Despite initial optimism and robust sales, the lab-grown diamond sector now confronts the sobering reality of maintaining viability in a market marked by evolving consumer preferences and increasing competition.
Retailers have voiced concerns over the profitability of lab-grown diamonds, citing the need to sell larger volumes to sustain financial viability.
While wholesale prices have experienced a sharp decline, retail prices have followed suit, leading to a squeeze on profit margins for jewellers and suppliers alike.
Industry analysts point to the disparity between wholesale and retail pricing as a key factor influencing profitability. Despite a perceived increase in margins when viewed in percentage terms, retailers find themselves challenged to achieve comparable profits in absolute dollar terms.
Recent data from industry experts such as Edahn Golan indicate a noticeable decline in retail prices, with total US retail revenues from lab-grown diamonds registering a year-on-year decrease for the first time in January 2024. This downward trend, attributed to price drops outpacing sales volume increases, underscores the growing pressure on retailers to adapt to changing market dynamics.
Catherine Angiel, owner of a prominent New York-based fine jewellery business, acknowledges the surge in demand for lab-grown diamonds, particularly in engagement rings. However, she cautions that smaller retailers may struggle to maintain profitability in this competitive landscape.
Similar sentiments are echoed by Lauren Petrovic, founder of the Laurenti New York jewellery brand, who notes a decline in dollar margins for lab-grown pieces. Petrovic emphasizes the need for increased sales efforts to offset diminishing profitability in the face of declining prices.
As concerns persist regarding the long-term viability of lab-grown diamonds, industry stakeholders urge caution and strategic planning. With lower costs translating to reduced margins, retailers are advised to maintain a diversified product range that includes natural diamonds, ensuring resilience in an ever-evolving market.
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