Diamond retailers under pressure as lab-grown rivals gain ground, festive sales could bring some cheer

Jewellers countrywide are anticipating sparkling diamond sales this festival season as falling prices attract customers to natural diamonds for weddings, even as sharply cheaper lab-grown diamonds try to make their mark. However, higher prices of gold may diminish some of the enthusiasm this year, they said.

At K.S. Durlabhji, a high-end jewellery store in Jaipur’s upmarket C-Scheme, there is strong demand for larger (natural) diamonds, which are 15-20% cheaper than last year. "In smaller diamonds too, there has been a price correction of about 10-15% in the last year or so, and some of that could also be because of lab-grown diamonds becoming more popular. But we aren't stocking those because our clients don't have a taste for them yet," said Ruchi Durlabhji, a partner at the store.

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Meanwhile, lab-grown diamonds, which have turned 60-90% cheaper in the past two years, may steer consumer choices at the entry level, while medium and larger pieces will still be natural diamonds, retailers said. Retailers are hopeful of demand for larger stones thanks to lower prices, despite gold which is at least 10% pricier. India is one of the top three consumers of natural diamonds, behind the US and China. Large retailers like Tanishq and Senco Gold are trying to carve out separate identities for the two kinds of diamonds.

Shrinking sale

Sales of natural diamonds shrank 3-4% in the June quarter, said Suvankar Sen, CEO of Senco Gold, which operates 165 stores. "While our endeavour is always to increase diamond sales (that would add to the margins), Q1 did not see that much growth in diamond sales. Rather, there was a de-growth. Things were difficult (and) the sentiments of consumers, due to price rises, had an impact on the gold component, and footfalls went down and consumers wanted to procrastinate and postpone their purchases," Sen said during the company's June quarter earnings call.

However, customers have since returned given better diamond prices, both for wedding and non-wedding jewellery, with demand for earrings in gold and diamonds, Sen told Mint.

Globally, lab-grown diamonds have emerged as a cheaper alternative. A one-carat natural diamond of 'excellent' quality starts at ₹2 lakh, if it meets specific criteria on clarity, colour, cut and carat, while lab-grown diamonds begin around ₹40,000. In India, curiosity about lab-grown diamonds is also growing, though the cultural pull of natural diamonds for weddings remains strong.

Pratap Madhukar Kamath, managing director of Abaran Timeless Jewellery, which runs three high-end jewellery stores in Bengaluru, said very few consumers want lab-grown stones at his outlets. "Diamond prices have come down, but lab-grown has fallen much more in the last year or so, which could be why many serious jewellery connoisseurs still want to buy natural diamonds. We are seeing an 8-10% growth in our diamond business since the pandemic ebbed. This year was healthy till August too, and we're expecting business to again pick up in early October all the way into the festive season," he said.

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India is the world’s largest hub for cutting and polishing rough diamonds, particularly small and medium-sized stones, handling 90% of global polished diamond production by volume. In 2023, the US made up over 50% of global demand for natural polished diamonds, while China and India together accounted for 25%. India's jewellery sector is expected to grow by around 10%, driven by a rising middle class, increased per capita income, and more high-income households, according to a report by consultancy company BCG and diamond production company De Beers.

Best years past

David Kellie, CEO at Natural Diamond Council, a non-profit organization that educates consumers about natural diamonds, said, "In 2021-22, we saw the best years ever in the diamond market. There is a hangover from that. Globally, the diamond jewellery market is $88-90 billion. India will see a high single-digit or low double-digit growth in diamond sales this year, outpacing China," he said.

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Last month, the country’s largest organized jewellery brand Tanishq launched a three-year collaboration with De Beers to boost sales of natural diamonds across its 500-odd stores. There will be significant investment in terms of money, energy and resources to get more consumers to consider natural diamonds, the two said.

Ajoy Chawla, CEO, jewellery division, Titan Co. Ltd, said there is too much “media noise" around lab-grown diamonds. “We are not seeing any significant demand for lab-grown diamonds across our network of stores. Yes; customers come asking for clarity; they are confused about lab-grown and naturals…Those are the nature of conversations that we have heard so far. They are very different (consumer) segments," Chawla said in an interview in August.

Newer buyers

A plunge in prices of lab-grown diamonds has also attracted newer buyers. Several start-ups selling lab-grown diamonds have now popped up in India's top cities. In busy markets of Lajpat Nagar in New Delhi and Bandra in Mumbai, such stores sit next to well-established jewellery chains. Buyers can purchase them online too.

“We see first-time diamond buyers and others looking beyond natural diamonds," said Toshik Anand, founder of Better Diamonds, a lab-grown jewellery brand. Anand said shoppers appreciate the better value proposition that lab-grown diamonds offer, especially with similar buyback options.

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In 2022, India’s lab-grown diamond jewellery market was valued at $264.5 million, as per management consultants Technopak Advisors. By the end of the next decade, its sales are expected to rise at 14.8% CAGR, increasing the market size from $299.9 million in 2023 to $1.1 billion by 2033.

However, some big retailers like Kalyan Jewellers are not encouraging any lab-grown diamond sales. In the company's Q1FY25 call, Ramesh Kalyanaraman said there was an insignificant demand for lab-grown diamonds in their stores, with minimal customer inquiries. He added that Kalyan isn't promoting lab-grown diamonds due to unstable pricing, which could offend loyal customers if prices drop.