Are Millenials Giving Lab Diamonds the Finger?
You like plants. You believe in climate change. You’re up to your eyeballs in college debt. Congratulations, you’re a millennial. With lab-grown diamonds being more sustainable and more affordable than mined diamonds, the choice sounds easy.
By all accounts, lab diamonds are more affordable than mined diamonds, up to 50% more affordable. Most buyers also agree that lab diamonds avoid the the ethical and environmental issues that traumatized us in Blood Diamonds (thanks, Leo). So, while DeBeers insists that “real is rare, real is a diamond” we see more and more environmentally conscious Millennials giving lab diamonds their ring finger.
But, we also see our fair share of Millennials giving lab diamonds the other finger. The diamond mining consortium is investing heavily in anti-lab diamond marketing, but, that’s not the only thing influencing young couples’ decisions. Let’s dig in to the top reasons Millennials are for, and against, lab grown diamonds.
LAB DIAMONDS AREN’T AS ROMANTIC
We’ll be the first to admit it. There’s a certain romance to mined diamonds. The billion year journey of a stone forming deep within the earth, culminating rightfully atop your finger, has appeal. There’s also the fact that each one is unique, and that they’re produced by mother earth herself. And don’t forget that it’s a gift, you want it to be special. You’re not quite sure if lab = special in quite the same way. Isn’t it OK to put aside your concerns and be a little bit selfish?
The reality is modern diamond mining is mostly OK, thanks to increased consumer pressure, and the need for security and safety. Improvements in technology have enabled better traceability, and improvements in safety and environmental stewardship have help diamond mining actually improve the lives of people living in areas that depend on diamond mining. It’s impossible to mine anything without making a mess, but, things have come a long way over the past 20 years. So, if you want a mined diamond to commemorate your love, we say have at it, and remember, you can always buy one that’s been recycled.
LAB DIAMONDS ARE MORE AFFORDABLE.
As we mentioned earlier, lab-grown diamonds are significantly more affordable than their mined counterparts. Meaning you can go bigger and get the stone of your dreams. Or go smaller and save the money for your honeymoon.
Let’s face it — engagement kicks off a lengthy list of expenses. A hefty price tag can have the unintended side effect of setting your marriage off on rocky financial footing. When purchasing a lab diamond, you can expect to pay about 50% of what you’d pay for a mined diamond.
LAB DIAMONDS HAVE NO RESALE VALUE. (BUT, DO MINED ONES?)
The lack of resale value is the most common objection to the affordability of lab diamonds. While it’s mostly true that lab grown diamonds are difficult to resell, you can expect this to change in the coming years as the market for lab grown diamonds matures. But, before you sell your bitcoin and invest in mined diamonds, prepare to be underwhelmed by their resale value as well.
For as long as the tradition of engagement rings has existed, the expectations around their resale value have been inflated. Diamonds are a gorgeous, sparkling symbol of your love, commitment, and partnership. But, they are not an investment in a strictly financial sense.
For the mathematically inclined, let’s take a look at the numbers. For everyone else, skip ahead.
How to calculate the resale value of a mined diamond
The average resale value of a mined diamond can vary widely. It’s determined by the carat and quality of the diamond, but, also by the larger commodity market for diamonds, which is constantly changing. No matter who you sell it to, how many quotes you get, and how well you negotiate, you’ll never get 100% of the purchase price. In fact, you’re going to get less. A lot less. But, why is it the resale value so much lower than what you paid for it?
Let’s look at a common scenario. Say you purchased a platinum solitaire with a 1 carat round brilliant diamond online at a very fair price, $6,000. If the diamond was $5,000, the seller’s profit margin on the diamond was probably around 20%. If you deduct that from your purchase price, the commodity “value” of your stone is only $4,000. The commodity value of the metal in your setting is probably a couple hundred bucks. So, that puts you at an estimated $4,200 commodity value, a 30% reduction from your original purchase price. Brace yourself, it gets worse from here.
Try to sell your diamond back to that online store for $4,000 and see what they say. Hopefully, their rejection will be polite. That’s because most diamond retailers don’t ever own the vast majority of stones they sell. Instead, the inventory is owned and held by diamond wholesalers and manufacturers all over the world, all of whom are buying and selling diamonds every day. These wholesalers own nearly all of the inventory that powers the $76bn global diamond market. Even traditional brick and mortar retailers typically don’t own the diamonds in their display cases, so they’re not going to jump at the opportunity to buy yours. It’s not their business model. To sell your diamond, you’ll have to go to someone that operates in the supply part of the market.
The diamond wholesalers
The diamonds that the vast majority of retailers offer for sale online and in their display cases are actually on loan from wholesalers. You can approach a wholesaler and attempt to sell your diamond.
The catch with this is that most diamond wholesalers buy in bulk and get heavy discounts from diamond cutters. They’re also undoubtedly more experienced than you are at negotiating diamond pricing. Your chances of getting a fair offer are…fairly low. Unless there’s something unique or rare about your diamond, they’d probably rather purchase elsewhere. If you go this route and you get more than 50% of what paid, you did good.
One alternative to approaching a diamond wholesaler yourself is going with Worthy. Worthy will present your diamond ring to it’s network of wholesalers, and receive all the offers. You can accept the highest offer, and Worthy handles the rest. The only catch with this is that Worthy’s commission for the service is a whopping 20%. For your $6,000 ring, there’s no way you’ll get an offer for $4,200, but even if you did, you’d pay $840 of that to Worthy. Going this route, you’re virtually guaranteed to get less than half of your original purchase price, but the convenience might be worth it.
This might not be where you thought you’d end up, but, there is one more option. The pawnshop. Sure, chuckle now, but, pawnshops are the fastest and most popular way to sell engagement rings. They don’t pay particularly well, but, they do provide a service if you’re in a hurry.
The major downside of selling to a pawnshop is that it’s likely they won’t have as much experience purchasing diamonds, and yours won’t get the benefit of the doubt. In fact, inexperienced diamond buyers are more likely to low-ball you to reduce their risk of overpaying. If you get anywhere close to 50% of what you paid for a ring by selling at a pawnshop, you deserve a medal.
“Investing” in diamonds
It seems like it’s going to be hard to get more than 50% of your diamond’s value converted back into cash. At this point, you might have been wondering why you thought diamonds go up in value. While diamonds can appreciate due to inflation and the fluctuations of the diamond market, real growth in value is generally reserved for investment-grade diamonds that are bought at auction or through private gemologists. Investment-grade diamonds are not commonly used for engagement rings. An example being this 14.93 carat rare pink diamond that fetched 32 Million at Christie’s.
If your goal is to invest your money in something you can wear, gold is a far better store of value than diamonds. Gold can actually grow in value over time. Gold also has the advantage of trading at a publicly listed commodity price, the “spot price,” that anyone can use as a point of reference.
While the market for reselling lab-grown diamonds may be small, the reality is that the up front savings on the cost of a lab grown diamond are greater than the resale value of an equivalent mined diamond. When you buy a lab grown diamond, you can literally have your cake and eat it too. Better yet, invest those savings in the stock market.
LAB DIAMONDS ARE BETTER FOR THE EARTH. SOMETIMES.
There’s been some recent chatter, instigated by a study commissioned by DeBeers, that lab diamonds are less environmentally friendly than mined diamonds. If you’re scratching your head and wondering how they got to such a counterintuitive conclusion, read on.
Growing lab-grown diamonds uses electricity. A lot of the growth is happening in China, India, and Singapore, where renewable energy is less mature. Lab diamonds consume between 50 kWh and 750 kWh to produce 1 carat. Efficient growers use around 250 kWh per ct. This is the same amount of electricity it takes to fully charge a Tesla two-and-one-half times. But, if you’re buying a diamond grown from a carbon-neutral certified grower using solar energy, it’s much more cut and dry.
Mined diamonds use a similar amount of electricity (less depending on which study you’re reading and which mine) as lab-grown diamonds. The environmental damage from diamond mining comes from water use and land destruction. While it’s less damaging than gold mining, that’s not saying a lot.
The verdict? It’s possible to find a mined diamond that consumed less electricity. But, that’s ignoring the tremendous amount of earth removal, displaced wildlife, water pollution, and other forms of damage caused by mining. The most environmentally friendly option of all is a lab grown diamond grown using solar power. Just ask us, we’ll help you find one.
MINED DIAMONDS HAVE HAD A REAL ECONOMIC IMPACT ON SOME COMMUNITIES.
While we talk a lot about the ethical concerns of mined diamonds, we talk less about the economic impact the diamond mining industry has had on countries like Botswana. Sustainability is as much about economic development as environmental impact, and while mined diamonds have hurt, they have also helped.
Of course, the counterpoint to this would be that economic growth is no longer an excuse for environmental damage. Mining companies must begin to consider the broader impact of their actions if they want to stay relevant in 2019. Luckily, some are.
SO ARE MILLENIALS GIVING LAB DIAMONDS THE FINGER?
Yes, and yes. Lab diamonds are growing at an astonishing 8% annually. While not everyone is in favor of these flawless gems, more millenials are giving them their ring finger than their middle finger — regardless of what DeBeers wants you to do.
READY TO GET STARTED?
Every great ring starts with a great setting, but picking a setting out online is hard — or at least it used to be. At Frank Darling, all our engagement ring settings are available for free home try-on. It’s like the internet, but you can touch things.
Get started by selecting your favorite four rings. We’ll send you sterling silver size seven replicas set with 1 carat CZ stones. Want to see other stone sizes? Just ask.
Each try at home kit comes with a pre-paid return label, ring sizer, and The Handbook. A practical guide to purchasing a diamond for the matrimonial inclined. So, what are you waiting for? Let’s get this party started.