Luxury gemologists and retailers often refer to the 4Cs as criteria for assessing the quality of a diamond (i.e., color, cut, clarity, and carat). But for today’s consumers, are those four features sufficient to define the value of such a major purchase? Diamonds offer an especially compelling example for understanding how value can be created, seemingly out of nothing, by good marketing. In the late nineteenth century, the discovery of huge diamond mine reserves threatened to undermine (sorry) the market and drive prices rapidly downward. Because it held a near monopoly on the market, such that it could create a global conglomerate, De Beers worked quickly to avoid this development. It launched a remarkable, well-known, and highly successful campaign (“Diamonds Are Forever”) to convince consumers that the hard, clear, pressurized carbon stones represented the epitome of luxury, as well as the only real way to express love. Soon, diamonds came to be expected as a signifier of affection for any couple deciding to get married.

But as is true of so many traditional forms of consumption, today’s consumers are questioning some of expectations surrounding diamonds. Informed by ethical concerns about blood diamonds and exploitation, some people refuse to consume them whatsoever. In turn, some innovators have proposed lab-grown diamonds as an alternative. Although they occur naturally in only select areas, the gemstones can be created in any setting that imposes enough pressure on carbon, and in just a few weeks. There is thus no concern that miners will be subject to hazardous conditions or that mining operations will pollute the surrounding area in this process. Instead, there are other concerns, based in the amount of energy required for labs to grow diamonds. Because of the energy demands associated with their production, it may be hard to make the argument that lab-grown diamonds are really the sustainable alternative.

However, they are the less expensive option. Mined diamonds remain extremely expensive, such that a recent survey indicated that the average cost of an engagement ring was around $6000. Among Millennial and Gen Z consumers, such a substantial outlay of money seems unnecessary; for many of them, the idea of spending their budgets on a fantastic honeymoon vacation seems much more appealing. Rather than being impressed by the traditional lore surrounding mined diamonds, they find little value difference and deeply appreciate the lower price point for the lab-grown diamonds. The price gap also continues to grow, as production of lab-grown diamonds increases, such that for the same size and clarity, buyers will pay approximately 80 percent for a lab-grown versus mined diamond.

Diamond retailers have responded to these trends in various ways. Some of them have fully embraced the shift, offering both mined and lab-grown diamonds in the same space. But others—especially older, more luxury-oriented retailers—have rejected the lab-grown option out of hand. They cite concerns about the legacy of the manufactured diamonds, which appear unlikely to hold their resale value as well as conventional stones. But they also probably are worried about their own value—that is, the profits they can earn from selling beautiful diamonds at very high prices.

Discussion Questions

1. Of course we’re going to ask: If you were to begin shopping for engagement rings, would you look for a mined or a lab-grown diamond? Why?
2. How should diamond sellers price their offerings of mined and lab-grown diamonds strategically?

Sources: Katie Mather, “Are Lab-Grown Diamonds ‘Worthless’? Experts Weigh In as Engagement Ring Priorities Shift for Millennials, Gen Z,” Yahoo!Finance, January 26, 2024; Thomas Biesheuvel, “Diamond Demand Is Falling so Fast–Courtesy Lab-Grown Stones—and De Beers Is Cutting Some Prices by More than 40%,” Fortune, September 3, 2023; Uri Friedman, “How an Ad Campaign Invented the Diamond Engagement Ring,” The Atlantic, February 13, 2015