According to Zimnisky's rough diamond index, diamond prices have dropped 5.7% so far this year, down more than 30% from their peak in 2022. (Photo : by Frazer Harrison/Getty Images)
Chinese diamond demand declines due to factors like declining marriage rates, preference for gold, and increasing popularity of lab-grown stones, with consumers shifting spending from diamonds to travel experiences post-pandemic.
Natural diamond prices have fallen by 5.7% this year, over 30% from their 2022 peak, attributed in part to the rising preference for lab-grown diamonds, which can be up to 85% cheaper and represent a growing share of the market.
Traditional perceptions of diamonds as investments are diminishing with falling prices, according to Daga, signaling a need for strategic marketing efforts to revitalize consumer interest, particularly in markets like China, as noted by experts like Anish Aggarwal and initiatives by major players like Signet Jewelers and De Beers.
Chinese demand for diamonds has decreased, according to market research firm Daxue Consulting, as a result of declining marriage rates, rising desire for gold, and the growing popularity of lab-grown stones. Following the lifting of the pandemic restrictions, people shifted their purchasing from diamond items to trip experiences.
The inclination towards lab-grown diamonds is a significant factor in the decline in the cost of natural diamonds.
Lab-grown diamonds are created under strict conditions with high heat and pressure, and they can be up to 85% less expensive than real diamonds. The procedure mimics the formation of natural diamonds in the Earth's mantle. Zimnisky research shows that sales of lab-grown diamonds increased from just 2% of the worldwide diamond jewelry industry in 2017 to 18.4% in 2023.
Furthermore, according to Daga, there is less and less need to purchase diamonds as an investment. He said, "Over the last 50 years, diamonds were seen as an asset and inflation hedge." However, when prices fall, this investment justification has essentially evaporated.
Experts See Potential for Recovery Through Strategic Marketing
The diamond industry faces significant challenges, with some experts predicting that natural diamond prices could fall another 15%-20% over the next 12 months. However, there is some optimism about the industry's future.
Experts acknowledge the difficulties but believe they can be addressed. Anish Aggarwal, co-founder of the diamond advisory firm Gemdax, emphasized that diamonds, as discretionary products, require effective marketing to stimulate demand, similar to other luxury goods like high-end watches and bags. He pointed out that the industry has lacked large-scale category marketing for nearly two decades, leading to current challenges. To reignite consumer demand, particularly in China, a cohesive marketing strategy is essential.
The substantial industry marketing could significantly impact the diamond market. Recent initiatives show promise; for instance, Signet Jewelers, the world's largest jewelry retailer, announced a marketing collaboration with De Beers to boost demand for natural diamonds. Signet anticipates a 25% increase in engagements over the next three years.
Anglo American's Esquivel also highlighted that higher engagement rates and rising disposable incomes could help mitigate the market's challenges. The collaboration between the largest diamond miner and the largest diamond retailer is seen as a significant move that could positively influence the broader industry.
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