds.

While jewelers don’t sell loose diamonds as loose, they buy loose diamonds, and they set them in jewelry.

From a diamond industry perspective, selling loose diamonds to retailers, as opposed to selling to jewelry manufacturers, is an exceptionally important sales channel, and not only because of the considerable volume. This is the main sales channel for the larger, better, and pricier diamonds.

In value, this 22% share was worth about $8.6 billion in annual sales to consumers in the US in 2022.

Lab Grown, Market Share, and Diamond Analytics

Based on data collected by Tenoris, in the past three years, the share of lab-grown diamond sales has only increased.

By value, the share of loose lab-grown diamonds doubled from an average of 8.3% in 2020 to 17.3% in 2022. To get a better perspective on the rapid change and its trend, the value share of loose lab-grown diamonds tripled from 7.2% in January 2020 to 22.9% this past February.

Lab grown and natural diamond Share of sales value Jan 2020 - Feb 2023 analysis by - Edahn Golan

At this point, I won’t venture into a prediction, really a guesstimate, as to when the value of loose lab-grown diamond sales will match or surpass that of loose natural diamonds. This is primarily because loose lab-grown diamond prices are falling rapidly, and no one knows when the avalanche will end.

The First Turning Point: Unit Sales

While share of sales by value is tricky to predict, unit sales are considerably easier.

Loose lab-grown diamond unit sales held a share of 13.7% in 2020. That was viewed as relatively high at the time. Since then, their share has only increased, nearly tripling to 33.8% in 2022.

That is a rapid rate. The incredible part is the steep rise from an 11.6% share in January 2020 to a remarkable 46.6% last month (February 2023). In just three years, we moved from just a tenth of sales to nearly half.

Natural and lab grown diamond Share of unit sales Jan 2020 - Feb 2023 - analysis by Edahn Golan

The Tipping Point is Here

So let’s confront the question: When will loose lab-grown diamonds capture more than 50% of all diamonds sold? One way of approaching the question is to draw a linear-line forecast. Based on loose natural and lab-grown diamond buying trends from January 2020 to February 2023, this will happen in November of this year.

A linear forecast is okay, but very basic. It does not consider seasonality. A more effective forecasting tool is a third-degree polynomial, which does take demand fluctuations into account.

The result: By May of this year, 50% of loose diamonds sold by American jewelry retailers are expected to be lab-grown diamonds, as the graph below shows. More than half of consumer purchases of these goods are expected to be lab-grown diamonds.

From then on, lab-grown diamonds will only capture a more substantial share. As far as diamond analytics are concerned, this short-term forecast is something to ponder.

When will lab-grown diamond sales reach the 50% tipping point forecast - Edahn Golan Diamond Analytics - Mar 2023

Not Just Loose Diamonds

There are other areas where lab-grown diamonds are especially dominant, and in some cases, have already captured a 50% market share.

Some pockets of activity may escape notice. One such pocket hides among diamond engagement rings, no less.

The share of diamond engagement rings set with lab-grown diamonds is constantly increasing. Out of total diamond engagement ring sales, 17.3% were set with lab-grown diamonds in February 2023. This is a significant increase from the 1.7% share they had three years ago.

Natural diamond vs lab-grown set engagement ring share of sales Jan 2020-Feb 2023 - Edahn Golan Diamond analytics

The typical diamond engagement ring, one set with a natural diamond, would historically contain a one-carat diamond. If the purchased ring comes set with a diamond, it will usually be a little smaller, around 0.85 carats. When a couple buys a ring and picks the diamond, it tends to be a diamond larger than one carat.

As stated, with loose diamonds representing 22% of specialty jewelers’ jewelry sales, the larger diamonds are a significant part of their business activity.

When examining consumer demand for engagement rings set with lab-grown diamonds, we find that 50% is no longer a future scenario.

In January of this year, sales were evenly split 50/50 between natural and lab-grown diamonds.

2 carat natural diamonds vs lab-grown set engagement ring share of sales Jan 2020-Feb 2023 - Edahn Golan diamond analytics

If you follow lab-grown diamond sales this is not completely surprising. The average size of sold lab-grown diamonds is only growing.

Also, as the average retail price of 2-carat lab-grown diamonds dropped below $4,700, it now costs 30% less than a 1-carat natural diamond. Wouldn’t you want to save 30% while doubling your purchase?

And here lies the key issue.

Why Is Lab-Grown Diamond Sales Share Important?

If you are in the diamond industry, it makes sense to compare a 1-carat natural diamond to a 1-carat lab-grown diamond. It seems like comparing two comparable items.

But consumers with a certain budget in mind are looking to maximize their purchase. They are comparing to similar expense levels. If they can buy more for less, that is great. If they can buy much more for the same price, that is welcome too.

The importance of this shift in consumer demand is that the bifurcation that I and many others expected to see in the market is not yet happening. For it to happen will require a massive amount of marketing and effort, especially as we are witnessing a generational shift.

The Bottom Line

While we may be far away from the day when lab-grown diamond sales are 50% of all diamond sales. And yet, in some places, this is already a reality, especially when measured by the number of diamonds sold.

Lab-grown diamonds sales are happening everywhere, including in the coveted bridal sector. If the natural diamond industry wants to protect its domain, it needs considering a strong pull towards restoring its positioning as a luxury item. No bargain sales, no end of season sales, no buy two get one free sales. Firm pricing.

Photo: Manuel Navarro