An announcement by De Beers that it will be launching a fashion jewelry brand with laboratory-grown or synthetic diamonds caught many in the diamond and jewelry sectors by surprise. It also left some wondering whether one of the world’s two most important producers of rough natural diamonds had finally decided to consort with a sector that threatens to undermine its core product.
But a careful consideration of the De Beers plan suggests just the opposite. Not only does the company aim to protect the position of the natural diamond, but the way it is positioning its new jewelry products is likely to cut deeply into the profits of the other synthetic diamond producers.
On May 29 De Beers announced that it is launching a new company called Lightbox Jewelry, which in September will begin selling online a new brand of laboratory-grown diamond jewelry at prices that reportedly are 75 percent lower than those being charged by existing lab-grown diamond producers.
FASHION JEWELRY BUT NOT FINE JEWELRY
“Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting: affordable fashion jewelry that may not be forever, but is perfect for right now,” said Bruce Cleaver, CEO of the De Beers Group, who insisted that its new offering will complement, rather than compete with its existing product range.
“Our extensive research tells us this is how consumers regard lab-grown diamonds – as a fun, pretty product that shouldn’t cost that much – so we see an opportunity here that’s been missed by lab-grown diamond producers,” Cleaver added.
It should be noted that De Beers is hardly a newcomer to the synthetic diamonds. It has been a commercial producer of the product for almost 60 years, predominantly for industrial use, with its synthetic diamond subsidiary, Element Six, being the most prominent producer in the field.
To support Lightbox, De Beers Group will be investing a total of $94 million over four years in a new Element Six production facility near Portland, Oregon, in the United States, adding to Element Six’s existing facilities in the United Kingdom. Once fully operational, the plant will be capable of producing upwards of 500,000 rough carats of lab-grown diamonds each year.
Lightbox’s product pitch on its website, clearly differentiating between its synthetic diamond and the natural diamonds that make up De Beers’ standard offering.
The prices being listed by Lightbox are about 70 percent below those being quoted by other synthetic producers, and many expect this will enable De Beers to wrest control over the market.
A DIFFERENT PRICING STRUCTURE
De Beers clearly put a great deal of thought into the project. The wants to put as much daylight as possible between the way in which the public perceives of natural diamonds, and the way in which it perceives synthetics. And it is doing not only in terms of each product’s Unique Selling Proposition, but also in terms of its price structure.
At the same time, De Beers seeks to take control over a new industry sector, which for the past several years seemed like it might take control over De Beers’ traditional market.
The fixed pricing structure will not come as good news to the other synthetic producers, who believed that the price of natural diamonds would always be the benchmark for the price at which they can sell their own products.
All in all, it seems like a very astute move on the part of De Beers. But like so many other things in life, time ultimately will tell whether it will be successful.