Is There a Resale Market for Lab-Grown Diamonds?
Last week, at the urging of a commenter, Ilooked into Kay’s and Jared’s policy for lab-grown diamond upgrades andtrade-ins, now that both of those chains are selling them. Suffice it tosay, it’s not the same as for naturals. Here’s Jared’s:
Our diamond trade-in and upgrade services allowyou to take any diamond jewelry (excluding lab-created diamonds) you no longerwear and trade it in for a brand new one.
Kay’s site has similar language. And so doesone of the biggest lab-grown diamond sellers online, Brilliant Earth.
Lab-grown manufacturer Diamond Foundry hastraditionally touted its “forever 100% value guarantee”, which“guarantee[s] the value of your diamond forever” with a “free lifetimeupgrade.” At press time, JCK could not find the guarantee stilllisted on its site. The company did not respond to requests for commentabout the guarantee’s current status. (UPDATE: After this piece wasposted, Diamond Foundry emailed it’s “still offering” the guarantee butthe site “is focusing more on B2B sales right now so it is not currentlylisted.”)
This is a thorny issue for the lab-grown diamond world. Given that technology cheapens over time, and created-diamond production isn’t limited by nature, most believe that synthetic prices will drop. In fact, that process has already started, with prices falling over the last year despite a clear spike in demand. (Natural diamond prices have fallen recently, too, though not as much.) Last December, Diamond Foundry announced that it was setting its diamonds at 55% below the Rapaport list. A vendor just approached me on LinkedIn, promising prices 78%–89% below Rap.
Retail prices are falling, too. Analyst PaulZimnisky estimates they have dropped an average of 20%–30% since thebeginning of the year. In January, a 2.01 ct. J SI2 very good–cut lab-grownwith an IGI report sold for $6,800 on Brilliant Earth. You can now seelab-growns with similar specs on the site in the $4,000 range.
Which may explain why some sellers are skittishabout trade-ins. Though not all are.
Both Ada Diamonds and MiaDonna offer lab-grownupgrades, though they require the purchaser spend a certain price on the newstone—one and one-half times the original in Ada’s case and two times inMiaDonna’s. That isn’t unusual; many traditional sellers have similarpolicies.
And while it seems an exception, Wisconsinchain Kesslers Diamonds offers the same trade-in policy forlab-growns as it does for naturals—with no minimums.
If the approaches here seem all over the map, they point to a larger issue: Do lab-grown diamonds have resale value? Many in the mined world maintain they don’t.
There is a secondary market for labdiamonds, though it’s still a small one. (Which makes sense, as the category isstill small.) Ada Diamonds has had a buyback program since May 2018.This year saw the launch of a somewhat-mysterious site, We Buy LabDiamonds. And, of course, you can sell anything on eBay.
Ada founder and director of sales LindsayReinsmith says its buyback program serves three purposes. First, Ada specializesin high-color and -clarity lab-growns, and those remain hard to find. Two, liketraditional jewelers, it gets better prices on second-hand diamonds. Andfinally, and more specific to the lab-grown market, it’s a “client benefit.”
“If you are guaranteed that you will receive afinancial offer, that is peace of mind for a luxury clientele,” she says. “Theyknow they won’t get a product with zero resale value.”
Of course, most don’t get full retail value fortheir trade-ins, but that’s also true of natural diamonds: “It’s aluxury purchase, like a Rolls-Royce,” Reinsmith says. “People havegot to stop thinking this is a good place to park your money.”
For now, Ada’s buyback program is not a big partof its business.
“Theproduct is fairly new and hasn’t been around a long time,” she says.“[Customers] haven’ t had a chance to get divorced yet.”
And like most jewelers, Reinsmith is selectiveabout what she buys.
“We only buy what we are willing to sell,” shesays. “We recently purchased a 2 ct. D VVS. That is something we will sell veryquickly and we gave a good offer on it. If [consumers] have an uglystone, they are going to struggle to sell it.”
Reinsmith admits that it’s not as easy toresell lab-growns as it is naturals, but she feels a market will eventuallydevelop.
For the moment, though, most secondhand dealersare staying away, Paul Zimnisky found:
[M]ost of the prominent C2B (consumer-to-business)buyers of diamonds tend to only buy natural. For example, industry leaders WPDiamonds (White Pine), IIDV and Mondiamo, a Blue Nile partner, currently do notbuy lab-created diamonds. Online player, Worthy.com, will buy lab-createddiamonds, but only in solitaire sizes 2-carats or larger. I Do Now I Don’t(Delgatto) recently started “experimenting” with buying lab-created but notedthat they will only buy at very discounted prices.
He thinks that a “robust [natural] diamond resalemarket for consumers is arguably one of the best ways for the industry todemonstrate the value of its product and also differentiate itself from notonly lab-created diamonds, but from other competing luxury products.”
Yet it’s not clear whether customers willcare or notice, given that these policies are usually relegated to fineprint. Consumers tend to buy diamonds expecting they will be forever. Andyounger shoppers may feel it’s worth it to save a little money now, even ifthey could lose down the road.
Still, when I talk to jewelers reluctant to sell lab-growns, their number one reservation almost always revolves around value and how they’ll handle trade-ins and buybacks. For some now carrying them, the answer seems clear: They won’t.